Hennepin County District Court File No. P896298
Considered and decided by Stoneburner , Presiding Judge, Harten , Judge,
and Minge , Judge.
When valuing and dividing trust assets, trustees have discretion to use a reasonable valuation method, including the fair market value and investment value approaches.
The opinion of the court was delivered by: Minge, Judge
In a dispute over valuation of a minority block of stock in a closely held corporation for purposes of determining equal distribution of assets pursuant to a will and trust, the district court upheld the trustees' determination that they were required to use the fair market value approach, which discounted for lack of control and lack of marketability. Appellant claims that since the block of stock, together with the other stock the respondent already owns, will give respondent control of the closely held corporation, the district court erred by approving this fair market valuation approach. Appellant argues that the district court should have directed the trustees to use the investment value approach, which would recognize the value to the respondent of the control of the corporation that decedent's minority block of stock would give. Because the fair market value approach is an acceptable method for determining the value of a minority block of stock, because the trustees prefer that method, and because the trustees have discretion to select a valuation approach, we affirm.
Patricia D. King died in 1996; respondents William A. King and U.S. Bank National Association were appointed her personal representatives. By the terms of her will, and following a disclaimer by her sister, the residue of her estate was devised to her personal representatives as trustees for the benefit of, and for distribution in equal parts to, her two nephews: respondent Joseph Glaisyer and his brother appellant Robert Glaisyer. A significant part of that residue was a minority block of stock in Capitol Securities Corporation (CSC).
CSC is a closely held corporation. When King died, she owned 726 shares of CSC stock. Virtually all remaining shares were held by appellant Robert and respondent Joseph Glaisyer. Joseph owned 645 shares, and Robert owned 468 shares. Joseph is president and CEO of CSC. The trust provides:
[T]o the extent possible, all shares of stock of Capitol Securities Corp. included in the residue of the trust shall be allocated to the share of the residue of the trust to be distributed to my nephew, Joseph L. Glaisyer * * *.
The trust grants the trustees the authority to "determine values" but does not specify a method.
Appraisers determined that, based on the net value of the assets of CSC, its stock was worth $3,880 per share. The parties do not dispute this value. The personal representatives then determined the fair market value of the shares held by King at her death by applying a 45% discount because the shares represent a minority interest and are not readily marketable. The revised plan of distribution uses the resulting fair market value of $2,134 per share. The same value and valuation method had been used in valuing the shares for estate tax purposes.
Robert objected to the use of the fair market value approach in valuing King's CSC stock. He claimed that receipt of the King shares would give Joseph not a minority block of stock, but control of CSC, that control carried with it substantial value, and that as a result, use of the fair market approach would defeat King's intent that assets be equally divided between him and Joseph. Robert advocated use of the investment value method of determining the value of the King block of stock. This investment approach would value the CSC stock according to its value to the ...