4. Corporations and Farms/Ranches Can Be Complicated In August 2023, the Nebraska Court of Appeals (in an unpublished case) addressed a trial court decision addressing years of litigation between family members concerning both a trust and a corporation that handled a farming operation. Hohenstein v. Hohenstein, Case No. A-22-108, 2023 WL 5217713 (Neb. Ct. App. Aug. 15, 2023) (unpublished). The case is a cautionary tale for those involved in matters concerning the ownership of shares within a trust. The court affirmed the trial court’s decision that the surviving spouse (although subject to undue influence by her son) and trustee of the relevant trust breached her fiduciary duties as trustee in multiple ways, including (1) failing to inform beneficiaries of the establishment of the trust and funding of the trust with the corporation stock; (2) failing to provide beneficiaries with a copy of the trust and reports or accountings of the trust; (3) failing to inform beneficiaries of agreements relating to the trust; (4) distributing assets of the trust to one son with necessity for health, education, support or maintenance (per the trust terms); (5) prematurely distributing son’s remainder interest in the trust; (6) selling assets of the trust for significantly less than fair market value and failing to inform beneficiaries of the sale; (7) failing to administer the trust in good faith, in accordance with its terms; and (8) failing to keep beneficiaries reasonably informed about the administration of the trust. The interplay of the corporation farm and the trust added to the issues the trustee faced. Lesson: Understand the interplay of the Trust Code and the corporation-related statutes in Nebraska, and be mindful of the fiduciary duties owed to trust beneficiaries and those duties owed to shareholders in a corporation. Those fiduciary duties include providing information, staying true to the terms of a trust, keeping beneficiaries reasonably informed and more. 16 NEBRASKA BANKER
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