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308 Nebraska Reports

IN RE TRUST CREATED BY McGREGOR

Cite as 308 Neb. 405

In re Trust Created by Clifford Allen 

McGregor, deceased.

Allen E. McGregor, appellant, v. 

Evelyn L. McGregor, appellee.

___ N.W.2d ___

Filed February 12, 2021. No. S-20-281.

1. Trusts: Equity: Appeal and Error. Trust administration matters are 

reviewed for error appearing on the record, absent an equity question.

2. Judgments: Appeal and Error. When reviewing a judgment for errors 

appearing on the record, the inquiry is whether the decision conforms 

to the law, is supported by competent evidence, and is neither arbitrary, 

capricious, nor unreasonable.

3. Wills: Trusts. The interpretation of the words in a will or a trust pre

sents a question of law.

4. Judgments: Appeal and Error. In instances when an appellate court is 

required to review cases for error appearing on the record, questions of 

law are nonetheless reviewed de novo on the record.

5. Trusts. A nonjudicial settlement agreement is valid only to the extent it 

does not violate a material purpose of the trust.

6. Trusts: Presumptions. A spendthrift provision in the terms of the trust 

is presumed to constitute a material purpose of the trust.

7. Trusts: Words and Phrases. “Spendthrift provision” means a term of a 

trust which restrains both voluntary and involuntary transfer of a beneficiary’s interest.

8. Trusts. The material purposes of a trust are subject to the settlor’s 

discretion, to the extent that its purposes are lawful, are not contrary 

to public policy, are possible to achieve, and are for the benefit of its 

beneficiaries.

9. Appeal and Error. An appellate court is not obligated to engage in an 

analysis that is not necessary to adjudicate the case and controversy 

before it.

Nebraska Supreme Court Online Library

www.nebraska.gov/apps-courts-epub/

04/16/2021 08:08 AM CDT
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IN RE TRUST CREATED BY McGREGOR

Cite as 308 Neb. 405

Appeal from the County Court for Hayes County: Anne M. 

Paine, Judge. Affirmed.

Galen E. Stehlik, of Stehlik Law Firm, P.C., L.L.O., for 

appellant.

Larry R. Baumann and Christine E. Seck, of Kelley, 

Scritsmier & Byrne, P.C., L.L.O., for appellee.

Heavican, C.J., Miller-Lerman, Cassel, Stacy, Funke, 

Papik, and Freudenberg, JJ.

Funke, J.

Allen E. McGregor, a beneficiary of a trust created by his 

father, Clifford Allen McGregor, now deceased, petitioned 

the county court for Hayes County, Nebraska, for approval 

of a nonjudicial settlement agreement. After a trial, the court 

declined to approve the agreement. Allen appeals. We hold 

the nonjudicial settlement agreement violates a material purpose of the trust. Therefore, we affirm the decision of the 

county court.

BACKGROUND

Clifford died on October 15, 2009. Evelyn L. McGregor is 

Clifford’s surviving spouse. Prior to Clifford’s death, Clifford 

and Evelyn created separate trusts and equally divided their 

real estate into their respective trusts. Clifford’s trust was titled 

the “C.A. McGregor Trust.” The trust states that it “shall be 

administered and disposed of in accordance with the provisions of [the] trust instrument.” Clifford reserved the right to 

revoke or amend all or any part of the trust during his lifetime. 

Clifford and Evelyn were cotrustees.

When Clifford died, the trust became irrevocable and Evelyn 

became the sole trustee. After providing for the payment of 

funeral expenses and the disposition of certain itemized personal property, the trust created an irrevocable trust, known as 

the C.A. McGregor Family Trust (Family Trust), which held 

the remaining assets of the trust estate. Evelyn retained all 
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IN RE TRUST CREATED BY McGREGOR

Cite as 308 Neb. 405

net income generated from the real estate owned by the Family 

Trust and paid all real estate expenses, such as real estate taxes 

and income taxes.

