In re Trust Created by McGregor
308 Neb. 405
| Neb. | 2021Background
- Clifford and Evelyn McGregor created separate revocable trusts and divided real estate between them; Clifford’s trust (C.A. McGregor Trust) became irrevocable at his death and funded the C.A. McGregor Family Trust (Family Trust).
- The Family Trust created irrevocable carve-out trusts for each child (Allen and Debra) that "shall remain in trust," included non-support discretionary spendthrift language, and limited powers of appointment (prohibiting appointment to the beneficiary, estate, or creditors).
- Evelyn (surviving cotrustee) retained net income from Family Trust real estate and was sole trustee after Clifford’s death; in May 2011 Evelyn, Allen, and Debra executed a trust settlement agreement distributing Family Trust assets outright to Allen and Debra on Evelyn’s death (plus an additional tract to Allen and an equalization mechanism).
- Evelyn purportedly revoked the settlement agreement by email in May 2017; Allen filed a petition under Neb. Rev. Stat. § 30-3811 seeking court approval of the nonjudicial settlement agreement in July 2018.
- The county court denied approval, holding the agreement violated a material purpose of the trust (the spendthrift and "remain in trust" provisions) because it would distribute assets outright and allow alienation/reach by creditors; the court also concluded (alternatively) that unknown future issue of the carve-out trusts qualified as "interested persons" whose consent was not obtained.
- The Nebraska Supreme Court affirmed, holding the settlement agreement invalid because it violated the trust’s material purpose (the spendthrift provisions) and therefore need not resolve the interested-persons question.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the nonjudicial settlement agreement violates a material purpose of the trust (spendthrift and "remain in trust" clauses) | Allen: Agreement implements settlor intent (treat children equally) and Evelyn supported modification; equalization better reflects settlor’s intent | Evelyn: Agreement converts trust properties to outright distributions, defeating spendthrift and irrevocable-design purposes | Held: Agreement invalid — spendthrift provisions are a presumed material purpose and Allen offered no evidence to rebut; agreement impermissibly distributes assets outright rather than in trust |
| Whether unidentified future beneficiaries (issue of Allen/Debra) are "interested persons" whose consent is required under § 30-3811 | Allen: Only parties to the agreement (and appeared beneficiaries) needed to consent | Evelyn: The class of future issue are beneficiaries whose rights are affected and therefore are interested persons whose consent is required | Held: Court declined to decide as dispositive ruling on material purpose made it unnecessary; lower court had found unknown issue were interested persons |
Key Cases Cited
- In re Trust Created by Fenske, 303 Neb. 430, 930 N.W.2d 43 (Neb. 2019) (discussing spendthrift provisions as presumptively material purposes of a trust)
- In re Estate of Somers, 277 Kan. 761, 89 P.3d 898 (Kan. 2004) (applying Restatement rule that spendthrift trusts generally cannot be terminated if continuance is necessary to carry out a material purpose)
- In re Trust Created by Augustin, 27 Neb. App. 593, 935 N.W.2d 493 (Neb. Ct. App. 2019) (discussing parties/beneficiaries and indispensable parties in trust modification contexts)
- In re Trust Created by Isvik, 274 Neb. 525, 741 N.W.2d 638 (Neb. 2007) (trust language interpretation treated as a question of law)
- Benjamin M. v. Jeri S., 307 Neb. 733, 950 N.W.2d 381 (Neb. 2020) (appellate courts need not resolve issues unnecessary to adjudicate the case)