In re Trust Created by McGregor
954 N.W.2d 612
Neb.2021Background
- Decedent Clifford A. McGregor created the C.A. McGregor Trust; at his death it became irrevocable and funded the C.A. McGregor Family Trust, with his wife Evelyn as sole trustee.
- The Family Trust created irrevocable, non‑support discretionary carve‑out trusts for each child (Allen and Debra), containing explicit spendthrift language and limiting powers of appointment so assets remain in trust for beneficiaries and their issue.
- In 2011 Evelyn, Allen, and Debra executed a trust settlement agreement to distribute Family Trust assets outright to Allen and Debra (and require an equalization payment); Evelyn later attempted to revoke the agreement in 2017.
- Allen sued under Neb. Rev. Stat. § 30‑3811 (2016) in 2018 seeking court approval of the nonjudicial settlement agreement; Evelyn opposed, arguing the agreement violates material purposes of the trust and lacked consent of all interested persons.
- The county court denied approval, finding (1) unknown future takers (issue of Allen/Debra) were interested persons whose consent was not obtained, and (2) the agreement violated the trust’s spendthrift/material purpose by distributing assets outright, adding an extra tract to Allen, and changing equalization mechanics.
- The Nebraska Supreme Court affirmed, basing its decision on the spendthrift provisions’ presumption as a material purpose and concluding the agreement was invalid to the extent it defeated that purpose.
Issues
| Issue | Plaintiff's Argument (Allen) | Defendant's Argument (Evelyn) | Held |
|---|---|---|---|
| Whether all “interested persons” (including unknown future takers) had to consent to validate a § 30‑3811 nonjudicial settlement agreement | Agreement is binding with parties’ consent (Evelyn supported it) and effectuates settlor intent to treat children equally | Unknown future beneficiaries (issue of Allen/Debra) are interested persons whose consent was not obtained | Court declined to reach this issue as dispositive ruling elsewhere; county court had found unknown issue were interested persons but Supreme Court did not decide consent question because agreement failed on other grounds |
| Whether the settlement agreement violated a material purpose of the trust (spendthrift/in‑trust disposition) | Agreement better effectuates settlor’s intent to equalize distributions and thus should be approved | Agreement converts trust interests into outright ownership, defeating explicit spendthrift and irrevocability provisions | Court: spendthrift provisions are presumed a material purpose; no evidence rebutting presumption; agreement invalid because it distributes assets outright and permits transfer/attachment contrary to trust terms |
| Whether proposed substantive changes (extra tract to Allen; mandatory equalization) are permissible by nonjudicial settlement | Changes reflect settlor intent and are reasonable modifications | Changes alter dispositive, material terms of an irrevocable spendthrift trust | Court: those changes were substantial and fall outside matters authorized for nonjudicial resolution under § 30‑3811(d); they violate material purpose and are invalid |
Key Cases Cited
- In re Trust Created by Fenske, 303 Neb. 430 (2019) (discusses spendthrift provisions and material purposes under Nebraska Uniform Trust Code)
- In re Trust of Shire, 299 Neb. 25 (2018) (principles for interpreting trust instruments and applying Uniform Trust Code guidance)
- In re Henry B. Wilson, Jr., Revocable Trust, 300 Neb. 455 (2018) (trust administration review standards)
- In re Trust Created by Nabity, 289 Neb. 164 (2014) (de novo review of legal questions in trust cases)
- In re Estate of Somers, 277 Kan. 761 (2004) (Kansas Supreme Court holding spendthrift trusts ordinarily may not be terminated where presumption of material purpose is unrebutted)