Minnesota Legislature
Office of the Revisor of Statutes
Minnesota Session Laws - 1996, Regular Session
Key: (1) language to be deleted (2) new language
KEY: stricken = old language to be removed
underscored = new language to be added
CHAPTER 314-H.F.No. 1998
An act to trusts; regulating the investment and
management of trust assets; providing standards;
amending Minnesota Statutes 1994, sections 48.38,
subdivision 6; 48.84; 317A.161, subdivision 24;
525.56, subdivision 4; and 529.06; proposing coding
for new law in Minnesota Statutes, chapter 501B;
repealing Minnesota Statutes 1994, sections 501B.10;
and 501B.11.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
Section 1. Minnesota Statutes 1994, section 48.38,
subdivision 6, is amended to read:
Subd. 6. It may invest all moneys received by it in trust,
in authorized securities, and shall be responsible to the owner
or cestui que trust for the validity, regularity, quality,
value, and genuineness of these investments and securities at
the time made and for the safekeeping of these securities and
the evidences thereof. When special directions are given in any
order, judgment, decree, will, or other written instrument as to
the particular manner or the particular class or kind of
securities or property in which any investment shall be made, it
shall follow this direction and, in such case, it shall not be
further responsible by reason of the performance of the trust.
It may, in its discretion, retain and continue any
investment and security or securities coming into its possession
in any fiduciary capacity. For the faithful discharge of its
duties and the discharge of its trust, it shall be entitled to
reasonable compensation or such amount as has been or may be
agreed upon by the parties and all necessary expenses, with
legal interest thereon.
In the absence of an express prohibition in the trust
instrument, the trustee may acquire and retain securities of any
open-end or closed-end management type investment company or
investment trust registered under the Federal Investment Company
Act of 1940. The fact that the banking institution, or any
affiliate of the banking institution, is providing services to
the investment company or trust as investment advisor, sponsor,
broker, distributor, custodian, transfer agent, registrar, or
otherwise, and receiving compensation for the services shall not
preclude the trustee from investing in the securities of that
investment company or trust. The banking institution shall
disclose to all current income beneficiaries of the trust the
rate, formula, and method of the compensation. This paragraph
does not alter the degree of care and judgment required of
trustees by section 501B.10, subdivision 1 501B.151.
No compensation or commission paid or agreed to be paid to
it for the negotiation of any loan or the execution of any trust
shall be deemed interest within the meaning of the law, nor
shall any excess thereof over the legal rate be deemed usury.
Sec. 2. Minnesota Statutes 1994, section 48.84, is amended
to read:
48.84 [CORPORATE TRUSTEE; TRUST FUNDS, INVESTMENT,
COMMINGLING.]
Any trust company or state bank which is permitted to
exercise trust powers under the provisions of sections 48.37 to
48.47 inclusive may invest all moneys received by it in trust in
authorized securities, and shall be responsible to the owner or
cestui que trust for the validity, regularity, quality, value,
and genuineness of these investments and securities so made, and
for the safekeeping of the securities and evidences thereof. In
the absence of an express prohibition in the trust instrument,
the trustee may acquire and retain securities of any open-end or
closed-end management type investment company or investment
trust registered under the Federal Investment Company Act of
1940. The fact that the banking institution, or any affiliate
of the banking institution, is providing services to the
investment company or trust as investment advisor, sponsor,
broker, distributor, custodian, transfer agent, registrar, or
otherwise, and receiving compensation for the services shall not
preclude the trustee from investing in the securities of that
investment company or trust. The banking institution shall
disclose to all current income beneficiaries of the trust the
rate, formula, and method of the compensation. This paragraph
does not alter the degree of care and judgment required of
trustees by section 501B.10, subdivision 1 501B.151. When
special directions are given in any order, judgment, decree,
will, or other written instrument as to the particular manner or
the particular class or kind of securities or property in which
any investment shall be made, it shall follow such directions,
and in such case it shall not be further responsible by reason
of the performance of such trust. In all other cases it may
invest funds held in any trust capacity in authorized securities
using its best judgment in the selection thereof, and shall be
responsible for the validity, regularity, quality, and value
thereof at the time made, and for their safekeeping. Whether it
be the sole trustee or one of two or more cotrustees, it may
invest in fractional parts of, as well as in whole, securities,
or may commingle funds for investment. If it invests in
fractional parts of securities or commingles funds for
investment, all of the fractional parts of such securities, or
the whole of the funds so commingled shall be owned and held by
the trust company or state bank in its several trust capacities,
and it shall be liable for the administration thereof in all
respects as though separately invested; provided, that not more
than $100,000, at the cost price of such investments, shall be
so invested for any one trust at any one time in fractional
parts or as commingled funds for investment by a trust company
or state bank having capital and surplus of less than $500,000,
unless the authority to invest in fractional parts or as
commingled funds be given in the order, judgment, decree, will,
or other written instrument governing such trust. Funds so
commingled for investment shall be designated collectively as a
common trust fund. Such trust company or state bank shall
maintain such common trust fund in conformity with the rules and
regulations prevailing from time to time of that federal
governmental agency which regulates the collective investment of
trust funds by national banks. It may, in its discretion,
retain and continue any investment and security or securities
coming into its possession in any fiduciary capacity. The
foregoing shall apply as well whether a corporate trustee is
acting alone or with an individual cotrustee.
