Opinion ID: 1910412
Heading Depth: 1
Heading Rank: 14

Heading: type of trust hansen created

Text: Ruth's estate argues that a trustee's liability for abusing its discretion during a beneficiary's lifetime is not extinguished by the beneficiary's death and that the county court could not make that determination without an evidentiary hearing. The remainder beneficiaries argue that [u]nder a discretionary support trust, after a life beneficiary's death, the trustee cannot distribute assets to or for the beneficiary because the purpose of the trust related to the life beneficiary has ceased. [14] Under our de novo on the record review, we determine that the threshold issue presented by these arguments is what type of trust the settlor created. The extent of the beneficiary's interest in a trust depends upon the discretionary power that the settlor intended to grant the trustee. [15] When the parties do not claim that the terms are unclear or contrary to the settlor's actual intent, the interpretation of a trust's terms is a question of law. [16] The parties do not claim that the terms of the trust are unclear or fail to accurately reflect Hansen's intent. Thus, the type of trust he created is a question of law, and we conclude that the county court and both parties are laboring under an incorrect assumption that Hansen created a discretionary support trust, or hybrid trust. We begin with the distinction between a support trust and discretionary trust, which we recently clarified in Pohlmann v. Nebraska Dept. of Health & Human Servs. [17] : The settlor's intent determines whether a trust is classified as a support or a discretionary trust. . . . A support trust essentially provides the trustee `shall pay or apply only so much of the income and principal or either as is necessary for the education or support of a beneficiary.' ... A support trust allows a beneficiary to compel distributions of income, principal, or both, for expenses necessary for the beneficiary's support.. . . Conversely, a discretionary trust grants the trustee `uncontrolled discretion over payment to the beneficiary' and may reference the `general welfare' of the beneficiary. . . . [T]he beneficiary of a discretionary trust does not have the ability to compel distributions from the trust. . . . We further stated in Pohlmann that trust provisions granting trustees the power to pay trust assets to a beneficiary ` as it may, from time to time, deem appropriate for [ the beneficiary's ] health, education, support or maintenance' . . . do not create a right of the beneficiary to compel payments from the trust. [18] Hansen, however, did not grant the trustee the same breadth of discretion created by the trust in Pohlmann. That is, Hansen did not provide that the trustee `may, from time to time,' make determinations of his daughter's needs; rather, he provided that `the Trustee  shall ' make payments for his daughter's benefit if she should require funds in excess of the trust's income because of an accident or illness. This provision is the functional equivalent of a term providing that `the trustee  shall pay or apply only so much of the . . . principal ... as is necessary for the [medical care] ... of a beneficiary.' [19] The trustee had discretion to determine whether and how much additional support Ruth properly required as the result of an accident or illness, but it did not have discretion to determine whether to support her. [20] In general, trustees of support trusts have discretion to determine what is needed for the beneficiary's support and to make payments only for that purpose. [21] But this level of discretion does not preclude a beneficiary from seeking to show that a trustee has abused its discretion in failing to make support payments. [22] The language of Hansen's trust indicates that his primary concern was the care of his daughters in the event of an accident or illness. We conclude that Hansen authorized the trustee to exercise the same degree of discretion created by an ordinary support trust but limited Ruth's interests in the trust's principal to the support she needed upon the happening of a designated event. [23] Having established which type of trust Hansen intended to create, we turn to the county court's determination regarding the trustee's postdeath obligations.