Legal Memorandum: Definition of "Insider" in MN

Issue: What relatives are considered ‘insiders’ under the Minnesota Fraudulent Transfer Act?

The Minnesota Fraudulent Transfer Act, in Minn. Stat. § 514.41(7), defines “insider” to include a relative of the debtor, and “relative” is further defined in subsection (11) to include an individual related to a spouse within the third degree as determined by the common law.  Minn. Stat. § 514.41(7), (11). 

There is some Minnesota authority suggesting that a first cousin is a fourth-degree relative, when calculated according to the civil law, not the common law.  In Reiss Greenhouses, Inc. v. Hennepin County, 290 N.W.2d 785 (Minn. 1980), for instance, the court considered the statutory definition of “family farm corporation” under Minn. Stat. § 273.111, subd. 3, which required that all of the stockholders of a such a corporation be members of a family related to each other within the third degree of kindred according to the rules of civil law.  (The definition of family farm corporation is actually in Minn. Stat. § 500.24(c)).  The court concluded in that case that, because cousins are related within the fourth degree of kindred, and two of the stockholders in Reiss Greenhouses were cousins, the property in question did not qualify as a family farm corporation.  See also State v. Wilson, 524 N.W.2d 271 (Minn. Ct. App. 1994) (explaining that the civil law computes the degree of kinship by counting up from the person in question to the nearest common ancestor, and then down to the other person, calling it one degree for each generation in the ascending as […]