## Facts

- A settlor created an irrevocable life-insurance trust for her four daughters, naming her attorney as trustee.
- The trust’s only assets were three life-insurance policies on the settlor’s life totaling about $8.5 million in death benefits.
- The trustee drafted the trust instrument and completed the insurance applications, which identified the trust as owner and listed a false out-of-state mailing address for policy correspondence.
- The trust included provisions stating the trustee had no duty to pay premiums, no duty to notify beneficiaries of nonpayment, and limited accounting obligations.
- The settlor paid more than $250,000 in premiums in 2009 and a similar amount in 2010; at least some funds were paid to an agent who failed to remit them to insurers.
- Because notices were sent to the false address, the settlor, trustee, and beneficiaries allegedly did not learn the policies had lapsed for nonpayment until around August 2012.
- The settlor and beneficiaries sued the trustee for breach of fiduciary duty and breach of trust, alleging the false address and lack of notice caused the loss of premiums and policies.

## Issues

1. Whether the complaint plausibly alleged breach of mandatory trustee duties under the Nebraska Uniform Trust Code despite trust terms disclaiming duties regarding premiums, notice, and reporting.
2. Whether exculpatory terms drafted by the trustee-attorney could, at the pleading stage, bar liability for alleged conduct that could amount to bad faith or reckless indifference to the trust’s purposes and beneficiaries’ interests.
3. Whether proximate causation and damages were sufficiently alleged to survive a motion to dismiss.

## Decision

- The Nebraska Supreme Court reversed the dismissal and remanded for further proceedings.
- The court held the complaint stated a plausible claim that the trustee breached mandatory statutory duties, including good-faith administration and keeping beneficiaries reasonably informed of material facts.
- The court held exculpatory provisions could not, as a matter of law, relieve a trustee from liability for breach committed in bad faith or with reckless indifference.
- The court held it was premature to decide lack of proximate cause on a motion to dismiss; the pleaded facts plausibly linked the false address and lack of notice to the lapse and loss.

## Legal Principles

- A trustee’s duties are defined by the trust instrument plus applicable statutes and common-law trust rules; trust terms do not displace mandatory statutory duties.
- Upon accepting trusteeship, a trustee must administer the trust in good faith, consistent with the trust’s terms and purposes, the beneficiaries’ interests, and the Nebraska Uniform Trust Code.
- A trustee has a duty to keep beneficiaries reasonably informed of material facts necessary to protect their interests, including timely disclosure when trust assets are in danger.
- A breach of any legally required trustee duty—whether willful, negligent, or by oversight—constitutes a breach of trust, and the trustee may be liable for damages proximately caused.
- An exculpatory clause is unenforceable to the extent it purports to relieve a trustee of liability for bad faith or reckless indifference to the trust’s purposes or beneficiaries’ interests.

## Conclusion

The court held that statutory trustee duties of good-faith administration and beneficiary disclosure could not be eliminated by trust-drafted disclaimers, and that allegations that the trustee used a false address and failed to ensure notice plausibly supported breach and causation, requiring the case to proceed beyond dismissal.


Rafert v. Meyer, 290 Neb. 219, 859 N.W.2d 332 (2015)