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

may provide that at least a substantial portion went to each member of the
class of appointees. By the time that the power was exercised, however,
the law provided that powers of appointments could be exclusive, meaning
that a potential appointee could be excluded. Beneficiary exercised the
power of appointment to exclude one of his children. The Court held that
to apply the law at the time of exercise could have constitutional
implications and, therefore, the law in effect when the power was created
governed the exercise. As a result, the exercise was invalid because one
of the appointees did not receive a substantial portion.
12. Trusts for McDonald, 953 N.Y.S.2d 751 (N.Y. App. Div. 2012). Trustee
has broad discretion to make distributions and a trustee will not be
removed solely due to friction with the beneficiaries. Beneficiaries’
mother was trustee of the trust created by trustee’s father. The trust
agreement provided that the trustee had “sole discretion” to make
distributions as she “deems advisable” to provide for the beneficiaries’
“maintenance, support, education, health and welfare….” Trustee refused
to make distributions to the beneficiaries for their educational expenses.
The Court provided that it would not interfere with the trustee’s discretion
unless it can be shown that there was an abuse. The trust agreement
manifested an intent to give the trustee broad discretion and there was no
abuse of discretionary because the beneficiaries had other sources of funds
available to provide for their education expenses. Additionally, the trustee
will not be removed due to “mere friction or disharmony.”
13. Van Gundy v. Van Gundy, 292 P.3d 1201 (Colo. App. 2012). Trust
agreement may limit trustee’s duties with respect to investments.
Beneficiary created a trust which included a provision that permits the
trustee to make investments, “whether or not such investments are of the
character permissible for investments by fiduciaries under any applicable
law.” Trustee invested 100% in stocks and mutual funds, many of which
were purchased on margin and the trust suffered significant losses.
Beneficiary asserted a breach of fiduciary duty against the trustee. While
the prudent investor rule requires diversification, a trust provision may
alter or eliminate such requirement. The Court held that a trust agreement
may relax the duty to diversify and absent fraud, duress, or incapacity, a
court should not change the terms of an agreement merely because the
terms end up to be improvident.
14. SBS Financial Services v. Plouf Family Trust, 821 N.W.2d 842 (S.D.
2012). Trust agreement mandated that beneficiary’s share be offset by
current amount of outstanding loan. Settlors loaned funds to daughter,
which was secured by a mortgage. The mortgage was subsequently
assigned to a trust of which the settlors were lifetime beneficiaries and
trustees. Subsequently, daughter gave a bank another mortgage on the
home. The trust agreement provided that a beneficiary’s interest shall be
reduced by “any financial obligation of any beneficiar[y].” The Court
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