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Wells Fargo Bank, Nat’l Ass’n v. Unknown/Undiscovered Heirs (In re Tr. of Shire) - 229 Neb. 25, 907 N.W.2d 263 (2018)

Rule:

The party seeking a modification of a trust must affirmatively demonstrate that all beneficiaries have consented to the modification.

Facts:

The last will and testament of Jennie Shire created a Testamentary Trust. Paragraph IV of Shire’s will provided that the Trust would be funded with $125,000 and that the trustees would pay $500 monthly to Shire’s daughter, Ruth Banner Gronin (Ruth), during her life and to Shire’s granddaughter, Shirley Smith Gronin (Shirley), upon Ruth’s death and Shirley attaining the age of 25 years. Further, paragraph IV provided that upon the death of Ruth and Shirley, the balance of the trust fund shall be added to the residue of Shire’s estate. Shire died in 1948, and when Ruth passed away in 1983, the monthly $500 payments from the Trust were made to Shirley. The trustee, Wells Fargo Bank, N.A. then filed a petition for trust proceeding, seeking to provide increased disbursements from the trust of Shire to the remaining life beneficiary, Shirley. Before filing the petition, Wells Fargo attempted to identify potential heirs of the beneficiaries identified in paragraph VI of Shire’s will. In its petition, Wells Fargo specifically identified 12 individuals and entities that may have an interest in the residuary and requested the court to notify them of the proceeding. The following known beneficiaries were present at the hearing on the Trust’s modification: six individual beneficiaries participated by counsel, one individual beneficiary participated pro se, and the Nebraska Attorney General’s office participated on behalf of charitable beneficiaries. At Wells Fargo’s request, the court appointed an attorney to represent the “Unknown/Undiscovered Heirs,” if any, of the beneficiaries under paragraph VI of Shire’s will (Unknown Beneficiaries). After the hearing, the parties had the opportunity to submit post-trial briefs. Counsel for the Unknown Beneficiaries was the only party that opposed Wells Fargo's motion. The court ruled that the requested modification of the trust was not warranted, holding that the language of the Trust did not permit an increased distribution; did not authorize a modification because not all beneficiaries had consented; did not permit a modification because increasing Shirley's annual payments would have a detrimental effect on the Trust's residue, which would not adequately protect the nonconsenting beneficiaries; and did not allow a modification because there was not an unanticipated change in circumstances. Shirley appealed, arguing that the court erred in concluding that modification of the Trust, to provide increased disbursements to her, was not appropriate under Neb. Rev. Stat. §§ 30-3837(b) and (e) (Reissue 2016) and the doctrine of deviation.

Issue:

Did the trial court err in determining that modification of the Trust was not appropriate under Neb. Rev. Stat. § 30-3837(b)?

Answer:

No

Conclusion:

The Supreme Court held that the court did not err in determining that the trust could not be modified, under Neb. Rev. Stat. § 30-3837 (Reissue 2016), because the beneficiaries did not unanimously consent to the modification and modification would not adequately protect the interests of the non-consenting beneficiaries. The Court averred that the requested modification could not satisfy the requirement that the interests of nonconsenting beneficiaries be adequately protected. According to the Court, the context of Neb. Rev. Stat. § 30-3837 (Reissue 2016) and the Nebraska Uniform Trust Code implied that the phrase "adequately protected" should not be construed to limit the rights of nonconsenting beneficiaries. Neb. Rev. Stat. § 30-3837 was focused on modifications of trusts with the consent of the beneficiaries and the settlor, either by actual consent or by being consistent with the purpose of the trust. The Court averred that the context of this statute did not suggest that a court may force a modification upon beneficiaries that will negatively affect their interests.

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