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

The remaining principal and any accrued or undistributed
income of the trust, plus any amount so added for computation
purposes, shall be allocated to my then living issue, by right of
representation. Each share so allocated to any person shall be
reduced (but not below zero) by (a) the total amount added for
computation purposes attributable to principal distributions
made to or for the benefit of such person or such person’s
issue, and (b) such person’s portion (determined by right of
representation) of any amount added for computation purposes
attributable to such person’s ancestors or such ancestors’ issue
who are not living and have no living issue.
The language “(but not below zero)”
addresses the potential ambiguity that
could arise if a charge-back exceeded the
beneficiary’s share.
The language in part (b) attempts to
address distributions made to a
beneficiary who later dies and whose
share is then allocated among his or her
issue.
Here is an example of an equalization clause that caused problems:
In Estate of Presetegaard, the will provided that certain property should be
distributed in equal shares to the decedent’s three children, but that each child’s
share should be “reduced by the amount of any emergency or exceptional
education payments I made to any institution for such child, or the descendants of
such child.” The will provided further that any reduction would then be divided
among all the children (including the child whose share was so reduced). One of
the children challenged the personal representative’s interpretation of the formula
language, claiming that educational distributions charged against his share were
not “emergency or exceptional” and therefore should not have been included in
the chargeback. The Court of Appeals held that the personal representative
correctly interpreted the formula to provide that “exceptional educational
payments” meant payments other than from certain educational funds the
decedent had established. In re the Estate of Presetegaard, A07-1713 (Minn. Ct.
App. June 17, 2008).
The obvious problem with this provision is its lack of clarity – reasonable minds will
differ as to what constitutes an “exceptional” distribution. Similarly, in a recent
Hennepin County District Court case, various beneficiaries disputed the meaning of the
following language regarding division of a trust upon the death of the testator’s daughter
(the trust authorized distributions during the daughter’s life to her, and to the testator’s
grandchildren and more remote descendants):
“I recognize that certain beneficiaries may, at different times and for different reasons, need more
financial help than others, and for this reason I have expressly authorized unequal distributions to
beneficiaries hereunder. However, I want each grandchild of mine ultimately to share as equally
as is feasible in my estate, and I want the issue of any deceased grandchild of mine to receive
benefit from their parent’s share by right of representation. Therefore, on division and distribution
of the trust estate, the trustees should make such adjustments in the shares of the individual
beneficiaries as the trustees in their sole discretion consider proper to effectuate the purposes
hereinabove stated.”
The beneficiaries disagreed on whether distributions to descendants of grandchildren
should be charged back at all. They also disagreed as to which distributions to
grandchildren should be charged back. In the end, the case was settled. Had it gone to
trial, the trustee likely would have been given broad discretion to determine an
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