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

acknowledged, the conflict waived and accepted. Once past
that issue, the corporate trustee may encounter additional
challenges with respect to the powers granted under the
document. One common scenario is where a revocable trust
grantor wishes to use a line of credit to fund a project using
revocable trust assets as collateral. A revocable trust grantor
can do whatever they wish with their trust assets, including
transfer them out, terminate the trust or amend the trust. But
when they are acting as co-trustee with a corporate trustee
and wish to borrow, the corporate trustee may not have the
needed power if the only powers granted are those in the
statute. Minnesota law does not presume the grantor retains
an absolute power to direct the co-trustee in order to relieve
the co-trustee of this duty. This becomes a risk to the
corporate trustee where the grantor wishes to borrow and
pledge the revocable trust assets because the decision to
pledge the assets is a discretionary act. The risk to the
corporate trustee arises if the borrowed funds are used for
some purpose that is contrary to the interests of the
remaindermen of the trust. The following language gives the
corporate trustee the needed power to borrow without
making a discretionary decision:
“ I give my trustees the authority to pledge trust assets for the
benefit of the grantor and at the grantor's direction.”
There are other ways to resolve this issue if borrowing is the
right solution for a client. The corporate trustee could resign,
or the assets could be placed in an investment account
outside the trust. But both of these solutions have
shortcomings.
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