Minnesota’s impartiality statute is one sentence, and its last eight words are the whole doctrine. Minn. Stat. § 501C.0803:
If a trust has two or more beneficiaries, the trustee shall administer the trust impartially, giving due regard to the beneficiaries’ respective interests.
Beneficiaries read “impartially” and hear “equally.” Trustees sometimes read it the same way and try to split everything down the middle, and that’s how a trustee ends up breaching the duty while trying to comply with it. The statute doesn’t say equal. It says respective, and in most trusts the respective interests are unequal by design. A widow entitled to income for life and three stepchildren entitled to whatever’s left don’t have equal interests. A trustee who treats them as though they do has swapped in its own estate plan for the settlor’s.
Impartiality is the duty to weigh unequal interests honestly. It’s a duty about process and reasoning, and it’s enforceable precisely because the reasoning can be examined.
When does the duty attach at all?
On one condition: “If a trust has two or more beneficiaries.” A single-beneficiary trust has no impartiality problem. There’s nobody to be impartial between.
But “two or more beneficiaries” counts across time, not just across the room. A trust with one current income beneficiary and one remainder beneficiary has two beneficiaries for purposes of § 501C.0803, and that’s the setup where the duty actually gets litigated. The fight isn’t between two people standing in the same spot. It’s between the person getting money now and the person who gets what’s left.
Minnesota states the same duty a second time, in the principal-and-income article, and this time it names the parties. Section 501C.1102, subd. 1: “A trust must be administered with due regard to the respective interests of income beneficiaries and remainderpersons.”
The blended-family structure that produces most of these disputes
The usual fact pattern isn’t exotic. A settlor in a second marriage leaves a trust that pays income to the surviving spouse for life, with the remainder to the settlor’s children from a first marriage. Often the surviving spouse is also the trustee, or a co-trustee, or holds the power to remove and replace the trustee.
Now look at what each side wants in dollars:
- The income beneficiary wants yield: bonds, dividend-paying stocks, rental income, high current distributions. The spouse is often in her seventies or eighties and has no interest in a portfolio built for a twenty-year horizon she won’t see.
- The remainder beneficiaries want growth and preservation: equities, low distributions, minimal principal invasion. Every dollar distributed is a dollar they don’t get, and every year of high-yield, low-growth investing eats into what’s left.
Neither of those is a bad-faith position. They’re the positions the instrument handed them, and the trustee sitting in the middle can’t satisfy both. That’s exactly why the statute imposes a duty of reasoning, not a duty of outcome. The fight gets sharper when the stepchildren and the surviving spouse are close in age, when the trust holds an illiquid asset like a farm, a cabin, or a closely held company, or when yield is low enough that “income” and “what the spouse needs to live on” have stopped being the same number. Where the spouse is also the trustee, the arrangement carries a loyalty problem on top of an impartiality problem.
Why impartiality and the prudent investor rule are the same problem
They aren’t two duties that happen to collide. Modern portfolio investing is what created the conflict in the first place.
Under Minnesota’s Prudent Investor Act, § 501C.0901, subd. 2(b), a trustee’s decisions “must be evaluated not in isolation but in the context of the trust portfolio as a whole and as a part of an overall investment strategy having risk and return objectives reasonably suited to the trust.” Subdivision 3 requires diversification unless the trustee “reasonably determines that, because of special circumstances, the purposes of the trust are better served without diversifying.” A trustee following those provisions invests for total return, meaning income and appreciation together, because that’s what prudent portfolio management means.
But the trust instrument almost certainly says the spouse gets “income.” Once the portfolio is built for total return, the accounting idea of income stops tracking the economics. A trustee can be perfectly prudent and still starve the income beneficiary. Or a trustee can chase yield to fund the spouse and quietly wreck the remainder.
Section 501C.0901 sees this coming in two places. Subdivision 2(c) lists circumstances a trustee may consider, including “(5) the expected total return from income and the appreciation of capital”; “(6) other resources of the beneficiaries known to the trustee, including earning capacity”; and “(7) needs for liquidity, regularity of income, and preservation or appreciation of capital.” Clause (6) is the one trustees underuse. A spouse with substantial assets outside the trust is in a different spot from one without, and the statute says the trustee may take that into account.
