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

ultimate burning out of the sun and destruction of our solar system. It
is way better than Pepsi.” Any direction to hold a single asset as a
pure investment under any and all conditions is as foolish as our
hypothetical clause suggests, and both drafters and trustees should
avoid such an obvious trap.
Alternatively, specifying a future state can lead to little real help for
the fiduciary: “My trustee shall continue to hold the contributed
common shares in Coca Cola as an asset of the trust but may sell
such shares as they, in their absolute discretion, shall deem prudent
based upon the trustee’s evaluation of market conditions, consumer
tastes and preference and other relevant macroeconomic factors.”
Unfortunately, “may sell” is as good as “shall sell.” Even if a trustee
sought to hold the asset, the expense of evaluating and documenting
their evaluation of market conditions, etc., may render trust
administration uneconomical.
B. Statement of Governance Method and Oversight?
b. Cost Savings?
If a long-term trust relaxes the basic obligation to diversify, can a
trustee obtain comfort from a clear statement of governance
obligations on the part of the trustee? This will often be an uncertain
undertaking and requires early and detailed work with the proposed
trustee to determine what level of detail will provide sufficient
comfort to the trustee while meeting the needs of the grantor.
A direction to retain may actually result in greater expense of administration
that ordinary trust administration if the trustee is obligated to evaluate
multiple factors in making the decision to sell or retain. This will typically
not square with the expectations of many grantors.
c. Sample Clause: Family Business
Provision
UPIA Reference
The Grantor hereby specifically exercises all
rights that he may have to limit, restrict or
eliminate Trustee duties under Minnesota
Statutes §510B.15, the Uniform Prudent
Investor Act, by severely limiting the duty to
diversify the assets of the Trust in light of the
special circumstances of this Trust.
Diversification is not a significant purpose of
this Trust. The Trust will initially hold a
majority stake in the XYZ company, a family
business, and it is my firm intention that the
Trustee shall continue to hold its interest in
XYZ, including any successor entity or
organization, during the Trust term unless the
Calls forth the source of
authority (§1(b)) and
states the intent is to
limiting a UPIA
provision
Indicates purpose of trust.
As trust term increases,
purpose elaboration
increases as does the
elaboration of how the
purpose aligns with the
§2(b) factors.
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