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

Through good planning and good practices, in addition to upfront communication which
sets forth expectations, the chances for misunderstandings and disputes with
beneficiaries can hopefully be avoided, or in the very least, minimized.
In addition to educating the parties to the trust and establishing good ground rules and
practices for communications among the parties, several planning strategies may be
available to provide flexibility and address potential issues which may arise, particularly
with the use of irrevocable dynasty trusts designed with a long “shelf life.” Among those
available are the following:
Delegation and Divided Duties:
Can dividing traditional trust duties among different individuals protect trustees and
minimize disputes among beneficiaries? The most obvious division of duties is
separating trust administration from investment management. Historically, a trustee
could not delegate the duties assumed under the trust without explicit authorization in
the trust document. Modern trust law, however, now allows for broad delegation of a
trustee’s duties. Most jurisdictions now permit trustees to delegate certain
responsibilities to third parties, and trust documents often include such delegation
provisions. For example, the trust document may allow for the appointment of specific
individuals or committees to address investments and discretionary distributions.
Drafting considerations must take into account the appropriate parties who can serve on
such committees, and even when exercising delegation powers, a trustee still has
responsibility to find the appropriate person to whom the delegation is made, in addition
to consistently monitoring the agent to avoid liability. (See Minn. Stat. 501B.152 Agents
of Trustee). Therefore, the trustee must (1) ensure that the agent is fully capable of
performing the delegated duties, (2) provide sufficient information to him or her to carry
out these duties on a continuing basis, and (3) clearly define the terms and scope of the
delegation.
Some other issues to consider in situations where delegation is being considered or
utilized:
--the trustee may want to memorialize the reasons for delegating certain duties,
including the trustee’s own abilities and limitations to perform certain functions;
--the scope and terms of the agent’s duties should be set forth and understood by all
parties;
--the agent’s compensation and how that might affect the compensation of the trustee;
--the trustee’s expectations for the agent’s performance, and the respective rights and
responsibilities of both parties; and
--the agent’s accounting and reporting responsibilities.
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