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

outright and free of trust. If either son does not
survive me, his share shall be held in trust and
administered in accordance with the provisions of
Section 9 and subsequent sections. Notwithstanding
the forgoing, I intend my children to be treated
essentially equally as to advancements and loans
received during my lifetime or assets of my estate
received at my death. If, at my death, either child of
mine is indebted to me on a Promissory Note or
Mortgage, I direct that the outstanding principal
balance and accrued interest of the indebtedness be
considered an advancement to such child from my
estate and be deducted from the share of the residue
due my child (or any share for the then living
descendant or descendants, collectively, by right of
representation, of my child if he is then dead
leaving a descendant or descendants then living),
thus reducing his share of other assets of my estate
accordingly. The amount of said outstanding
principal balance and accrued interest shall be
determined by my trustees based upon my records
or the trustees’ records. Such indebtedness is to be
considered an asset of my estate for the purposes of
computing the value of said estate.” (Emphasis
added.)
The court determined that while promissory notes and mortgages were
expressly to be treated as advancements under the terms of this provision,
it was not certain from this language that the grantor intended that only
promissory note and mortgages were to be considered advancements.
d. Determining exactly what a loan is can also be the cause of significant
disagreement. Intra family “loans” are frequently not documented with
formal promissory notes. In a case not involving an equalization clause but
rather simply whether sums shown in a notebook as loans as well as noted
as loans on the checks given to a child, the Nebraska Supreme Court found
this to be sufficient to hold that sums so advanced to the child were loans
for trust administration purposes. In re Margaret Mastny Revocable Trust,
744 N.W. 2d 700 (Neb. 2011). Here the fact that the amounts in issue were
not reported as gifts on tax returns was also considered by the court.
Here is an example of a definition of “Loans” that was used in a document which
provided that all “Loans” included among the assets of a trust would be allocated to the
obligor:
“It is hereby provided that the value of the Loans, for purposes of division of the residue of the
trust estate, shall be the outstanding principal and interest with respect to the Loans, up to and
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