Sec. 3. Minnesota Statutes 1994, section 317A.161,
subdivision 24, is amended to read:
Subd. 24. [MAY INVEST TRUST PROPERTY.] Except where the
trust instrument prescribes otherwise, a corporation may invest
trust property or its proceeds in accordance with section
501B.10 501B.151.
Sec. 4. [501B.151] [INVESTMENT AND MANAGEMENT OF TRUST
ASSETS.]
Subdivision 1. [PRUDENT INVESTOR RULE.] (a) Except as
otherwise provided in subsection (b), a trustee who invests and
manages trust assets shall comply with the prudent investor rule
set forth in this section.
(b) The prudent investor rule, a default rule, may be
expanded, restricted, eliminated, or otherwise altered by the
provisions of a trust. A trustee is not liable to a beneficiary
to the extent that the trustee acted in reasonable reliance on
the provisions of the trust.
Subd. 2. [STANDARD OF CARE; PORTFOLIO STRATEGY; RISK AND
RETURN OBJECTIVES.] (a) A trustee shall invest and manage trust
assets as a prudent investor would, by considering the purposes,
terms, distribution requirements, and other circumstances of the
trust. In satisfying this standard, the trustee shall exercise
reasonable care, skill, and caution.
(b) A trustee's investment and management decisions
respecting individual assets must be evaluated not in isolation
but in the context of the trust portfolio as a whole and as a
part of an overall investment strategy having risk and return
objectives reasonably suited to the trust.
(c) The circumstances that a trustee may consider in making
investment decisions include, without limitation, the following:
(1) general economic conditions;
(2) the possible effect of inflation;
(3) the expected tax consequences of investment decisions
or strategies;
(4) the role that each investment or course of action plays
within the overall trust portfolio;
(5) the expected total return from income and the
appreciation of capital;
(6) other resources of the beneficiaries known to the
trustee, including earning capacity;
(7) needs for liquidity, regularity of income, and
preservation or appreciation of capital; and
(8) an asset's special relationship or special value, if
any, to the purposes of the trust or to one or more of the
beneficiaries if consistent with the trustee's duty of
impartiality.
(d) A trustee may invest in any kind of property or type of
investment consistent with the standards of this section.
(e) A trustee who has special skills or expertise, or is
named trustee in reliance upon the trustee's representation that
the trustee has special skills or expertise, has a duty to use
those special skills or expertise.
Subd. 3. [DIVERSIFICATION.] A trustee shall diversify the
investments of the trust unless the trustee reasonably
determines that, because of special circumstances, the purposes
of the trust are better served without diversifying.
Subd. 4. [DUTIES AT INCEPTION OF TRUSTEESHIP.] Within a
reasonable time after accepting a trusteeship or receiving trust
assets, a trustee shall review the trust assets and make and
implement decisions concerning the retention and disposition of
assets, in order to bring the trust portfolio into compliance
with the purposes, terms, distribution requirements, and other
circumstances of the trust, and with the requirements of this
section.
Subd. 5. [INVESTMENT COSTS.] In investing and managing
trust assets, a trustee may only incur costs that are
appropriate and reasonable in relation to the assets, the
purposes of the trust, and the skills of the trustee.