The Family Trust creates separate “carve-out” trusts for 

Clifford and Evelyn’s two children, Allen and Debra L. Schardt 

(Debra). Upon Evelyn’s death, the rest and residue of the 

Family Trust is to be equally distributed to the separate carveout trusts, which are named the “Allen Eugene McGregor 

Family Trust” and the “Debra Louise Schardt Family Trust.” 

The Family Trust states that it is Clifford’s intent, to the extent 

possible, to treat the children equally. If the Family Trust 

contains sufficient funds, the value of the distributions to the 

separate carve-out trusts will be equalized. However, if there 

are insufficient funds, the distributions will not be equalized.

Allen and Debra are to become the trustee of his or her 

respective trust. The trust instrument states that the assets of the 

carve-out trusts “shall remain in trust” and that the trusts “shall 

be irrevocable and shall not be revoked or amended in whole 

or in part by the trustee, beneficiary or any other person.” In 

the event of the death, resignation, or inability of a trustee of a 

carve-out trust, the Family Trust contains provisions to select a 

successor trustee, which could include a survivor of Allen and 

Debra, or a designated corporation or bank.

Until the death of Allen or Debra, the trustee of his or her 

respective trust shall from time to time, in his or her discretion, 

pay for the health, education, support, or maintenance of his or 

her children or grandchildren. In distributing trust income, the 

trustee must give first priority to Allen or Debra and secondary priority to Allen’s or Debra’s respective children. The trust 

instrument states that it is Clifford’s intent that each carve-out 

trust be construed as “a non-support discretionary spendthrift 

trust that may not be reached by the beneficiaries[’] creditors 

for any reason.” Upon the death of Allen or Debra, pursuant to 

a limited power of appointment, the trustee of the deceased’s 

carve-out trust may transfer the remainder of the separate trust 

for the benefit of a person, corporation, or other entity, but 
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IN RE TRUST CREATED BY McGREGOR

Cite as 308 Neb. 405

it shall not be exercised in favor of Allen or Debra, his or her 

estate, or creditors of his or her estate.

In May 2011, Evelyn, Allen, and Debra entered into a trust 

settlement agreement, which, upon Evelyn’s death, provides 

for the distribution of the Family Trust’s assets directly to 

Allen and Debra, free of trust. Per the agreement, Allen would 

receive an additional tract of real estate not distributed under 

the Family Trust. Further, the agreement requires an equalization payment between Allen and Debra. In May 2017, Evelyn 

emailed Allen, purporting to revoke the agreement.

On July 25, 2018, pursuant to Neb. Rev. Stat. § 30-3811 

(Reissue 2016), Allen filed this action in the county court for 

Hayes County seeking approval of the agreement and an order 

requiring compliance with the terms of the agreement. Evelyn 

filed an answer requesting that the court find the agreement 

to be nonbinding and alleging that the agreement violates 

a material purpose of the trust; did not include all potential 

beneficiaries, such as the issue of Allen or Debra; and lacked 

consideration.

Allen moved for summary judgment in June 2019. Following 

a hearing, the court issued a written order overruling Allen’s 

motion. The court found that according to the terms of the 

Family Trust, upon the death of Evelyn, four specific tracts 

of real estate would be transferred to Allen in trust and one 

specific tract of real estate would be transferred to Debra in 

trust. Debra would also receive, in trust, a Ford Model T. The 

remaining trust estate at the time of Evelyn’s death was to be 

equally distributed to the two carve-out trusts. However, equalization would depend on the availability of liquid assets. The 

court further found that the trust settlement agreement modified the Family Trust “in several ways.”

The matter then proceeded to a bench trial. After trial, the 

court issued an order rejecting the agreement and finding that 

the agreement was nonbinding under § 30-3811.

The court first analyzed the issue of “interested persons.” 

