SB384: Bill Text

SB384,114,3 (3) If a trust receives a marital deduction transfer, the trust instrument shall be construed to comply with the marital deduction provisions of the Internal Revenue Code.

SB384,114,9 (4) If a trust receives a marital deduction transfer, the trustee has all the powers, duties, and discretionary authority necessary to comply with the marital deduction provisions of the Internal Revenue Code. The trustee may not take any action or have any power that may impair the availability of the marital deduction, but this does not require the trustee to make the election under either section 2056 (b) (7), 2056A (a) (3), or 2523 (f) of the Internal Revenue Code.

SB384,153 Section 153. 701.09 (title), (1) and (2) of the statutes are renumbered 853.34 (title), (1) and (2).

SB384,154 Section 154. 701.09 (3), (4) and (5) of the statutes are repealed.

SB384,155 Section 155. Subchapter IX (title) of chapter 701 [precedes 701.0901] of the statutes is created to read:

SB384,114,15 chapter 701

SB384,114,16 subchapter IX

SB384,114,17 investment management of trusts

SB384,156 Section 156. 701.0901 of the statutes is created to read:

SB384,114,21 701.0901 Application of the Wisconsin Prudent Investor Act. Except as provided in this subchapter, the investment management of the property of a trust is governed by ch. 881.

SB384,157 Section 157. 701.0902 of the statutes is created to read:

SB384,114,24 701.0902 Directed trust property. (1) A directing party who has power over directed trust property shall do all of the following:

SB384,115,3 (a) Direct the trustee on the retention, purchase, sale, exchange, tender, encumbrance, or any other investment transaction of the directed trust property and the investment and reinvestment of principal and income.

SB384,115,5 (b) Direct the trustee with respect to the management, control, and voting powers, including voting proxies, of the directed trust property.

SB384,115,9 (c) Select and determine reasonable compensation of one or more outside investment advisors, managers, consultants, or counselors, which may include the trustee, and delegate investment authority to them pursuant to the investment delegation provisions under s. 881.01 (10).

SB384,115,12 (d) Determine the frequency of and methodology for valuing directed trust property and provide the value of property for which there is no readily available daily market value.

SB384,115,14 (2) A trustee who has no power over directed trust property does not have a duty to do any of the following with respect to the directed trust property:

SB384,115,15 (a) Prepare or review investment policy statements.

SB384,115,16 (b) Perform investment or suitability reviews, inquiries, or investigations.

SB384,115,18 (c) Determine or verify the value of directed trust property for which there is no readily available daily market value.

SB384,115,19 (d) Monitor the conduct or investment performance of the directing party.

SB384,158 Section 158. 701.0903 of the statutes is created to read:

SB384,116,2 701.0903 Nonapplication of prudent investor rule to life insurance contracts owned by trusts. (1) Notwithstanding s. 881.01, if a principal purpose of a trust is to hold a life insurance contract or to purchase a life insurance contract from contributions made to the trust, the trustee does not have a duty to determine whether the life insurance contract is or remains a proper investment of the trust. For purposes of this subsection, determining whether a life insurance contact is or remains a proper investment includes all of the following:

SB384,116,4 (a) Investigating the financial strength or changes in the financial strength of the life insurance company maintaining the life insurance contract.

SB384,116,6 (b) Determining whether to exercise any policy option, right, or privilege available under the life insurance contract.

SB384,116,8 (c) Diversifying the life insurance contract relative to any other life insurance contracts or any other assets of the trust.

SB384,116,10 (d) Inquiring about or investigating the health or financial condition of an insured.

SB384,116,13 (e) Preventing the lapse of a life insurance contract if the trust does not receive contributions or hold other readily marketable assets to pay the life insurance contract premiums.

SB384,116,15 (2) A trustee is not liable for a loss that arises because the trustee did not take an action specified in sub. (1).

SB384,116,21 (3) This section does not apply to a life insurance contract that is purchased from an affiliate of the trustee or to a life insurance contract from which the trustee or an affiliate receives a commission, unless the power to purchase the life insurance contract has been delegated to another person and that other person made the decision to purchase the life insurance contract from or through the trustee or an affiliate.

