November 21, 2025

Vol. XLII, No. 11

Nebraska Uniform Special Deposits Act

The Nebraska Legislature passed LB 231, introduced by Senator Bob Hallstrom (Syracuse), officially adopting the Uniform Special Deposits Act (USDA), a model law developed by the Uniform Law Commission (ULC) to resolve longstanding legal uncertainties surrounding special deposits. The law went into effect on September 2, 2025. In 2021, the Nebraska Court of Appeals issued an opinion in Ogallala Livestock Auction Market v. Leonard, 30 Neb. App. 335 (2021). In that case, a cattle and livestock broker purchased cattle and other livestock for third-party buyers on a commission basis. The broker's "arrangements" with his bank involved an account which consistently had a negative balance. Typically, checks would be drawn upon a negative balance on the account, the broker would verify that deposits were forthcoming, and the checks would be honored by the bank. At some point, the bank dishonored certain checks drawn on the broker's account and utilized the deposited funds to set off outstanding fees and interest the broker owed on his account. This led to a lawsuit, which could have been avoided had the USDA been in place.

Special deposits are bank-held funds designated for a specific purpose, where the rightful recipient is determined only after a specified contingency occurs. These deposits are commonly used in commercial and legal contexts, such as tenant security deposits, escrow arrangements, and class action settlements. However, the ULC has asserted that broader use has been hindered by inconsistent state laws and outdated case law interpretations.

The USDA provides Nebraska banks with a clear and uniform legal framework for handling special deposits. Most importantly, the Act is "opt-in". Banks and their customers must expressly state in the account agreement that the deposits are governed by the USDA. This preserves flexibility, allowing banks to offer special deposit products without disrupting existing account structures or relationships. To qualify as a special deposit under the Act, five criteria must be met: (1) the deposit must be governed by an account agreement, designating it as "special"; (2) it must benefit at least two parties (one of whom may be the depositor); (3) it must be denominated in a government-authorized medium of exchange; (4) it must serve a permissible purpose (such as escrow, security, or settlement); and (5) it must be subject to a contingency that triggers the bank's obligation to pay.

The USDA introduces several important legal protections. First, it makes special deposits "bankruptcy remote," meaning neither the depositor nor the beneficiary holds a property interest in the deposit itself - only the right to receive payment after the contingency occurs. This shields the funds from being swept into a bankruptcy estate. Second, it protects special deposits from premature creditor process. Creditors cannot freeze or garnish the deposit until the bank is obligated to pay a beneficiary, preserving the deposit's intended purpose. Third, the Act prohibits banks from exercising set-off or recoupment rights against special deposits for unrelated debts, except in narrowly defined circumstances such as fees directly related to the deposit or reversals due to mistake. Fourth, the Act clarifies that banks to do not owe fiduciary duties to depositors or beneficiaries in connection with special deposits. Instead, the relationship is strictly debtor-creditor once the bank becomes obligated to pay.

​The USDA also addresses operational concerns. It allows banks to rely on records presented in accordance with the account agreement to determine whether payment is due, and limits liability to actual damages caused by noncompliance, excluding punitive, special, or consequential damages unless required by other law. Unless otherwise specified in the account agreement, special deposits terminate five years after funding. If no beneficiary can be identified at termination, any remaining balance is returned to the depositor.

For Nebraska banks, the USDA opens the door to offering new deposit products tailored to commercial, legal, and financial market needs. Institutions should consider updating account agreement templates to include USDA opt-in language, training staff on the criteria and protections of special deposits, and reviewing internal procedures for managing contingencies and payment obligations.

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The foregoing Compliance Update is for informational purposes only and does not constitute legal advice. As a reminder, the NBA general counsel is the attorney for the Nebraska Bankers Association, not its member banks. The general counsel is available to assist members with finding resources to help answer their questions. However, for specific legal advice about specific situations, members must consult and retain their own attorney.