Minnesota Session Laws - 1990, Regular Session

  

                         Laws of Minnesota 1990 

                        CHAPTER 581-S.F.No. 1891 
           An act relating to trusts; changing certain trust 
          requirements; amending Minnesota Statutes 1989 
          Supplement, sections 501A.05; 501B.09, by adding a 
          subdivision; 501B.46; 501B.65, subdivision 2; 501B.67, 
          subdivision 1; 501B.68; 501B.69; and 501B.72, 
          subdivision 2.  
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:  
     Section 1.  Minnesota Statutes 1989 Supplement, section 
501A.05, is amended to read: 
    501A.05 [PROSPECTIVE APPLICATION.] 
    (a) Except as extended by subsection (b), sections 501A.01 
to 501A.07 apply to a nonvested property interest or a power of 
appointment that is created after December 31, 1990 1991.  For 
purposes of this section, a nonvested property interest or a 
power of appointment created by the exercise of a power of 
appointment is created when the power is irrevocably exercised 
or when a revocable exercise becomes irrevocable. 
    (b) If a nonvested property interest or a power of 
appointment was created before January 1, 1991 1992, and is 
determined in a judicial proceeding, commenced after December 
31, 1990 1991, to violate this state's rule against perpetuities 
as that rule existed before January 1, 1991 1992, a court upon 
the petition of an interested person may reform the disposition 
in the manner that most closely approximates the transferor's 
manifested plan of distribution and is within the limits of the 
rule against perpetuities applicable when the nonvested property 
interest or power of appointment was created. 
    Sec. 2.  Minnesota Statutes 1989 Supplement, section 
501B.09, is amended by adding a subdivision to read:  
    Subd. 2a.  [INAPPLICABLE TO CERTAIN TRUSTS.] Subdivision 2 
does not apply to a trust if the beneficial interests in the 
trust are evidenced by or constitute securities within the 
meaning of section 2(1) of the Securities Act of 1933, title 15, 
United States Code, section 77(b)(1).  
    Sec. 3.  Minnesota Statutes 1989 Supplement, section 
501B.46, is amended to read:  
    501B.46 [PETITION FOR COURT ORDER TO SELL, MORTGAGE, OR 
LEASE REAL PROPERTY HELD IN TRUST.] 
    (a) Except as provided in paragraph (c), if the assets of 
an express trust by will or other written instrument include 
real property in this state that the trustee is not, under the 
terms of the trust, then permitted to sell, mortgage, or lease, 
and if section 501B.23 is applicable to the trust, the trustee 
or a beneficiary of the trust may petition the court then having 
jurisdiction of the trust for an order directing the trustee to 
sell, mortgage, or lease the real property or any a part of the 
real property.  
    (b) Except as provided in paragraph (c), if the assets of 
an express trust by will or other written instrument include 
real property in this state that the trustee is not, under the 
terms of the trust, then permitted to sell, mortgage, or lease, 
and if section 501B.23 is not applicable to the trust, the 
trustee or a beneficiary of the trust may petition an 
appropriate district court under section 501B.16 for an order 
directing the trustee to sell, mortgage, or lease the real 
property or a part of the real property.  
    (c) If a trust is of the kind described in section 501B.09, 
subdivision 2a, no order described in paragraph (a) or (b) may 
be entered upon a petition filed by a person other than the 
trustee.  
    Sec. 4.  Minnesota Statutes 1989 Supplement, section 
501B.65, subdivision 2, is amended to read:  
    Subd. 2.  [INCOME.] The increment in value realized upon 
sale, redemption, or other disposition of a bond or other 
obligation for the payment of money bearing no stated interest 
but payable or redeemable at maturity or at a future time at an 
amount in excess of the amount in consideration of which it was 
issued or in accordance with a fixed schedule of appreciation in 
excess of the price at which it was issued, is distributable as 
income.  The increment in value is distributable to the 
beneficiary who was the income beneficiary at the time of 
increment from the first principal cash available or, if none is 
available, when realized by sale, redemption, or other 
disposition.  Whenever unrealized increment is distributed as 
income but out of principal, the principal must be reimbursed 
for the increment when realized.  
    Sec. 5.  Minnesota Statutes 1989 Supplement, section 
501B.67, subdivision 1, is amended to read:  
    Subdivision 1.  [ALLOCATION OF RECEIPTS.] If a part of the 
principal consists of a right to receive royalties, overriding 
or limited royalties, working interests, production payments, 
net profit interests, or other interests in minerals or other 
natural resources in, on, or under land, the receipts from 
taking the natural resources from the land must be allocated 
under paragraphs (a) to (c).  
    (a) If received as rent on a lease or extension payments on 
a lease, the receipts are income.  
    (b) If received from a production payment carved out of a 
mineral property, the receipts are income to the extent of a 
factor for interest or its equivalent provided in the governing 
instrument or a greater amount determined by the trustee to be 
reasonable and equitable in view of the interests of those 
entitled to income as well as those entitled to principal.  The 