And clause (8) has the express cross-reference: a trustee may consider “an asset’s special relationship or special value, if any, to the purposes of the trust or to one or more of the beneficiaries if consistent with the trustee’s duty of impartiality.” That proviso is a trap for the trustee who keeps the family cabin because one beneficiary loves it. Holding an illiquid asset that produces no income, for the benefit of the remainder, while the income beneficiary goes without, is the exact use of clause (8) the proviso forbids.
Can a settlor direct the trustee to favor one beneficiary?
Yes, and Minnesota says so in unusually direct terms. Section 501C.1102, subd. 3:
In exercising a power to adjust under section 501C.1112 or a discretionary power of administration regarding a matter within the scope of sections 501C.1101 to 501C.1118, a fiduciary shall administer the trust or estate impartially, based on what is fair and reasonable to all of the beneficiaries, except to the extent that the terms of the trust or the will clearly manifest an intention that the fiduciary shall or may favor one or more of the beneficiaries. A determination in accordance with sections 501C.1101 to 501C.1118 is presumed to be fair and reasonable to all of the beneficiaries.
That cuts two ways. A settlor who wants the surviving spouse preferred should say so clearly: “the trustee shall prefer the interests of my spouse over the interests of the remainder beneficiaries and may exhaust the trust for my spouse’s benefit” is a sentence that settles years of future argument. A trust that just grants broad discretion hasn’t clearly manifested that intention.
And the last sentence of subd. 3 is a real safe harbor: an allocation made in accordance with the Principal and Income Act is presumed fair and reasonable. Subdivision 2 adds a companion protection. Where the instrument gives the trustee discretion in crediting receipts or charging expenditures, “no inference of imprudence or partiality arises from the fact that the trustee has made an allocation contrary to sections 501C.1101 to 501C.1118.”
But a preference clause isn’t a blank check. Section 501C.0105(b) makes several floors non-waivable, including “(2) the duty of a trustee to act in good faith and in accordance with the terms and purposes of the trust and the interests of the beneficiaries” and “(3) the requirement that a trust and its terms be for the benefit of its beneficiaries, and that the trust have a purpose that is lawful, not contrary to public policy, and possible to achieve.” And § 501C.0814(a) goes straight at broad discretionary language:
Notwithstanding the breadth of discretion granted to a trustee in the terms of the trust, including the use of such terms as “absolute,” “sole,” or “uncontrolled,” the trustee must exercise a discretionary power in good faith, in accordance with the terms and purposes of the trust and, in the best interests of the beneficiaries.
In Minnesota, broad discretionary language isn’t a defense. Section 501C.0814(a) names the drafting words outright (“absolute,” “sole,” or “uncontrolled”) just to say none of them does what people think it does.
The fix for the income-versus-remainder fight, and the trap inside it
Minnesota’s structural answer is the trustee’s power to adjust between principal and income, Minn. Stat. § 501C.1112. Subdivision 1 lets a trustee adjust “to the extent the trustee considers necessary to comply with section 501C.1102, subdivision 3, after applying section 501C.1102, subdivisions 1 and 2,” on two conditions: the trustee invests and manages the assets as a prudent investor, and the terms of the trust describe the amount that may or must be distributed to a beneficiary “by referring to the trust’s income.” The power exists so prudent total-return investing doesn’t silently disinherit the current beneficiary.
Subdivision 2 supplies ten factors, including the nature, purpose, and expected duration of the trust; the intent of the settlor; the identity and circumstances of the beneficiaries; the needs for liquidity, regularity of income, and preservation and appreciation of capital; the composition of the assets and “whether an asset was purchased by the trustee or received from the settlor”; the anticipated tax consequences of an adjustment; and the investment return under current economic conditions from other portfolios meeting fiduciary requirements. Working those factors on paper is what an impartiality file looks like.
Subdivision 6 protects the power from sloppy drafting: terms that limit adjustment “do not affect the application of this section unless it is clear from the terms of the trust that the terms are intended to deny the trustee the power of adjustment conferred by subdivision 1.”
Now the trap. Subdivision 3 prohibits an adjustment in seven situations, and two of them describe the blended-family structure itself: a trustee may not make an adjustment “(6) if the trustee is a beneficiary of the trust; or (7) if the trustee is not a beneficiary, but the adjustment would benefit the trustee directly or indirectly.”