Section 30-3811(a) states that “‘interested persons’ means 
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IN RE TRUST CREATED BY McGREGOR

Cite as 308 Neb. 405

persons whose consent would be required in order to achieve 

a binding settlement were the settlement to be approved by the 

court.” The court found that § 30-3811 required that all interested persons consent to the agreement, but noted that there 

are no published Nebraska cases addressing the issue of “interested persons” in the context of nonjudicial settlement agreements. As an aside, the court noted that the Nebraska Court of 

Appeals considered the issue of indispensable parties in a case 

involving parties seeking to modify a trust. 1

Regarding the case at hand, the court found that upon the 

death of Allen or Debra, the assets of the carve-out trusts 

would be distributed pursuant to a limited power of appointment or, in the event of a default, the assets would be distributed to the issue of Allen or Debra per stirpes. The court 

further found that although yet unknown and undetermined, 

the beneficiaries of the carve-out trusts are a specific class 

of beneficiaries whose rights are affected by the agreement, 

and that thus the beneficiaries qualify as “interested persons.” 

Because the unknown and undetermined beneficiaries had not 

consented to the agreement, the court determined that Allen 

failed to establish under § 30-3811 an enforceable nonjudicial 

settlement agreement.

The court then analyzed the requirements of § 30-3811(c), 

while assuming that all interested persons had consented to the 

agreement. Section 30-3811(c) states in part that “[a] nonjudicial settlement agreement is valid only to the extent it does not 

violate a material purpose of the trust . . . .” The court found 

that the agreement violates a material purpose of the Family 

Trust, because the agreement sought to change specific terms 

of the irrevocable trust in at least three respects. First, Allen 

would receive an additional tract of land which he would not 

receive under the Family Trust. Second, upon Evelyn’s death, 

Allen and Debra would receive the assets of the carve-out 

1 See In re Trust Created by Augustin, 27 Neb. App. 593, 935 N.W.2d 493 

(2019).
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IN RE TRUST CREATED BY McGREGOR

Cite as 308 Neb. 405

trusts outright rather than in trust. Third, Allen and Debra 

would be required to equalize their distributions, either through 

an allocation of debt or cash settlement. The court found that 

none of these issues came within the categories of matters 

which may be resolved through nonjudicial settlement agreements under § 30-3811(d). The court found the changes made 

by the agreement were substantial and constituted a violation 

of a material purpose of the trust, which was to leave the real 

estate in trust for the benefit of Allen and Debra during their 

lives and then pass on to their issue upon their deaths.

Allen filed an appeal. We moved the case to our docket on 

our own motion.

ASSIGNMENTS OF ERROR

Allen assigns, restated, that the court erred in (1) finding a 

lack of consent by all interested persons and (2) finding that 

the agreement altered a material purpose of the trust.

STANDARD OF REVIEW

[1,2] Trust administration matters are reviewed for error 

appearing on the record, absent an equity question. 2 When 

reviewing a judgment for errors appearing on the record, the 

inquiry is whether the decision conforms to the law, is supported by competent evidence, and is neither arbitrary, capricious, nor unreasonable. 3

[3,4] The interpretation of the words in a will or a trust 

presents a question of law. 4 In instances when an appellate 

court is required to review cases for error appearing on the 

record, questions of law are nonetheless reviewed de novo on 

the record. 5

2 See, In re Henry B. Wilson, Jr., Revocable Trust, 300 Neb. 455, 915 

N.W.2d 50 (2018); In re Trust of Shire, 299 Neb. 25, 907 N.W.2d 263 

(2018); In re Estate of Radford, 297 Neb. 748, 901 N.W.2d 261 (2017).

3 In re Trust Created by Isvik, 274 Neb. 525, 741 N.W.2d 638 (2007); In re 

Trust Created by Inman, 269 Neb. 376, 693 N.W.2d 514 (2005).

