Trustee Attorney Fees are Properly Paid from the Trust under Minn. Stat. Sec. 501C.0709, 1004; Breach of Fiduciary Duty Claims Require Proof of All Elements; Removal of Trustee Under 501C.0706 Reviewed

The Court of Appeals issued the long awaited Lund appeal which addressed several issues but this review only touches on 3 issues. The first issue is the right of a trustee to have its attorney fees paid from the trust. The district court found that Minn. Stat. § 501C.1004 supersedes common law and denied the trustee attorney fees but the court of appeals reversed. The common law provides that “a trustee is entitled to reasonable attorneys’ fees, to be paid out of the trust estate, incurred in good faith in defending his administration of the trust.” In re Freeman’s Trust, 75 N.W.2d 906, 907 (Minn. 1956). The court of appeals found that Minn. Stat. § 501C.0709 authorizing a trustee to pay attorney fees from the trust leaves the common law on this point undisturbed. The ability to pay attorney fees to “any party” under Minn. Stat. § 501C.1004 did not alter the common law or section 0709. So trustees can still pay attorney fees from the trust incurred in good faith, and “any party” may also have fees paid from the trust under Minn. Stat. § 501C.1004. The next issue is proving a breach of fiduciary duty. In this case the party asserting the breach of fiduciary duty failed to prove the last element in a breach case, damages. The person asserting a breach must prove duty, breach, causation and damages. But the party bringing the claim failed to prove damages in their brief. Apparently they tried to argue damages in the response brief but that is not allowed. Because one of the elements of breach of duty was not proven the claim fails. The third issue is removal of trustees.  Minn. Stat. § 501C.0706 allows removal of trustees for a substantial change in circumstances. That was apparently found for one trustee but the court also seemed to say that such trustee’s removal was by the consent of all qualified beneficiaries, served the beneficiaries best interests and was not inconsistent with the material purpose of the trust. Since all beneficiaries requested the removal, a substantial change of circumstances ruling was not needed. Another trustee was not removed because there was no substantial change in circumstances.


About Robert McLeod

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