Subd. 6. [REVIEWING COMPLIANCE.] Compliance with the
prudent investor rule is determined in light of the facts and
circumstances existing at the time of a trustee's decision or
action and not by hindsight. The prudent investor rule is a
test of conduct and not of resulting performance.
Subd. 7. [LANGUAGE INVOKING STANDARD.] The following terms
or comparable language in the provisions of a trust, unless
otherwise limited or modified, authorizes any investment or
strategy permitted under this section: "investments permissible
by law for investment of trust funds," "legal investments,"
"authorized investments," "using the judgment and care under the
circumstances then prevailing that persons of prudence,
discretion, and intelligence exercise in the management of their
own affairs, not in regard to speculation but in regard to the
permanent disposition of their funds, considering the probable
income as well as the probable safety of their capital,"
"prudent man rule," "prudent trustee rule," "prudent person
rule," and "prudent investor rule."
Subd. 8. [DISPOSAL OF PROPERTY.] Unless the trust
instrument or a court order specifically directs otherwise, a
trustee need not dispose of any property, real, personal, or
mixed, or any kind of investment, in the trust, however
acquired, until the trustee determines in the exercise of a
sound discretion that it is advisable to dispose of the
property. Nothing in this subdivision excuses the trustee from
the duty to exercise discretion at reasonable intervals and to
determine at those intervals the advisability of retaining or
disposing of property.
Subd. 9. [NO LIMITATION ON POWERS OF COURT.] This section
does not restrict the power of a court of proper jurisdiction to
permit a trustee to deviate from the terms of a will, agreement,
court order, or other instrument relating to the acquisition,
investment, reinvestment, exchange, retention, sale, or
management of trust property.
Subd. 10. [TRUSTEES DEFINED.] As used in this section,
"trustee" means individual trustees and corporations having
trust powers acting under wills, agreements, court orders, and
other instruments, whether existing on the effective date of
this section or made at a later time.
Subd. 11. [INVESTMENT COMPANIES.] (a) In the absence of an
express prohibition in the trust instrument, the trustee may
acquire and retain securities of any open-end or closed-end
management type investment company or investment trust
registered under the Federal Investment Company Act of 1940.
The fact that a trustee which is a banking institution, as
defined in section 48.01, subdivision 2, or any affiliate of a
trustee which is a banking institution, is providing services to
the investment company or trust as investment advisor, sponsor,
broker, distributor, custodian, transfer agent, registrar, or
otherwise, and receiving compensation for the services shall not
preclude the trustee from investing in the securities of that
investment company or trust. A trustee which is a banking
institution shall disclose to all current income beneficiaries
of the trust the rate, formula, and method of the compensation.
(b) This subdivision does not alter the degree of care and
judgment required of trustees under this section.
Subd. 12. [APPLICATION TO EXISTING TRUSTS.] This section
applies to trusts existing on and created after its effective
date. As applied to trusts existing on its effective date, this
section governs only decisions or actions occurring after that
date.
Subd. 13. [SHORT TITLE.] This section may be cited as the
"Minnesota prudent investor act."
Sec. 5. [501B.152] [AGENTS OF TRUSTEE.]
(a) Unless prohibited or otherwise restricted by the terms
of the trust instrument, a trustee may delegate to any person,
even if the person is associated with the trustee, any trust
function that a prudent person of comparable skills could
properly delegate under the circumstances. The trustee shall
exercise reasonable care, skill, and caution in:
(1) selecting an agent;
(2) establishing the scope and terms of the delegation,
consistent with the purposes and terms of the trust; and
(3) periodically reviewing the agent's actions in order to
monitor the agent's performance and compliance with the terms of
the delegation.
(b) In performing a delegated trust function, an agent owes
a duty to the trust to comply with the terms of the delegation
and to act in a manner consistent with the purposes and terms of
the trust. This duty shall be enforced by the trustee.
(c) A trustee who complies with the requirements of
paragraph (a) is not liable to the beneficiaries or to the trust
for the decisions or actions of the agent to whom the trust
function was delegated.
(d) By accepting the delegation of a trust function from
the trustee of a trust that is subject to the laws of this
state, an agent submits to the jurisdiction of the courts of
this state.