receipts not allocated to income are principal.  
    (c) If received as a royalty, overriding or limited 
royalty, or bonus or from a working, net profit, or other 
interest in minerals or other natural resources, receipts not 
provided for in paragraph (a) or (b) must be apportioned on a 
yearly basis in accordance with this paragraph whether or not 
any natural resource was being taken from the land at the time 
the trust was established.  The receipts from these properties 
must be allocated in accordance with what is reasonable and 
equitable in view of the interests of those entitled to income 
as well as of those entitled to principal.  The amount allocated 
to principal must be presumed to be reasonable and equitable if 
it is not neither substantially more nor less than the amount 
allowable as a deduction for depletion, amortization, 
depreciation, or similar costs under the Internal Revenue Code 
of 1986.  Any allocated amount must be added to principal as an 
allowance for depletion of the asset.  The balance of the gross 
receipts, after payment from the receipts of all direct and 
indirect expenses, is income.  
    Sec. 6.  Minnesota Statutes 1989 Supplement, section 
501B.68, is amended to read:  
    501B.68 [TIMBER.] 
    If a part of the principal consists of land from which 
merchantable timber may be removed, the receipts from taking the 
timber from the land must be allocated in accordance with what 
is reasonable and equitable in view of the interests of those 
entitled to income as well as of those entitled to principal.  
The amount allocated to principal must be presumed to be 
reasonable and equitable if it is not neither substantially more 
nor less than the amount allowable as a deduction for depletion, 
amortization, depreciation, or similar costs under the Internal 
Revenue Code of 1986.  
    Sec. 7.  Minnesota Statutes 1989 Supplement, section 
501B.69, is amended to read:  
    501B.69 [OTHER PROPERTY SUBJECT TO DEPLETION.] 
    Except as provided in sections 501B.67 and 501B.68, if part 
of the principal consists of property subject to depletion, 
including leaseholds, patents, copyrights, royalty rights, and 
rights to receive payments on a contract for deferred 
compensation, the receipts from the property must be allocated 
in accordance with what is reasonable and equitable in view of 
the interests of those entitled to income as well as of those 
entitled to principal.  The amount allocated to principal is 
presumed to be reasonable and equitable if it is not neither 
substantially more nor less than the amount allowable as a 
deduction for depletion, amortization, depreciation, or similar 
costs under the Internal Revenue Code of 1986.  
    Sec. 8.  Minnesota Statutes 1989 Supplement, section 
501B.72, subdivision 2, is amended to read:  
    Subd. 2.  [APPLICATION.] In applying sections 501B.59 to 
501B.76 to nontrust estates, the rules in paragraphs (a) to 
(c) (d) must be followed.  
    (a) A legal life tenant or a remainderperson who has 
incurred a charge for the tenant's or remainderperson's benefit 
without the consent or agreement of the other, shall pay the 
charge in full.  
    (b) Costs of an improvement, including special taxes or 
assessments representing an addition to value of property 
forming part of the principal that cannot reasonably be expected 
to outlast the legal life estate, must be paid by the legal life 
tenant.  
    (c) If the improvement can reasonably be expected to 
outlast the legal life estate, only a portion of the costs must 
be paid by the legal life tenant and the balance by the 
remainderperson.  
    (1) The portion payable by the legal life tenant is that 
fraction of the total found by dividing the present value of the 
legal life estate by the present value of an estate of the same 
form as that of the legal life estate but limited to a period 
corresponding to the reasonably expected duration of the 
improvement.  
    (2) The present value of the legal life estate must be 
computed by applying the federal estate tax regulations for the 
calculation of the value of life estates under section 2031 of 
the Internal Revenue Code of 1986.  The federal estate tax 
regulations applied must be those in force on the date when the 
costs of the improvement are initially determined by assessment, 
agreement, or otherwise.  No other evidence of duration or 
expectancy may be considered.  
    (d) No allowance may be made for depreciation of property 
held by a legal life tenant on January 1, 1990, if the life 
tenant was not making the allowance with respect to the property 
prior to January 1, 1990.  
    Sec. 9.  [EFFECTIVE DATE.] 
    Section 3 applies to proceedings initiated after January 1, 
1990, with respect to interests created before, on, or after 
January 1, 1990.  
    Sections 4, 5, 6, and 7 apply to a receipt received after 
December 31, 1989, by a trust, decedents's estate, or legal 
estate whether established before, on, or after January 1, 1990, 
and whether the asset involved or legal estate was acquired by 
the trustee, personal representative, legal life tenant, or 
remainderperson before, on, or after January 1, 1990.  
     Except as otherwise provided, this act is effective January 
1, 1990, and applies to trusts, property interests, and powers 
of appointment whenever created to the extent permitted under 
the United States Constitution and the Minnesota Constitution. 
    Presented to the governor April 28, 1990 
    Signed by the governor May 3, 1990, 5:38 p.m.