New York Estate Planning & Elder Law Blog
In a recent opinion, a Minnesota Appellate Court rejected a petition to revise a trust’s terms to permit the early distribution of trust assets to beneficiaries. The court also rejected a request by the petition for the trust to pay attorney’s fees and held that the litigation was neither necessary nor existed for the benefit of the trust. This opinion functions as a reminder of the high threshold that a person must overcome when beneficiaries attempt to revise a trust’s distribution terms.
The Court’s Decision
In Skarsten-Dineman v. Milton, a trust settlor established a revocable naming his six children as the primary beneficiaries following his death. Assets were to be passed to the man’s children until three of them had passed away then the trustee was to end the trust and pass on the principal equally divided to the surviving children.
Following the man’s death, one of the children petitioned the court to modify the trust to allow the sale of the farmland and distribution of the assets to the six children. The child argued the modification should occur because the value of the assets had decreased, the decrease would lead to reduced income for the trust beneficiaries, and the terms of the trust required distribution after the first three children passed away and unfairly penalized the children who passed away while benefiting the children who survived. All beneficiaries agreed to the modification.
Important Lessons from the Case
Settlors, as well as beneficiaries and trustees, should review the outcome of this decision. Even though it’s unpublished and will not be binding on future decisions, the case offers several important lessons, which include:
- Trustees have an obligation to administer trusts as settlors intend. This is true even if administering a trust in such a way conflicts with the beneficiary’s wishes. Like in this case, this duty can require trustees to defend the plain language of the trust against beneficiary actions to modify trust agreements.
- Trust Codes often provide several methods that can be utilized to modify irrevocable trusts. If a potential modification exists in contrast to a settlor’s stated wishes, courts often decline to approve changes.
- Trust settlors can utilize their judgment when deciding how trust assets should be utilized even if another choice might result in a higher rate of return for assets in the trust. Assuming that significant changes in the situation do not occur, courts, as well as trustees, should follow these wishes.
The case, however, also leaves questions open. One question is whether courts can apply common law standards to beneficiaries’ requests for payment of attorney fees. The best strategy is to consider all possible standards when pursuing lawyers’ fees. Revisions to trusts and fiduciary duties are nuanced and litigation involving trusts is increasingly becoming more common. One of the best ways to avoid undesirable outcomes with a trust is to obtain the assistance of an experienced estate planning attorney.
Contact an Experienced Estate Planning Attorney
Estate planning is full of challenges, but an experienced estate planning attorney can help you navigate this process. Contact Ettinger Law Firm today to schedule a free case evaluation.