Sec. 6. Minnesota Statutes 1994, section 525.56,
subdivision 4, is amended to read:
Subd. 4. [DUTIES OF GUARDIAN OR CONSERVATOR OF THE
ESTATE.] The court may appoint a guardian of the estate if it
determines that all the powers and duties listed in this
subdivision are needed to provide for the needs of the
incapacitated person. The court may appoint a conservator of
the estate if it determines that a conservator is necessary to
provide for the needs of the incapacitated person through the
exercise of some, but not all, of the powers and duties listed
in this subdivision. The duties and powers of a guardian or
those which the court may grant to a conservator include, but
are not limited to:
(1) The duty to pay the reasonable charges for the support,
maintenance, and education of the ward or conservatee in a
manner suitable to the ward's or conservatee's station in life
and the value of the estate. Nothing herein contained shall
release parents from obligations imposed by law for the support,
maintenance, and education of their children. The guardian or
conservator has no duty to pay for these requirements out of
personal funds. Wherever possible and appropriate, the guardian
or conservator should meet these requirements through
governmental benefits or services to which the ward or
conservatee is entitled, rather than from the ward's or
conservatee's estate. Failure to satisfy the needs and
requirements of this clause shall be grounds for removal, but
the guardian or conservator shall have no personal or monetary
liability;
(2) The duty to pay out of the ward's or conservatee's
estate all just and lawful debts of the ward or conservatee and
the reasonable charges incurred for the support, maintenance,
and education of the ward's or conservatee's spouse and
dependent children and, upon order of the court, pay such sum as
the court may fix as reasonable for the support of any person
unable to earn a livelihood who is legally entitled to support
from the ward or conservatee;
(3) The duty to possess and manage the estate, collect all
debts and claims in favor of the ward or conservatee, or, with
the approval of the court, compromise them, institute suit on
behalf of the ward or conservatee and represent the ward or
conservatee in any court proceedings, and invest all funds not
currently needed for the debts and charges named in clauses (1)
and (2) and the management of the estate, in accordance with the
provisions of sections 48.84 and 501B.10, subdivision 1
501B.151, or as otherwise ordered by the court. The standard of
a fiduciary shall be applicable to all investments by a guardian
or conservator. A guardian or conservator shall also have the
power to purchase certain contracts of insurance as provided in
section 50.14, subdivision 14, clause (b);
(4) Where a ward or conservatee has inherited an undivided
interest in real estate, the court, on a showing that it is for
the best interest of the ward or conservatee, may authorize an
exchange or sale of the ward's or conservatee's interest or a
purchase by the ward or conservatee of any interest other heirs
may have in the real estate.
Sec. 7. Minnesota Statutes 1994, section 529.06, is
amended to read:
529.06 [GENERAL DUTIES OF CUSTODIAL TRUSTEE.]
(a) If appropriate, a custodial trustee shall register or
record the instrument vesting title to custodial trust property.
(b) If the beneficiary is not incapacitated, a custodial
trustee shall follow the directions of the beneficiary in the
management, control, investment, or retention of the custodial
trust property. In the absence of effective contrary direction
by the beneficiary while not incapacitated, the custodial
trustee shall observe the standard of care set forth in section
501B.10 501B.151. However, a custodial trustee, in the
custodial trustee's discretion, may retain any custodial trust
property received from the transferor.
(c) Subject to subsection (b), a custodial trustee shall
take control of and collect, hold, manage, invest, and reinvest
custodial trust property.
(d) A custodial trustee at all times shall keep custodial
trust property of which the custodial trustee has control,
separate from all other property in a manner sufficient to
identify it clearly as custodial trust property of the
beneficiary. Custodial trust property, the title to which is
subject to recordation, is so identified if an appropriate
instrument so identifying the property is recorded, and
custodial trust property subject to registration is so
identified if it is registered, or held in an account in the
name of the custodial trustee, designated in substance: "as
custodial trustee for ........ (name of beneficiary) under the
Minnesota uniform custodial trust act."
(e) A custodial trustee shall keep records of all
transactions with respect to custodial trust property, including
information necessary for the preparation of tax returns, and
shall make the records and information available at reasonable
times to the beneficiary or legal representative of the
beneficiary.
Sec. 8. [REPEALER.]
Minnesota Statutes 1994, sections 501B.10; and 501B.11, are
repealed.
Sec. 9. [EFFECTIVE DATE.]
Sections 1 to 8 are effective January 1, 1997.
Presented to the governor March 14, 1996
Signed by the governor March 15, 1996, 11:50 a.m.
Official Publication of the State of Minnesota
Revisor of Statutes