Probate & Trust Law Section Conference Manual ... - Minnesota CLE

E. Restrictions on Trustee Mischief. Although, as discussed below, trustees must
exercise the decanting power only with due regard to the trustee’s fiduciary
duties, some statutes contain specific provisions restricting a trustee’s ability to
decant in a manner that might benefit the trustee as a fiduciary, for example, by
allowing for increased trustee fees.
1. Trustee Compensation. The New York statute provides that unless a
court otherwise directs, the decanting power may not be exercised to
change the provisions regarding the determination of the compensation of
any trustee. The Ohio statute permits a change in trustee compensation
either with court approval or with the consent of all persons who are
current beneficiaries of the second trust. See also Michigan § 700.7820a.
The Illinois statute prohibits decanting solely to change the provisions
regarding trustee compensation but permits decanting “in conjunction with
other valid and reasonable purposes to bring the trustee’s compensation in
accord with reasonable limits in accord with Illinois law in effect at the
time of the exercise.” Most of the state decanting statutes are silent on the
issue of trustee compensation.
2. Trustee Fee for Decanting. The Illinois statute also prohibits the trustee
from receiving a special fee for decanting.
3. Trustee Liability. The Illinois statute also prohibits decanting to decrease
or indemnify against a trustee’s liability or exonerate a trustee from
liability for failure to exercise reasonable care, diligence and prudence.
See also the proposed Alaska amendment, which has a similar restriction
unless a court otherwise directs.
4. Trustee Removal Provisions. The Illinois statute specifically prohibits
decanting to eliminate a provision granting a person a right to remove or
replace the decanting trustee under most circumstances. See also the
proposed Alaska amendment, which has a similar restriction unless a court
otherwise directs.
5. Asset Valuation. The proposed amendment to the Alaska decanting
statute would also prohibit decanting to “fix as binding and conclusive the
value of an asset for purposes of distribution, allocation, or otherwise . . .”
§ 13.36.158(i)(4).
VI.
Notice
A. No Notice. A large number of states do not require the trustee to provide notice
to the beneficiaries of the old trust before decanting. See, e.g., Arizona,
Delaware, Michigan § 556.115a, Missouri, Nevada, South Dakota and Tennessee.
New Hampshire requires notice only to charity. The Nevada statute states that the
trustee may give notice to the beneficiaries.
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