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

the beneficiary. In the past, testators attempted to use trusts to discourage
marriage outside of the testator’s religion or other similar acts. There are
several cases discussing the public policy implications of such provisions,
but their popularity is waning so we will skip ahead to a popular modern
form of behavior clients would like to discourage: the abuse of alcohol and
mood-altering drugs.
Here are two provisions attempting to address this issue:
Certain
The trustee shall distribute all of the income and
principal remaining in the trust to the beneficiary upon
the latest to occur of (a) the initial funding of the trust,
(b) the date the beneficiary attains the age of 35 and (c)
the date that is five years after the beneficiary’s last
conviction of a criminal offense involving alcohol or
narcotics or other drugs.
This provides an objective and publicly
available yardstick for determining whether the
beneficiary has an alcohol or drug problem.
Flexible
It is my expectation, but not my direction, that the
trustee shall distribute all of the income and principal
remaining in the trust to the beneficiary upon the later
of (a) the initial funding of the trust and (b) the date the
beneficiary attains the age of 35. Notwithstanding the
foregoing, the trustee may withhold this distribution, up
to and including for the beneficiary’s entire lifetime, if
the trustee determines there is a compelling reason to do
so. Reasons that might justify withholding a
distribution pursuant to this provision may include, but
shall not be limited to, the beneficiary’s alcoholism or
chemical dependency, as determined by the trustee in
the trustee’s absolute discretion. The trustee shall be
absolutely exculpated and held harmless from and
against any liability for exercising or not exercising the
trustee’s discretion under this paragraph.
This provides a trustee with more discretion in
the event the trustee knows the beneficiary has
a problem but is not in a position to prove it.
Obviously, a beneficiary could have a severe
problem without ever being convicted of a
crime.
Also, it is sometimes difficult to tell from a
publicly available criminal conviction whether
the conviction involved drugs or alcohol.
Corporate trustees are often very reluctant to
take on this discretion, even with the
exculpation language. Consider naming an
individual trustee, co-trustee, or “trust
protector” who can make this determination.
One alternative is to require drug or alcohol
testing before a beneficiary can receive a
distribution, but this is very difficult to
administer.
E. Getting Burned by the Boilerplate – Apportionment and Payment of Taxes.
1. Minnesota Law. Equitable Apportionment. Minnesota law provides that
in the absence of contrary provisions in the will or other written
instrument, estate taxes are to be apportioned fully among the persons
interested in the estate. Minn. Stat. § 524.3-916(b)(1). In “special
circumstances” a court may direct apportionment of interest and penalties
in a manner different from that set forth in § 524.3-916(b) as it deems
equitable. Minn. Stat. § 524.3-916(c). Minnesota law provides further
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