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

Trust. The value of the Trust and total
return over time is of importance.
The Grantor therefore specifically directs
the Trustee to retain as a part of the Trust
[the funding asset], including any
successor entity or organization, without
regard to the value of such [funding asset]
in relation to the value of the Trust until
such time that the per-unit value of [the
funding asset], adjusted for any splits or
other relevant corporate actions, shall be
less than 30% of the initial funding value
of [the funding asset]. At that time, the
Trustee shall begin a program of
diversification under customary standards
utilized by the Trustee, and according to a
reasonable implementation schedule
determined by the Trustee.
The Grantor hereby exonerates the
Trustee from liability for continuing to
retain [the funding asset] upon the
conditions set forth and further exonerates
the Trustee for its actions, undertaken in
good faith, in diversifying the asset,
should such diversification occur upon the
conditions stated.
Substitute Rule: Rule
clarity obtained here by
specifying two
regimes—stock less than
30% of initial value, all
else. There is no
ambiguity as to what
regime applies. Action
in each regime is clearly
stated.
Exculpation: Direct and
complete during retention
phase and premised on
good faith during
diversification phase.
4. Long-Term Trusts. Weaker likelihood of success
a. Purpose: Strength of critical and strength of substitute standard
i. “Mixed Economic/Non-Economic Purpose”
To the extent that a trust is merely a financial asset pool generating a
financial return for beneficiaries, diversification will almost always be the
prudent course. There are times, however, when another purpose may
dominate; e.g., the desire to retain a family business noted in the
comments to UPIA §3. A family business supports both economic and
non-economic components of benefit. It may be possible to frame a longterm
trust as a wrapper for a family business in such a way that the basic
diversification requirement can be limited.
ii. Substitute Standard: Can a Court Approve it?
A. Statement of Future State: Poor option
Any statement of future state inevitably suffers from too much
rigidity or too little. For example, a client may insist upon a clause to
never diversify: “My trustee shall continue to hold the contributed
common shares of Coca Cola for all time, up to and including the
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