The adoption of the Uniform Trust Code (UTC) in Minnesota results in broad changes and modernization to Minnesota law. The changes give practitioners more clear and concise guidance on Trust issues and management. However, not all aspects of the trust law have been changed. Where the new Code is silent, the common law and principles of equity continue to be effective. In other areas, the Minnesota law was deliberately unchanged either because Minnesota chose not to adopt a specific section, or because the UTC section is the same or substantially similar to the prior Minnesota law.
Among the areas that are substantially the same are the following:
Venue refers to the appropriate place to commence a court action. The statutory provisions regarding venue in the new code are primarily the same as the venue provisions in the previous Minnesota law. For a trust created by will, the proceeding may be brought: 1) in the district court of the county where the will is probated; 2) the district court of the county where a trustee having custody of trust assets resides or has a trust office; or 3) the district court of the county where the trust’s principal place of administration will be. For non-testamentary trusts, proceedings may be brought: 1) in the district court of the county where a trustee having custody of trust assets resides; or 2) the district court of the county which is or will be the trust’s principal place of administration. For a trust holding real property, venue is the district court for the county in which the real property is situated. If there have been prior court proceedings in this state, proceedings must be filed in the court in which the prior proceedings were held.
The sections of the UTC regarding charitable trusts and setting forth the doctrine of cy pres for charitable trusts were not enacted. Minnesota’s previous law regarding charitable trusts has been retained, and was considered adequate by the Minnesota Attorney General.
Because of concerns by the Minnesota Department of Human Services regarding Medical Assistance planning, Minnesota chose not to enact the section of the UTC authorizing trusts for animals. The Animal Law section of the Bar will continue to advocate for this and work out differences with the Department of Human Services.
Minnesota’s Spendthrift Protection
A spendthrift provision in a trust prevents creditors from attaching the interest of the beneficiary before it is distributed. Minnesota has a long history of enforcing spendthrift provisions and protections. Therefore, Minnesota chose not to adopt the UTC section which provides the default rule that the assets are reachable by creditors. Minnesota also chose not to adopt the UTC exceptions to the enforceability of a spendthrift provision. The new law also codifies what has long been recognized in Minnesota common law: Trust terms providing that the interest of a beneficiary is held subject to a “spendthrift trust,” or words of similar import, are sufficient to create protection.
The new statute does incorporate a concept found in the UTC providing that a trust has a valid spendthrift provision if: 1) the trust includes a provision that restricts both voluntary and involuntary transfers of a beneficiary’s interest; or 2) by the terms of the trust instrument the settlor manifests an intent to impose restrictions on both voluntary and involuntary transfers of a beneficiary’s interest. The new statute goes on to provide that neither a valid disclaimer nor the exercise of a limited power of appointment is a voluntary transfer. A beneficiary may not transfer an interest in a trust in violation of a valid spendthrift provision, and a creditor may not reach the interest or a distribution before receipt by the beneficiary.
Creditors of the Settlor
The statutory law regarding the rights of the Settlor’s creditors to reach trust assets was not materially changed, providing that during the life of the Settlor, the assets in a revocable trust are subject to the claims of the Settlor’s creditors. With respect to an irrevocable trust, a creditor may reach the maximum amount that can be distributed to the Settlor. Upon the death of a Settlor, the property of a revocable trust remains subject to creditor claims.
The UTC provides that when a trust does not otherwise state whether or not it is revocable, the presumption is that it is revocable. This is opposite of the Minnesota common law presumption and therefore the new law provides that unless the terms of a trust expressly provide that it is revocable, the trust is presumed irrevocable.
Section 501.0703 codifies current Minnesota law with regard to actions by co-trustees. A trustee may delegate performance of any duty to a co-trustee as prudent under the circumstances. A trustee who does not join in the action of a co-trustee is not liable for the action.
Specific Trustee Powers
The specific powers of a Trustee enumerated in the new law are very similar to the powers defined under the previous Minnesota law.
Attorney’s Fees and Costs
Minnesota chose not to adopt UTC language regarding attorney’s fees. Minnesota favors the “American Rule” where each party bears their own attorney fees in the absence of a statutory or contractual exception. The UTC departs from this long standing common law principle.
While much was changed by the adoption of the UTC (see future blog articles), Minnesota law continues to recognize long standing Minnesota principles.
This blog article is the second of a six-part series focused on Minnesota’s new trust code. Below are links to other articles from this series:
Part One – “New trust code adopted by Minnesota” https://www.hjlawfirm.com/blog/221-new-trust-code-adopted-by
Part Three – “Decanting”
Please stay tuned for future postings in this series!