A Trustee's Duties

A Trustee's Duties


In its simplest form, a trust is a legal relationship in which property is held and managed for the benefit of another. A trust generally includes a settlor, who establishes the trust and contributes the property; a trustee, who manages the property according to the terms and purpose of the trust; and beneficiaries, who are entitled to receive its benefits.

Minnesota’s school trust relationship arose from federal land grants, the state’s acceptance of those grants, and the provisions of the Minnesota Constitution. The federal government granted lands to the state “for the use of schools,” and Minnesota accepted those lands subject to that purpose. The lands and the revenues they generate are held in trust for the benefit of Minnesota’s public schools.

The State of Minnesota acts as trustee of the school trust lands and the Permanent School Fund. The beneficiaries are Minnesota’s public schools, including both current and future generations of students. The principal of the Permanent School Fund must be preserved in perpetuity, while its investment earnings are distributed to public schools as provided by law.

Trustees owe fiduciary duties to the beneficiaries. These duties require school trust assets to be managed with loyalty, prudence, care, and attention to the interests of both current and future beneficiaries. Decisions affecting the assets must be directed toward their constitutional purpose rather than unrelated public purposes.

OSTL's Fiduciary Role

Minnesota law requires the Office of School Trust Lands to act in a fiduciary capacity for the beneficiaries. In carrying out that responsibility, OSTL:

  • Evaluates the financial position of school trust land assets.
  • Assesses their current and potential market value.
  • Advises the governor on management policies and other policies affecting the Permanent School Fund.
  • Advises the Executive Council and Land Exchange Board on school trust land matters.
  • Develops long-term strategies for improving asset value, cash flow, and portfolio performance.
  • Keeps beneficiaries, policymakers, and the public informed about the management and financial performance of school trust lands.

OSTL does not directly administer school trust lands. Instead, one of its principal statutory responsibilities is to provide independent advice and recommendations to DNR regarding the management of those assets. This includes management plans, leases, royalty agreements, land sales and exchanges, cost certification, and revenue-generating opportunities.

DNR's Fiduciary Role

The Department of Natural Resources has the authority and responsibility to administer Minnesota’s school trust lands. In advising DNR, OSTL evaluates proposed policies and management activities in relation to the statutory goals identified for DNR, including:

  • Managing school trust lands efficiently and with undivided loyalty to the beneficiaries.
  • Reducing management expenditures and maximizing revenues deposited into the Permanent School Fund.
  • Receiving not less than fair-market value from sales, exchanges, and commercial leases while retaining the value of long-term appreciation.
  • Maximizing long-term economic return while maintaining sound natural resource conservation and management principles.
  • Balancing short-term revenues and long-term interests so that long-term benefits are not lost in an effort to maximize short-term gains.
  • Maintaining the integrity of the trust and preventing the misapplication of its lands and revenues.

OSTL’s advice and recommendations are intended to help ensure that decisions affecting school trust lands reflect the state’s fiduciary obligations and are supported by appropriate financial, legal, and professional analysis. This includes consideration of revenues, costs, risks, market value, and future earning potential.