In Nebraska, as in many other states, a person, during his lifetime, may dispose of personal property either by gift or otherwise so as to completely vitiate the statutory share of a surviving spouse. One method employed by donors in attempting to effect inter vivos transfers of property is the so-called living revocable trust. This method is particularly attractive to the settlor since he not only enjoys a power of revocation but may also reserve a life interest in the income arising from the investment of the trust res. While most courts agree that such a trust is a valid nontestamentary disposition, there seems to be some disagreement as to whether this type of trust device should also prevail against the claim of a surviving spouse. The dispute on this question does not arise from a propensity by some courts to restrict the alienability of property in the favor of the surviving spouse. The dispute arises because some courts have held that in a revocable inter vivos trust, the settlor, so far as his or her spouse is concerned, has not in fact departed with the substantial rights and powers of ownership so as to effectuate an alienation of the trust property.

I. Introduction

II. The Fraudulent Transfer Test

III. The Illusory Transfer Test

IV. Some Ramifications of the Illusory Test

V. Acceptance and Growth of the Illusory Doctrine

VI. When Is a Trust Illusory

VII. Conclusion