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

3. Irrevocable trusts may be modified or terminated with the consent of the
settlor and all of the beneficiaries or by the court with the consent of all the
beneficiaries. Upon termination, the trustee shall distribute the trust as agreed
to by all of the beneficiaries or as approved by the court.
4. Courts have the power to modify a trust because of unanticipated
circumstances or because continuation of the trust would be impracticable or
wasteful or impair the trust’s administration. Courts may apply “cy pres” to
modify a charitable trust that becomes unlawful, impracticable or impossible
to achieve. Courts may also reform a trust to correct mistakes or to achieve
the settlor’s tax objectives.
5. Trustees may terminate an uneconomic trust (defined in the UTC as a trust
having less than $50,000) with notice to the qualified beneficiaries. Trustees
may also combine or divide trusts with notice to the qualified beneficiaries.
6. The UTC does not address decanting – the trustee’s power to appoint assets to
a new trust.
E. Article V – Creditor’s Claims, Spendthrift Trusts and Discretionary Trusts.
1. A beneficiary’s creditor may not reach a beneficiary’s interest in an
irrevocable trust until a distribution is made, to the extent the beneficiary’s
interest in the trust is protected by a spendthrift provision.
2. A spendthrift provision does not protect against certain governmental claims
(taxes, public support), child support or alimony claims.
3. During the lifetime of a settlor, the property of a revocable trust is subject to
the claims of the settlor’s creditors.
4. With respect to an irrevocable trust, a creditor of the settlor may reach the
maximum amount that can be distributed to or for the settlor’s benefit.
5. Creditors may reach a “mandatory” or “overdue” distribution to a beneficiary.
F. Article VI – Revocable Trusts.
1. The capacity to create a revocable trust is the same as the capacity to create a
will.
2. Trusts are presumed revocable unless the terms of the trust specify otherwise.
3. While a trust is revocable, the rights of the beneficiaries are attributed to the
settlor and the duties of the trustee are owed exclusively to the settlor. The
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