Frequently there is tension between the intent of the person who created the trust (the settlor), the beneficiaries and the trustee. A recent Nebraska case is a good example of this.
Jack Fenske was an “old school” bachelor farmer in Madison County. He considered owning agricultural land as a sign of success. While he valued education, he appreciated the value of farm work even more.
One year before he died in 1998, he wrote his will. His attorney had been urging him to do so and the attorney testified that it might have been written and executed in one day. His two great nieces were to receive income for their lives but the principal could be invaded for their education. The trust paid $240,000 for that purpose.
At the time of trial, the trust consisted of $52,000 in cash and pasture valued at $278,000. The land is close to Norfolk and could be developed into some other use. The trustee fees now exceeded the income from the trust.
The beneficiaries asked the bank trustee to resign. They proposed that the husband of one of the beneficiaries, an Omaha attorney, serve as trustee. He would do so without charge. The bank refused to resign and the issue was joined.
At trial the attorney who drafted the will testified that the settlor didn’t want any of his “relatives being in charge of his assets.” And that he wanted to “hold on to the land for as long as possible….” Now bear in mind that the settlor passed away in 1998 and the trial was in 2017. That’s the notion of dead hand control.
The bank trustee was interested in continuing to receive its fees and it is worth noting that the trust was not going to terminate until the deaths of both his great nieces; at least 20 years in the future.
There was also evidence that the new trustee – with the consent of the beneficiaries – might terminate the trust in another legal proceeding.
The Nebraska Supreme Court held that the bank trustee could not be removed because it was inconsistent with a material purpose of the trust, namely, the land was to be kept in tact until the deaths of his great nieces and that only the trustee he named could serve as his trustee. In that respect, the courts honored and upheld the clear intent of the settlor.
Source: In re Trust Created by Fenske, 303 Neb. 430 (June 28, 2019).