Minnesota Amends Trust Instruction Procedure Statute

The 2015 Minnesota Legislature adopted, and Governor Dayton signed into law, a revised Minnesota Trust Code, which will go into effect on January 1, 2016. The Minnesota Trust Code, Chapter 501C, is the first major revision of Minnesota trust law since 1989. These changes bring the Minnesota Trust Code more in line with the Uniform Trust Code, but do not fully adopt the UTC because the Minnesota Bar advocated keeping some provisions that are unique to Minnesota. The changes made to the Minnesota Trust Code provide more clarity and will help to keep Minnesota competitive as trust law continues to evolve.

While most of the Minnesota Trust Code does not apply to municipal, corporate and securitization trusts,¹ notably for corporate trustees, the revised Minnesota Trust Code restates and partially revises the statute governing Trust Instruction Proceedings (“TIPs”).² The restated TIP statute does apply to municipal, corporate and securitization trusts. The restated TIP statute is similar to the old statute³, but a number of changes have been implemented to conform the TIP statute with the Minnesota Trust Code. The changes to the TIP statute are unlikely to have a material effect on the use of TIPs by trustees in connection with the administration of municipal, corporate or securitization trusts.

The old TIP statute permitted a trustee or a “person interested in the trust” to petition the court for a trust instruction. The restated statute permits any “Interested Person” to petition the court for a trust instruction. “Interested Person” is now specifically defined in the restated statute and includes, in addition to trustees, “any person seeking court appointment as trustee whether or not named in the trust instrument, a beneficiary, a creditor, and any other person having a property or other right in or claim against the assets of the trust.”⁴ The statute also provides that “[t]he meaning of interested person, as it relates to a particular person, may vary from time to time and must be determined according to the particular purposes of, and matter involved in, any petition.”⁵

Under the old statute, it was generally accepted that each security-holder qualified as a “person interested in the trust,” and now security-holders squarely fall within the definition of “Interested Person.” From the perspective of municipal, corporate and securitization trustees, there is no major substantive change regarding who may commence a TIP. There is one change, however, that may be useful in successor trustee situations. The restated statute now includes “any person seeking court appointment as trustee whether or not named in the trust instrument” as an Interested Person. If the proposed successor trustee can establish jurisdiction and venue,⁶ it will be able to initiate a TIP prior to being appointed.

Another change between the old and restated TIP statutes is the addition of an option to use personal jurisdiction to initiate a TIP. Under the old statute, jurisdiction was “in rem”, meaning the court had jurisdiction over the property in the trust. In providing notice of a TIP under “in rem” jurisdiction, the petitioner is required, at least 20 days prior to the hearing, to publish notice of the order for hearing in a legal newspaper in the county in which the petition is filed, so that any person with an interest in the trust will be on legal notice of the proceeding and bound by the ruling.⁷ The petitioner is also required to mail notice, at least 15 days before the hearing, of the order for hearing to the known trustees and beneficiaries. In rem jurisdiction will continue to be the default option for TIPs under the restated statute and will likely continue to be used by trustees of municipal, corporate and securitization trusts. Where the petitioner is able to serve all interested parties, however, it will now be able to opt for personal jurisdiction, and thus avoid the requirement of published notice. This will be of use primarily in personal trust situations where privacy is a major priority. We do not anticipate that trustees in corporate, municipal or securitization transactions will want to use the personal jurisdiction option.

Overall, the changes to the Minnesota TIP statute do not amount to a significant change from the perspective of corporate trustees. The restated statute does not detract from the ability of the trustee to obtain judicial direction in administering corporate, municipal or securitization trusts. It will permit a successor trustee to initiate a TIP before the succession is complete, which could not be done under the old statute. Otherwise, corporate trustees are unlikely to be affected by the changes.

_{1   See MINN. STAT. § 501C.0102, which provides:} 

_{(c) This chapter does not apply to corporate trusts, except that sections 501C.0201 to 501C.0208 apply to corporate trusts that are administered by a trustee located in this state. For purposes of this paragraph, the following terms have the meanings given:
(1) "Corporate trust" means any trust created pursuant to a corporate trust agreement; and
(2) "Corporate trust agreement" means any indenture, pooling and servicing agreement, collateral agency agreement, or other contractual arrangement that establishes an express trust either before or upon the occurrence of an event of default and was entered into with a trustee as a party to facilitate a commercial transaction for the issuance of debt or equity securities or for the creation of other similar rights or interests, whether or not the securities are subject to any securities laws, including but not limited to the Trust Indenture Act of 1939, as amended.}