In re Robert L. McDowell Revocable Trust

Summary

The Nebraska Supreme Court held that Betty Jane McDowell ineffectively exercised a limited power of appointment granted under Robert L. McDowell’s revocable trust by appointing the trust assets to her own revocable trust. Because the assets were commingled with her trust assets, the appointment could benefit persons outside the permissible class specified by Robert’s trust. The court also held that the trustee’s transfer of the assets constituted a breach of trust and affirmed the recovery and redistribution order as modified.

Holdings

1. Betty's exercise of the limited power of appointment was ineffective because she appointed the Trust A assets to her own revocable trust, which was not within the permissible class of appointees, and the governing instruments did not segregate those assets from Betty's assets or prevent them from benefiting Betty, her estate, or creditors.
2. The court declined to adopt or apply the doctrine of selective allocation to validate Betty's appointment because the doctrine is a rule of construction and the terms of Robert's trust, Betty's will, and Betty's trust were clear and unambiguous.
3. The doctrine of substantial compliance did not apply because Betty's attempted exercise failed substantively, not merely because she failed to satisfy a formal requirement.
4. The trustee of Robert's trust breached the trust by transferring Trust A assets pursuant to Betty's ineffective appointment, and the county court properly could order recovery, preservation, and redistribution of those assets under Neb. Rev. Stat. § 30-3890.

Questions Presented

1. Whether Betty effectively exercised the limited power of appointment under Robert's trust by devising the Trust A assets to her own revocable trust.
2. Whether the doctrines of selective allocation or substantial compliance could validate Betty's otherwise ineffective appointment.
3. Whether the trustee of Robert's trust breached the trust by transferring Trust A assets pursuant to the ineffective appointment and whether the county court could order recovery and redistribution of those assets.

Disposition

other