4 In re Estate of Barger, 303 Neb. 817, 931 N.W.2d 660 (2019).

5 In re Trust Created by Nabity, 289 Neb. 164, 854 N.W.2d 551 (2014).
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IN RE TRUST CREATED BY McGREGOR

Cite as 308 Neb. 405

ANALYSIS

Material Purpose of Trust

We begin our analysis by considering Allen’s second assignment of error, because its resolution is dispositive of his 

appeal. Allen argues that the county court erred in finding that 

the trust settlement agreement violates a material purpose of 

the Family Trust. Allen contends that Evelyn wanted to modify 

the trust in order to carry out Clifford’s intentions. Allen relies 

upon a recital in the agreement in which “Evelyn asserts the 

provisions for distribution of the trust estate in the [C.A. 

McGregor Trust] do not represent the intentions of [Clifford].” 

Specifically, Allen contends that modifying the terms of the 

trust to require equalization of the distributions to the carve-out 

trusts rather than making equalization dependent on the availability of liquid assets better serves Clifford’s intent to treat his 

children equally.

Although disputes involving the administration of trusts 

are encouraged to be resolved through nonjudicial means, 6

§ 30-3811 of the Nebraska Uniform Trust Code, see Neb. Rev. 

Stat. §§ 30-3801 to 30-38,110 (Reissue 2016, Cum. Supp. 2018 

& Supp. 2019), authorizes the court to determine the validity of 

a nonjudicial settlement agreement according to the provisions 

of the code or other applicable laws.

[5-8] In declining to approve the agreement, the court relied 

upon § 30-3811(c), which provides: “A nonjudicial settlement 

agreement is valid only to the extent it does not violate a 

material purpose of the trust . . . . A spendthrift provision in 

the terms of the trust is presumed to constitute a material purpose of the trust.” “Spendthrift provision” means “a term of 

6 See Unif. Trust Code § 111, comment, 7D U.L.A. 101 (2018). See, also, 

In re Trust Created by Fenske, 303 Neb. 430, 930 N.W.2d 43 (2019) 

(comments to Uniform Trust Code provide guidance as to Nebraska 

Uniform Trust Code), citing In re Trust of Shire, supra note 2; In re 

Trust Created by Isvik, supra note 3; John M. Gradwohl & William H. 

Lyons, Constitutional and Other Issues in the Application of the Nebraska 

Uniform Trust Code to Preexisting Trusts, 82 Neb. L. Rev. 312 (2003).
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IN RE TRUST CREATED BY McGREGOR

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a trust which restrains both voluntary and involuntary transfer 

of a beneficiary’s interest.” 7 “‘[T]he very nature or design of 

a trust suggests its protective nature or some other material 

purpose.’” 8 The material purposes of a trust are subject to the 

settlor’s discretion, to the extent that its purposes are lawful, 

are not contrary to public policy, are possible to achieve, and 

are for the benefit of its beneficiaries. 9

The Restatement (Second) of Trusts § 337(2) (1959) adopts 

the “material purpose” rule, which states: “If the continuance 

of the trust is necessary to carry out a material purpose of the 

trust, the beneficiaries cannot compel its termination.” 10 In In 

re Estate of Somers,

 11 the Kansas Supreme Court considered 

the issue of whether a court can terminate a spendthrift trust 

at the request of the beneficiaries, if the settlor is not available to consent to the termination. The court relied upon the 

Restatement (Second) of Trusts § 337, comment l., which proscribes the termination of spendthrift trusts, stating: “If by the 

terms of the trust . . . the interest of one or more of the beneficiaries is made inalienable . . . , the trust will not be terminated 

while such inalienable interest still exists, although all of the 

beneficiaries desire to terminate it . . . .” The court held that 

because the beneficiaries offered no evidence to rebut the presumption that the spendthrift provision was a material purpose 

of the trust, termination of the trust would frustrate a material 

purpose of the trust. 12

7 § 30-3803(17).

8 See In re Trust Created by Fenske, supra note 6, 303 Neb. at 439, 930 

N.W.2d at 49, quoting Restatement (Third) of Trusts § 65, comment d.

(2003).

