Among other obligations, a Minnesota trustee has a legal duty to deal impartially with each and every beneficiary of a Minnesota trust, meaning that all people or organizations that stand to benefit financially from the trust have to be treated equitably. While this duty does not always mean that different beneficiaries will get perfectly equal treatment or the treatment that they personally feel is best, the duty does mean that the trustee has to avoid flagrantly promoting the interests of one beneficiary at the expense of another. This could occur by keeping one beneficiary out of the loop as to what is going on with the financial affairs of the trust.
However, the trustee’s duty does not end at avoiding flagrant bias or prejudice. Unless a trust has only one beneficiary, the trustee has to give “due regard” to all of the trust beneficiaries’ interests, meaning favoring one class of beneficiaries can lead to legal trouble for the trustee. Again, while this does not mean a trustee cannot choose one option over another, it often does mean that a trustee cannot operate a trust in such a way that one beneficiary enjoys financial gains while another gets left hanging.
For example, if a trust has some beneficiaries that are not going to actually receive money for many years or even decades, a trustee may violate the duty of impartiality if he or she were to choose to invest trust funds in a highly risky venture that promised short-term gains but exposed the trust to a great deal of long-term financial risk.While a beneficiary receiving the trust income may immediately favor such an investment, it leaves other heirs and beneficiaries, like children and grandchildren, facing the real possibility of never seeing their inheritance.
A Minnesota trustee who is not acting with due regard for the interests of all beneficiaries can be potentially dangerous to some heirs. These heirs should know that litigation to remove such a trustee is a possibility.