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Keywords

lawsuitsettlementfiduciarytrustfiduciary dutybreach of fiduciary duty
fiduciarytrustfiduciary dutybreach of fiduciary duty

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Matter of Frei Irrevocable Trust Dated October 29, 1996, 133 Nev. 50, 390 P.3d 646

Facts

Emil Frei and his wife Adoria created the Frei Irrevocable Trust in 1996, naming their ten children as equal beneficiaries. After Adoria's death in 2009, her son Stephen successfully petitioned to modify the trust with Emil's consent, allowing beneficiaries to compel distributions. Stephen later settled lawsuits against him, pledging his interest in the trust as security. After Emil's death in 2013, Stephen did not receive his share, leading him to petition the court to compel repayment of funds paid on his behalf and to remove the trustee.

Emil Frei and his wife Adoria created the Frei Irrevocable Trust in 1996, naming their ten children as equal beneficiaries.

Issue

Whether the irrevocable spendthrift trust could be modified by the survivor of two settlors and interested beneficiaries, and whether the beneficiary was judicially estopped from arguing against the validity of the modifications.

Whether the irrevocable spendthrift trust could be modified by the survivor of two settlors and interested beneficiaries, and whether the beneficiary was judicially estopped from arguing against the validity of the modifications.

Rule

An irrevocable trust may be amended by a settlor and beneficiary as long as nonconsenting beneficiaries' interests are not prejudiced. A spendthrift clause becomes invalid once a beneficiary is entitled to compel distribution of their share.

An irrevocable trust may be amended by a settlor and beneficiary as long as nonconsenting beneficiaries' interests are not prejudiced.

Analysis

The court applied the Restatement (Second) of Trusts § 338, allowing for the modification of the trust with the consent of the settlor and beneficiaries. It found that the 2009 modification did not limit the beneficiaries' ability to compel distributions, thus invalidating the spendthrift protections. The court also determined that Stephen's prior agreement to use his trust share as security for a settlement constituted consent to the payments made by the trustee.

The court applied the Restatement (Second) of Trusts § 338, allowing for the modification of the trust with the consent of the settlor and beneficiaries.

Conclusion

The court affirmed the district court's ruling, concluding that the modifications to the trust were valid and that Stephen was judicially estopped from contesting them.

The court affirmed the district court's ruling, concluding that the modifications to the trust were valid and that Stephen was judicially estopped from contesting them.

Who won?

The prevailing party was the trustee, Premier Trust, Inc., as the court upheld the validity of the trust modifications and found no breach of fiduciary duty.

The prevailing party was the trustee, Premier Trust, Inc., as the court upheld the validity of the trust modifications and found no breach of fiduciary duty.

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