This week, the Minnesota legislature and Gov. Tim Walz passed a bill that includes a number of changes to enhance the clarity and efficiency of trust management in Minnesota. Overall, these changes help to modernize trust and estate law in Minnesota, ensuring it meets contemporary needs while safeguarding beneficiary rights. Our team summarized some of these changes and what they may mean for you.  

Dynasty Trusts

A dynasty trust is a type of trust that is designed to pass wealth down from generation to generation, while taking advantage of lifetime exemptions to transfer this wealth without additional tax consequences. In addition to tax benefits, these trusts offer other asset-protection benefits to multiple generations, while ensuring long-term family wealth is managed according to the family’s wishes. State law controls the limit for how long a dynasty trust may continue to exist.

Previously: Minnesota law placed a 90-year limit on dynasty trusts established in Minnesota.

Now: Trusts created in Minnesota on or after August 1, 2025 may continue to exist for up to 500 years.

What it means: Dynasty trusts are a very valuable tool that allow families to protect their wealth. This change significantly increases the power of this tool and should be considered as an option for any family interested in leaving a lasting legacy for many generations. 

Modifying or Terminating Uneconomic Trusts

In Minnesota, a trustee can always ask the court to terminate a trust or name a new trustee in cases where the value of the trust does not justify the ongoing administrative costs of the trust. Additionally, if the trust balance is under a certain threshold and the trustee determines that the value of the trust is insufficient to justify the cost of administration, the trustee, after providing notice to the trust beneficiaries, can terminate the trust without court approval.

Previously: The threshold for a trustee to terminate an uneconomic trust without court approval was $50,000.

Now: That threshold has been raised to $150,000.    

What it means: Trustees now have a greater ability to terminate a trust that is no longer cost-effective to administer, without needing to go to court to get approval. This helps avoid the delays and the additional costs that would further reduce the value of the trust. 

Clarification of Inheritance Rules Following Divorce

In Minnesota, when a married person makes a will leaving assets to their spouse, then gets a divorce and dies without updating their will, the divorce automatically revokes any provisions in that person’s will that left assets to their former spouse. The same is true for beneficiary designations and most trusts.

Previously: Following some recent Minnesota court cases, a legal gray area existed because a divorce did not necessarily revoke gifts to other relatives of the former spouse. This meant that family members of the former spouse could pursue claims against the estate in cases where the deceased individual had failed to update their will following their divorce.

Now: The Minnesota legislature has clarified that in these situations, a divorce also automatically revokes any provisions in a will, trust or beneficiary designation that was not updated post-divorce that left assets to relatives of the former spouse (assuming they are not also members of the deceased individual’s family). In addition, the divorce automatically revokes any provisions that nominated relatives of the former spouse to serve as personal representative, executor, trustee, conservator, agent or guardian.

What it means: While this change is helpful in that it likely reflects the outcome that most divorced people would want, it is also a good reminder that it is always important to review and update your estate plan following any major life event, including a marriage, a divorce, the birth of a child or a child reaching adulthood, buying or selling real estate or a business, or a major change in your finances.

Stricter Parental Inheritance Rights in Cases of Estrangement

In Minnesota, a parent is barred from inheriting from their deceased child in certain circumstances, such as when the parent’s parental rights were terminated and the parent-child relationship was not reestablished. The law also prohibits the parent from inheriting if the child died as a minor and there is clear and convincing evidence that the parental rights could have been terminated immediately before the child’s death.

Previously: The law did not specify whether parents in this situation could inherit after their child reached the age of 18.

Now: The law has been expanded to prevent a parent from inheriting from an adult child, if there is clear and convincing evidence that the parent’s parental rights could have been terminated while the child was a minor, and additionally, the parents and child were estranged in the years leading up to the child’s death.

What it means: This change should help to reflect the outcome that most people would want in this situation. However, it still requires “clear and convincing” evidence, which can be more challenging than people expect. This is another good reminder that it is always important to have a clear estate plan in place that states your exact wishes, including any specific intention to disinherit specific individuals.

The bill also clarifies the roles and powers of trustees, beneficiaries and representatives, particularly regarding the modification or termination of noncharitable irrevocable trusts.

Further amendments focus on the governance of trusts, detailing the powers of investment and distribution trust advisors, as well as trust protectors. The bill allows governing instruments to specify the authority of these advisors to direct or veto trustee actions and outlines their responsibilities, aligning them with trustee obligations. It also introduces a "savings provision" to ensure the effective exercise of powers related to trust principal, even if the trust instrument does not fully comply with statutory requirements. Moreover, the bill emphasizes compliance with the Internal Revenue Code to protect tax benefits associated with trusts.

While many of these changes apply in only very specific situations, we encourage you to reach out to Larkin Hoffman’s trusts and estates team if you’d like to discuss how they may impact you.