So the surviving spouse serving as her own trustee can’t use the statute’s main remedy for her own problem. The bar cuts both ways, and it’s worth stating exactly: it disqualifies any trustee who is a beneficiary from making an adjustment, whichever direction that trustee’s interest runs. A child of the first marriage serving as trustee is disqualified by the same clause, for the same reason (being a beneficiary), not because of anything about declining to adjust. Nothing in subdivision 3 compels an adjustment or penalizes a trustee for leaving the allocation alone, which is why the disqualification lands almost entirely on the beneficiary-trustee who wants one. This surprises families constantly, and you want to know it before the trust is drafted, not after.
Subdivision 4 supplies the workaround: where clause (4), (5), (6), or (7) disables a trustee and there’s more than one trustee, “a cotrustee to whom the provision does not apply may make the adjustment unless the exercise of the power by the remaining trustee or trustees is not permitted by the terms of the trust.” Read that as a drafting instruction. A trust that names a beneficiary as sole trustee and expects adjustments to happen is a machine missing a part.
A parallel restriction runs through discretionary distributions. Section 501C.0814(b)(1) provides that a person other than a settlor who is both beneficiary and trustee, and who holds a power to make discretionary distributions for the trustee’s own benefit, “may exercise the power only in accordance with an ascertainable standard”, and § 501C.0814(c) lets the remaining trustees, or a special fiduciary appointed by the court or by the trustees, exercise a power paragraph (b) limits. Paragraph (d) carves out several situations, the first being “a power held by the settlor’s spouse who is the trustee of a trust for which a marital deduction, as defined in section 2056(b)(5) or 2523(e) of the Internal Revenue Code of 1986, as in effect on January 1, 2016, or as later amended, was previously allowed.” Whether a trust falls inside that carve-out is a question for tax counsel. The point is that both the rule and its exceptions have to be checked before a beneficiary-trustee exercises discretion in her own favor.
What a trustee should actually do, and what a beneficiary can force
For a trustee, the most important sentence in this area is § 501C.1112, subd. 7: “Nothing in this section is intended to create or imply a duty to make an adjustment, and a trustee is not liable for not considering whether to make an adjustment or for choosing not to make an adjustment.” The same subdivision limits the remedy. In a proceeding about nonexercise of the power to adjust from principal to income, “the sole remedy is to direct or deny an adjustment (or greater adjustment) from principal to income.”
Read that before you assume a starved income beneficiary has a damages claim for failure to adjust. Under subd. 7 the claim is for an order directing the adjustment, not for money. A damages theory, if there is one, has to be built on § 501C.0803, on the prudent investor rule, or on some other duty, not on the failure to exercise § 501C.1112.
That’s also why a beneficiary’s real leverage is information. Section 501C.0813(a) requires a trustee to keep qualified beneficiaries of an irrevocable trust “reasonably informed about the administration of the trust and of the material facts necessary to protect their interests,” and the allocation between income and principal, the yield the trustee is targeting, and whether adjustment was ever considered are all material facts. What that duty does and doesn’t require is where building an impartiality claim starts.
For the trustee, § 501C.1112, subd. 8 is the procedure worth using. A trustee may mail a notice of proposed action, and a proposed action expressly “includes a course of action and a determination not to take action.” The notice goes to all adult beneficiaries receiving or entitled to receive income, or entitled to receive principal if the trust terminated then. It has to state the trustee’s name and address, a contact person, “a description of the action proposed to be taken and an explanation of the reasons for the action,” an objection period “which must be at least 30 days from the mailing of the notice of proposed action,” and the date on or after which the proposed action may be taken or is effective. If no written objection arrives within the period, subdivision 8(e) protects the trustee from liability in the listed circumstances. If an objection does arrive, subdivision 8(f) lets either side petition, and “a beneficiary objecting to the proposed action has the burden of proof as to whether the trustee’s proposed action should not be performed.”
That burden is the reason to use the notice. A trustee who proposes, explains, and waits has put the burden on the objector. A trustee who just acts hasn’t.
The file wins or loses it
Impartiality claims are won and lost on documents that either exist or don’t. The trustee who can hand over a written analysis has a defensible file whatever the outcome: the beneficiaries’ respective interests as the instrument defines them, the § 501C.0901, subd. 2(c) circumstances considered, the § 501C.1112, subd. 2 factors weighed, and either an adjustment or a reasoned decision not to adjust, noticed under subd. 8. The trustee who’s been quietly favoring whichever beneficiary calls most often has a problem good intentions won’t fix. Section 501C.0803 doesn’t ask whether the trustee meant well. It asks whether the trustee gave due regard to interests the settlor made unequal on purpose.
