After 26 years, Minnesota’s Trust Law has been upgraded to recognize dramatic changes which have occurred in trust administration. Minnesota’s updates, initially drafted by the MSBA Probate and Trust Section and based on the Uniform Law published by the Uniform Law Commission, was signed by Governor Dayton in March 2015, and goes into effect for all trusts (whether established before or after) on January 1, 2016. In this and subsequent articles, we will summarize significant aspects of the new law, and invite you to contact our estate planning department if you have any particular questions or comments.
At this writing, the Uniform Trust Code has been adopted, with various modifications, by approximately 31 jurisdictions, and is pending in others. Although trust law is state-specific, there is a great deal of uniformity among the states that have adopted their version of the Uniform Act. The new law is a tremendous leap from the old law, and will be considered more user-friendly because of its organizational structure and more specific instructions for all parties dealing with trusts subject to Minnesota Law. The new Minnesota Trust Code also includes changes to Minnesota’s versions of the Prudent Investor Act, Uniform Principal and Income Act and Powers of Appointment. Our series of articles will identify the important aspects of this new Minnesota Trust Law, which reflects many of the national trends that have developed over the last 26 years.
MN – SF578
To start, here is a brief summary, partially revised by us, prepared for use by the Minnesota Senate:
ARTICLE 1 – GENERAL PROVISIONS
“Minnesota Trust Code”; specifying applicability; defining terms; providing for governing law, rules, administration, notices, settlement agreements, and rules of construction.
ARTICLE 2 – JUDICIAL PROCEEDINGS
Specifying role of court in administration of trust and nature of judicial proceedings, subject matter of judicial proceedings, orders for hearing and notice, order and appeal, court-supervised trusts, personal jurisdiction over trustee and beneficiary, venue, and application.
ARTICLE 3 – REPRESENTATION
Specifying representation basic effect, representation by holder of a general power, fiduciaries and parents, persons having substantially identical interest, and court.
ARTICLE 4 – CREATION, VALIDITY, MODIFICATION, AND TERMINATION OF TRUST
Specifying methods of creating trusts, requirements for creation, trusts created in other jurisdictions, trust purposes, creation of trust induced by fraud, evidence of oral trust, noncharitable trust without ascertainable beneficiary, trust termination or modification conditions, reformation to correct mistakes, and combination and division of trusts.
ARTICLE 5 – SPENDTHRIFT TRUSTS; CREDITOR’S CLAIMS
Providing a spendthrift provision, right to compel distribution, creditor claims, overdue distribution, and personal obligations of trustee.
ARTICLE 6 – REVOCABLE TRUSTS
Specifying requirements and conditions for capacity of settlor of revocable trust, revocation or amendment of revocable trusts, written statements regarding tangible personal property, settlor powers, limitation on action contesting validity of revocable trust, and distribution of trust property.
ARTICLE 7 – OFFICE OF TRUSTEE
Providing for accepting or declining trusteeship, trustee’s bond, cotrustees, vacancies, successor appointment, trustee resignation and removal, property delivery, trustee compensation, and expense reimbursement.
ARTICLE 8 – DUTIES AND POWERS OF TRUSTEE
Specifying duties to administer trust, loyalty, impartiality, prudence, delegation, directed trusts, property control, record keeping and property identification, claim enforcement, report duty, discretionary powers, general and specific trustee powers, and distribution upon termination.
ARTICLE 9 – PRUDENT INVESTOR ACT RECODIFICATION
“Minnesota Prudent Investor Act”; specifying investment and management of trust assets.
ARTICLE 10 – LIABILITY OF TRUSTEES AND RIGHTS OF PERSON DEALING WITH TRUSTEE
Providing remedies for breach of trust, damages for breach, remedies, attorney fees and costs, limitation of action, reliance on trust instrument, events affecting administration, exculpation, beneficiary consent, personal liability limitation, interest, protection, certificate, and affidavit.
ARTICLE 11 – UNIFORM PRINCIPAL AND INCOME ACT RECODIFICATION
“Uniform Principal and Income Act”; defining terms; specifying trustee duties, income, principal, charges, when right to income arises and apportionment of income, income earned during administration, entity distributions, bond premium, sole proprietorships, natural resources disposition, timber, annuities, compensation, retirement plans, trustee power to adjust, charges against income and principal, nontrust estates, application, income or principal ascertainment, and uniformity of interpretation.
ARTICLE 12 – MISCELLANEOUS PROVISIONS RECODIFICATION
Providing for a memorial fund, suspension of the power of alienation, trusts forming part of retirement plans, trust not affected, trusts linked to public assistance eligibility, supplemental needs trusts, public health care programs, effect of dissolution of marriage, settlor and agents of settlor, bona fide purchasers protected, certificate of custodianship, and affidavit. Captures the provisions of the current trust law that were not addressed in the new Uniform Trust Code.
ARTICLE 13 – APPLICATION AND CONSTRUCTION OF TRUST CODE
Specifying uniformity of application, construction and severability. The new law applies to all Trusts on January 1, 2016, whenever created, and judicial proceedings commenced on or after January 1, 2016. Also applies to judicial proceedings in progress on such date, unless ordered otherwise by the Court.
ARTICLE 14 – POWERS OF APPOINTMENT
Specifying common law of powers retained, varieties of power, extent of done authority to appoint or contract to appoint an estate, exercise of a power, trust decanting, rights of creditors, revocation and release, and rule against perpetuities; defining terms; repealing powers of appointment. Replaces Minn. Stat. § 502, and is an adaptation of the New York statutes governing powers of appointment.
ARTICLE 15 – CONFORMING CHANGES
Making conforming changes identified by the Revisor’s Office to update other statutes that will cross-reference the newly-renumbered trust law.
ARTICLE 16 – REPEALER
Repealing trust statutory provisions; in old § 501B, other than provisions related to charitable trusts and their supervision (501B.31-45), and real property court proceedings (501B.46-53).
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This blog article is the first of a six-part series focused on Minnesota’s new trust code. Below are links to other articles from this series:
Part Two – “Minnesota Trust Code: Unchanged Provisions” https://hjlawfirm.com/blog/244-minnesota-trust-code-unchanged-provisions
Part Three – “Decanting”
https://hjlawfirm.com/blog/247-minnesota-trust-code-decanting-part
Please stay tuned for future postings in this series!