§ 30-3850 — (UTC 505) Creditor's claim against settlor

Nebraska § 30-3850

• Jurisdiction: Nebraska
• Ch. 30: Decedents' Estates; Protection of Persons and Property

Text

(UTC 505) (a) Whether or not the terms of a trust contain a spendthrift provision, the following rules apply:
(1) During the lifetime of the settlor, the property of a revocable trust is subject to claims of the settlor's creditors.
(2) With respect to an irrevocable trust:
(A) A creditor or assignee of the settlor may reach the maximum amount that can be distributed to or for the settlor's benefit. If a trust has more than one settlor, the amount the creditor or assignee of a particular settlor may reach may not exceed the settlor's interest in the portion of the trust attributable to that settlor's contribution.
(B) A trustee's discretionary authority to pay directly to the taxing authorities or to reimburse the settlor for any tax on trust income or principal, that is payable by the settlor under the law imposing the tax, shall not be considered to be an amount that can be distributed to or for the settlor's benefit, and a creditor or assignee of the settlor shall not be entitled to reach any amount solely by reason of this discretionary authority.
(C) Anything in the Nebraska Uniform Trust Code to the contrary notwithstanding, the settlor shall not be considered to be a beneficiary of an irrevocable trust solely by reason of the trustee's authority to pay directly to the taxing authorities or to reimburse the settlor for any tax on trust income or principal that is payable by the settlor under the law imposing the tax, whether such authority arises pursuant to subsection (b) of section 30-3881 or the terms of the trust.
(3) After the death of a settlor, and subject to the settlor's right to direct the source from which liabilities will be paid, the property of a trust that was revocable at the settlor's death is subject to claims of the settlor's creditors, costs of administration of the settlor's estate, the expenses of the settlor's funeral and disposal of remains, and statutory allowances to a surviving spouse and children to the extent the settlor's probate estate is inadequate to satisfy those claims, costs, expenses, and allowances. A proceeding to assert the liability for claims against the estate and statutory allowances may not be commenced unless the personal representative has received a written demand by the surviving spouse, a creditor, a child, or a person acting for a child of the decedent. The proceeding must be commenced within one year after the death of the decedent. Sums recovered by the personal representative of the settlor's estate must be administered as part of the decedent's estate. The liability created by this subdivision shall not apply to any assets to the extent that such assets are otherwise exempt under the laws of this state or under federal law.
(4) A beneficiary of a trust subject to subdivision (a)(3) of this section who receives one or more distributions from the trust after the death of the settlor against whom a proceeding to account is brought may join as a party to the proceeding any other beneficiary who has received a distribution from that trust or any other trust subject to subdivision (a)(3) of this section, any surviving owner or beneficiary under sections 30-2734 to 30-2745 of any other security or securities account of the decedent or proceeds thereof, or a surviving party or beneficiary of any account under sections 30-2716 to 30-2733 .
(5) Unless a written notice asserting that a decedent's probate estate is insufficient to pay allowed claims and statutory allowances has been received from the decedent's personal representative before the distribution, a trustee is released from liability under this section on any assets distributed to the trust's beneficiaries.
(b) For purposes of this section:
(1) during the period the power may be exercised, the holder of a power of withdrawal is treated in the same manner as the settlor of a revocable trust to the extent of the property subject to the power; and
(2) upon the lapse, release, or waiver of the power, the holder is treated as the settlor of the trust only to the extent the value of the property affected by the lapse, release, or waiver exceeds the greater of the amount specified in section 2041(b)(2), 2503(b), or 2514(e) of the Internal Revenue Code as defined in section 49-801.01 .

Legislative History

Source: Laws 2003, LB 130, § 50; Laws 2022, LB707, § 32. Annotations: A creditor does not fail to comply with the notice provisions contained in subsection (a)(3) of this section merely because the amount requested by the creditor does not match the amount ultimately recovered after trial. Hastings State Bank v. Misle, 282 Neb. 1, 804 N.W.2d 805 (2011). Under subsection (a)(3) of this section, a surviving spouse's elective share is neither a statutory allowance nor a claim against the estate. In re Estate of Chrisp, 276 Neb. 966, 759 N.W.2d 87 (2009). Under this section, a personal representative has no interest in the decedent's validly created nontestamentary trust except to assert the trust's liability for this section's specified claims against the estate and statutory allowances that the decedent's estate is inadequate to satisfy. In re Estate of Chrisp, 276 Neb. 966, 759 N.W.2d 87 (2009). Whether premarital trust assets are part of the augmented estate for determining a surviving spouse's elective share is governed by section 30-2314 of the Nebraska Probate Code, not this section. In re Estate of Chrisp, 276 Neb. 966, 759 N.W.2d 87 (2009).