Madgett Law, LLC
We work the income-versus-remainder fight from both sides in Minnesota trusts: surviving spouses whose income has quietly disappeared into a growth portfolio, remainder beneficiaries watching a life tenant consume a trust that was supposed to reach them, and trustees caught in the middle who need the § 501C.1112 analysis done and noticed properly. If you’re drafting rather than fighting, two questions are worth settling now: whether the instrument clearly states a preference, and whether the trustee you’ve named is disabled from adjusting under § 501C.1112, subd. 3. Call 612-470-6529 or send us a message.
Sources: Minn. Stat. § 501C.0803 (Impartiality) — entire section (duty attaches if a trust has two or more beneficiaries; administer impartially, giving due regard to the beneficiaries’ respective interests). Minn. Stat. § 501C.1102 (Duty of Trustee as to Receipts and Expenditure) — subd. 1 (administration with due regard to the respective interests of income beneficiaries and remainderpersons; ordering of trust terms, the Act, and reasonable-and-equitable administration), subd. 2 (no inference of imprudence or partiality from a discretionary allocation contrary to §§ 501C.1101 to 501C.1118), subd. 3 (impartial administration based on what is fair and reasonable to all beneficiaries, except to the extent the terms clearly manifest an intention to favor one or more beneficiaries; determinations in accordance with the Act are presumed fair and reasonable). Minn. Stat. § 501C.1112 (Trustee’s Power to Adjust) — subd. 1 (power to adjust; prudent-investor and income-reference preconditions), subd. 2(1)–(10) (factors), subd. 3(6)–(7) (no adjustment if the trustee is a beneficiary, or if the adjustment would benefit the trustee directly or indirectly), subd. 4 (cotrustee to whom the disability does not apply may adjust), subd. 6 (limiting terms do not negate the power unless clearly intended to deny it), subd. 7 (no duty to adjust; no liability for not considering or not adjusting; sole remedy for nonexercise from principal to income is to direct or deny an adjustment), subd. 8(a) (proposed action includes a determination not to take action), 8(b) (who receives notice), 8(c)(1)–(5) (required contents, including an objection period of at least 30 days from mailing), 8(e) (protection from liability absent written objection), 8(f) (objecting beneficiary bears the burden of proof). Minn. Stat. § 501C.0901 (Minnesota Prudent Investor Act) — subd. 2(b) (portfolio as a whole), subd. 2(c)(5)–(8) (total return; other resources of the beneficiaries including earning capacity; liquidity, regularity of income, and preservation or appreciation of capital; an asset’s special relationship or special value “if consistent with the trustee’s duty of impartiality”), subd. 3 (diversification unless the trustee reasonably determines special circumstances). Minn. Stat. § 501C.0814 — para. (a) (discretion described as “absolute,” “sole,” or “uncontrolled” still must be exercised in good faith, in accordance with the terms and purposes of the trust and in the best interests of the beneficiaries), para. (b)(1) (beneficiary-trustee’s power to distribute for the trustee’s own benefit limited to an ascertainable standard), para. (c) (remaining trustees or a special fiduciary may exercise a limited power), para. (d)(1) (carve-out for a power held by the settlor’s spouse who is trustee of a trust for which a marital deduction under I.R.C. § 2056(b)(5) or § 2523(e) was previously allowed). Minn. Stat. § 501C.0105(b)(2)–(3) (mandatory good-faith duty; requirement that a trust and its terms be for the benefit of its beneficiaries). Minn. Stat. § 501C.0813(a) (duty to keep qualified beneficiaries of an irrevocable trust reasonably informed about the administration and the material facts necessary to protect their interests). All statutory text from the Minnesota Office of the Revisor of Statutes (2025 edition); no section cited was amended in the 2026 Regular Session, and the Revisor history for § 501C.0803 shows 2015 Minn. Laws ch. 5, art. 8, § 3 with no later amendment. The Internal Revenue Code sections named in § 501C.0814(d)(1) are quoted as they appear in the Minnesota statute (26 U.S.C. §§ 2056(b)(5), 2523(e)); nothing here is tax advice. No Minnesota appellate decision is cited in this article. This article is general legal information about Minnesota law, not legal or tax advice, and reading it does not create an attorney–client relationship. Whether a trustee has administered a particular trust impartially depends on the instrument, the portfolio, and the record. No outcome is promised or implied.