Purpose of the Bill

The purpose of this bill is to adopt the Uniform Special Deposits Act into Minnesota law. This act is intended to standardize the management of special deposits by financial institutions, such as banks and credit unions, within Minnesota.

Main Provisions

• Special Deposit Definition: The bill defines a special deposit as specific funds held by a bank to benefit multiple beneficiaries, which is subject to a contingency described in an account agreement.
• Account Agreement Requirements: The account agreement must include details such as the purpose of the special deposit, contingencies for withdrawal, and beneficiaries entitled to the funds.
• Permissible Purposes: The funds must serve specific purposes like holding escrow for transactions, security deposits, compliance with legal settlements, or supporting financial infrastructure.
• Payment to Beneficiaries: Banks are obligated to pay beneficiaries as per the account agreement when conditions are met. Payment can be distributed based on the available funds.
• Property Interest: Beneficiaries do not hold property interest in the deposit; they only have the right to payment as specified.
• Creditor Process: Creditor claims against special deposits are limited, and a process is outlined for when they can be enforced against the bank.
• Bank Duties and Liability: Banks have specific duties regarding compliance with account agreements but do not have a fiduciary responsibility. Liability is limited to damages caused by non-compliance.
• Term and Termination: Special deposits generally terminate after five years unless otherwise specified. Remaining funds, if any, are returned to the depositor.
• Uniformity and Transition: The act aims for uniform application across jurisdictions adopting it, with transitional provisions for agreements made before and after a specified date.

Significant Changes to Existing Law

This bill introduces a new standardized legal framework for managing special deposits, including detailed provisions on handling, using, and terminating such deposits. It represents a new section in the Minnesota Statutes chapter 47 and affects how financial institutions must handle special purpose deposits.

Relevant Terms

• Special Deposit
• Account Agreement
• Beneficiary
• Contingency
• Creditor Process
• Permissible Purpose
• Fiduciary Duty
• Transitional Provision