9 See § 30-3830.

10 See Gradwohl & Lyons, supra note 6.

11 In re Estate of Somers, 277 Kan. 761, 89 P.3d 898 (2004).

12 Id. See, also, Neeley v. Neeley, 26 Kan. App. 2d 924, 996 P.2d 346 (2000); 

Germann v. New York Life Ins. Co., 286 S.C. 34, 331 S.E.2d 385 (S.C. 

App. 1985).
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IN RE TRUST CREATED BY McGREGOR

Cite as 308 Neb. 405

Here, we find that the trust instrument contains spendthrift provisions. During his life, Clifford reserved the right to 

revoke or amend all or any part of the trust. Upon his death, 

Clifford’s trust became irrevocable and created the irrevocable 

Family Trust. The trust instrument specifically states that it 

“shall be administered and disposed of in accordance with the 

provisions of [the] trust instrument.” The Family Trust states 

that the estate assets provided for in the carve-out trusts “shall 

remain in trust” and that the carve-out trusts “shall be irrev

ocable and shall not be revoked or amended in whole or in 

part by the trustee, beneficiary or any other person.” Clifford 

specifically stated in his trust that his intent was to have each 

carve-out trust be construed as “a non-support discretionary 

spendthrift trust that may not be reached by the beneficiaries[’] 

creditors for any reason.” The record thus makes clear that the 

overriding intent and design of the Family Trust is to hold the 

beneficiaries’ interests in trust and restrain the transfer of such 

interests. The trust settlement agreement violates this fundamental and material purpose of the trust, because the agreement distributes estate assets to the beneficiaries outright rather 

than in trust. This provision of the agreement would allow the 

assets to “be reached by the beneficiaries[’] creditors” and 

would allow Allen and Debra to transfer the assets during their 

lifetimes, which directly conflicts with the limited power of 

appointment provided by the carve-out trusts.

We find no evidence offered by Allen to rebut the presumption that the spendthrift provisions constitute a material purpose of the trust. Allen argues that the court should give weight 

to the fact Evelyn supported the agreement and asserts that 

Clifford’s trust and Evelyn’s trust were intended to be joint and 

reciprocal. However, this assertion is defeated by a detailed 

provision in Clifford’s trust which sets forth his intention to 

have his trust operate independently of Evelyn’s trust.

We conclude that the spendthrift provisions of the Family 

Trust establish a material purpose of the trust, which the settlement agreement violates by transferring the trust assets to 
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IN RE TRUST CREATED BY McGREGOR

Cite as 308 Neb. 405

Allen and Debra outright rather than in trust. Because the 

agreement violates a material purpose of the trust, under the 

requirements of § 30-3811(c), the agreement is invalid. The 

probate court did not err in declining to approve the agreement.

Interested Persons

[9] Because the probate court correctly determined that the 

settlement agreement violates a material purpose of the Family 

Trust, we need not consider Allen’s assignment of error that the 

court erred in finding that an unknown and undetermined class 

of beneficiaries was required to consent to the trust settlement 

agreement. An appellate court is not obligated to engage in an 

analysis that is not necessary to adjudicate the case and controversy before it. 13

For completeness, we note that the concept of “interested 

persons” under § 30-3811 is legally distinct from “indispen

sable parties” in the context of Neb. Rev. Stat. § 25-323 

(Reissue 2016). 14 The county court referred to indispensable 

parties only in passing while remarking on the lack of Nebraska 

precedent on the subject of “interested persons.” The court did 

not dismiss Allen’s petition based on a lack of jurisdiction due 

to the absence of an indispensable party in the case. Debra 

appeared with counsel at trial and did not appeal.

CONCLUSION

For the foregoing reason, we affirm the order of the county 

court which denied Allen’s request for approval of a nonjudicial settlement agreement.

Affirmed.

13 Benjamin M. v. Jeri S., 307 Neb. 733, 950 N.W.2d 381 (2020).

14 See In re Trust Created by Augustin, supra note 1, citing Midwest 

Renewable Energy v. American Engr. Testing, 296 Neb. 73, 894 N.W.2d 

221 (2017).