Monday, March 8, 2021
Nebraska Supreme Court: Nonjudicial Settlement Agreement Violated Material Purpose Of Trust By Ignoring Spendthrift Provision
In In re Trust Created By McGregor, "the Nebraska Supreme Court held that spendthrift provisions of a trust established a material purpose of the trust, and held a nonjudicial settlement agreement invalid for violating the trust’s purpose."
Clifford McGregor died in 2009 with a surviving spouse, Evelyn McGregor. Before Clifford died, he and Evelyn created separate trusts and equally divided their real estate in their respective trusts.
After Clifford's death, Evelyn became the trustee of Clifford's trust. After expenses were paid, the trust created an irrevocable trust that consisted of the remaining assets of the trust estate.
The irrevocable trust, The Family Trust, created two separate trusts for the McGregor's children, Allen and Debra. Clifford's intent was to treat the two children as equal as possible.
Evelyn, Allen, and Debra entered into a trust settlement agreement, which stated that upon Evelyn's death, the assets of the Family Trust would pass directly to Allen and Debra. Six years later, Evelyn attempted to revoke this agreement via an email to Allen.
Allen brought action seeking to enforce the settlement agreement.
The lower court rejected the agreement because (1) not all necessary parties were present and (2) the settlement agreement violated a material purpose of the Family Trust because it altered specific terms of the irrevocable trust in a number of ways.
Under the Nebraska Uniform Trust Code, "a nonjudicial settlement is valid only to the extent it does not violate a material purpose of the trust."
The Nebraska Supreme Court affirmed the provision and held that the spendthrift provisions of the Family Trust established a material purpose of the trust and that Allen offered no evidence to rebut this presumption.
See Nebraska Supreme Court: Nonjudicial Settlement Agreement Violated Material Purpose Of Trust By Ignoring Spendthrift Provision, Probate Stars, February 25, 2021.