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Nebraska Supreme Court Hears First Impression Case Involving Trusts

The Nebraska Supreme Court heard oral arguments on March 7, 2014 in a case likely to create new standards governing the conduct of trustees, and the rights of trust beneficiaries in Nebraska. In re Rolf Brenneman Trust, originally decided by the Court of Appeals in a published decision, 21 NebApp 353, is being reconsidered by the Supreme Court.

Dave Domina, the lawyer for Trust Beneficiaries, asked the Supreme Court to review the Court of Appeals case. Domina's position is that the Court of Appeals made three decisions requiring reconsideration by the Supreme Court:

The Court of Appeals followed the traditional rule that a trust beneficiary is entitled to an accounting from a trustee upon establishing basic proof that no accounting has been rendered. But the Court of Appeals then expanded the law beyond previous limits by holding that where a trustee lacks data with which to make an accounting, a presumption arises that the trustee acted in good faith.

Having created the presumption of good faith, the Court of Appeals held that the beneficiary of a trust, who inherently lacks records or information because it is exclusively in the trustee's possession, must prove irregular conduct by the trustee to overcome the newly-created presumption.

In a case involving no documents except simplistic, incomplete IRS Forms K-1, the Court of Appeals held that the K-1s were adequate to constitute an accounting. Noting that an IRS Form K-1 only discloses the amount of income distributed to a trust beneficiary, and says nothing about the trust's assets, liabilities, or total income, Domina asked the Supreme Court for a reconsideration of this holding.

"The decision in this case will affect thousands of trusts, and tens of thousands of people, estate plans, and family business plans, across Nebraska," Domina said.

"We believe the Nebraska Trust Code creates or confers rights on trust beneficiaries, and imposes duties on trustees. It creates no presumptions in favor of trustees, and we contend it never imposes upon a trust beneficiary the duty to prove a fact that relies entirely on evidence within the trustee's control."

A decision is expected early in the summer of 2014.


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