Conversion to Total Return Trust

Ronald R. Volkmer (Professor of Law, Creighton University School of Law) has recently published his article entitled Nebraska’s “Total Return Trust” Statute: Unitrust Conversion and the Challenges of Managing a Trust and Drafting a Trust, 40 Creighton L. Rev. 135 (2006).

Here is the introduction to his article:

In 2005, the Nebraska Unicameral enacted legislation that authorizes a trustee to “convert a trust to a total return trust.” This authorization to convert is contained in Nebraska Revised Statutes section 30-3119.01 * * *. This Article’s main goals are to acquaint the reader with the background for the enactment of this legislation, to examine some of the particulars of the process of conversion to a total return trust, and to place this legislation in the context of the “real world,” occupied by those who administer trusts and those who draft trusts.

To place the new legislation in its proper context, the author will review the historical developments that provide the backdrop and context for an examination of the new statute. The brief review leading up to the statute’s enactment will focus on two predominant themes: the investment duties of trustees and the historic “principal and income problem.” The “principal and income problem” finds its source in the manner in which traditional private trusts have been drafted with regard to their distributive provisions. The “problem” or tension arises out of the trustee’s duty of impartiality with regard to the competing investment objectives of the two classes of beneficiaries.

For professionals whose lives intersect with the world of trusts on a daily basis, the story to be told is likely to be a familiar one. For the general practice lawyer and the public at large the topic is a daunting one – filled with complex considerations of fiduciary administration concepts, esoteric tax rules, and a virtual sea of information and advice regarding the “total return trust.”

Others have written eloquently and passionately about the “total return trust,” producing articles replete with charts, graphs, and grids. These in-depth articles are written, by and large, for the specialist. The author’s modest goal in the present undertaking is to take the reader down the road of trust law developments in Nebraska, ending up with a discussion of the Nebraska “total return” statute and its implications for those who administer trusts and those who draft trusts. The story begins with a somewhat personal approach to the telling of recent Nebraska trust law history.