SB384,116,25 (4) This section does not apply to a trust that was executed before the effective date of this subsection .... [LRB inserts date], unless the trustee notifies the qualified beneficiaries that the trustee elects to be governed by this section and provides the qualified beneficiaries with a copy of this section.

SB384,117,3 (5) Subject to sub. (4), this section applies to a life insurance contract acquired, retained, or owned by a trustee before, on, or after the effective date of this subsection .... [LRB inserts date].

SB384,159 Section 159. 701.10 of the statutes is repealed.

SB384,160 Section 160. Subchapter X (title) of chapter 701 [precedes 701.1001] of the statutes is created to read:

SB384,117,7 chapter 701

SB384,117,10 subchapter x liability of trustees and rights of persons dealing with trustee

SB384,161 Section 161. 701.1001 of the statutes is created to read:

SB384,117,13 701.1001 Remedies for breach of trust. (1) A violation by a trustee of a duty the trustee owes to a beneficiary is a breach of trust.

SB384,117,15 (2) To remedy a breach of trust that has occurred or may occur, a court may do any of the following:

SB384,117,16 (a) Compel the trustee to perform the trustee's duties.

SB384,117,17 (b) Enjoin the trustee from committing a breach of trust.

SB384,117,19 (c) Compel the trustee to redress a breach of trust by paying money, restoring property, or other means.

SB384,117,20 (d) Order a trustee to account.

SB384,117,24 (e) Appoint an additional trustee, a directing party, or a trust protector having the duties and authority ordered by the court, including, in the case of an additional trustee, the authority to take possession of the trust property and administer the trust.

SB384,117,25 (f) Suspend the trustee.

SB384,118,1 (g) Remove the trustee as provided in s. 701.0706.

SB384,118,2 (h) Reduce the compensation of or deny compensation to the trustee.

SB384,118,5 (i) Subject to s. 701.1012, void an act of the trustee, impose a lien or a constructive trust on trust property, or trace trust property wrongfully disposed of and order recovery of the property or its proceeds.

SB384,118,7 (j) Order any other appropriate relief, whether provided elsewhere in this chapter, available at common law, or under equity principles.

SB384,162 Section 162. 701.1002 of the statutes is created to read:

SB384,118,11 701.1002 Damages for breach of trust; liability of successor trustee. (1) A trustee who commits a breach of trust is liable to an affected beneficiary for the greater of the following:

SB384,118,13 (a) The amount required to restore the value of the trust property and trust distributions to what they would have been had the breach not occurred.

SB384,118,14 (b) The profit the trustee made by reason of the breach.

SB384,118,22 (2) Except as otherwise provided in this subsection, if more than one trustee is liable to a beneficiary for a breach of trust, a trustee is entitled to contribution from the other trustee or trustees. A trustee is not entitled to contribution if the trustee was substantially more at fault than another trustee or if the trustee committed the breach of trust in bad faith or with reckless indifference to the purposes of the trust or the interests of the beneficiary. A trustee who received a benefit from the breach of trust is not entitled to contribution from another trustee to the extent of the benefit received.

SB384,118,25 (3) A successor trustee is not liable for the acts and omissions of a former trustee or for the acts or omissions of any directing party or trust protector that are taken before the appointment of the successor trustee.

SB384,163 Section 163. 701.1003 of the statutes is created to read:

SB384,119,4 701.1003 Damages in absence of breach. Absent a breach of trust, a trustee is not liable to a beneficiary for a loss or depreciation in the value of trust property or for not having made a profit.

SB384,164 Section 164. 701.1004 of the statutes is created to read:

SB384,119,9 701.1004 Attorney fees and costs. (1) In a judicial proceeding involving the administration of a trust, the court, as justice and equity may require, may award costs and expenses, including reasonable attorney fees, to any party, to be paid by another party or from the trust that is the subject of the controversy.

SB384,119,15 (2) Subject to sub. (3), if a trustee, directing party, or trust protector defends or prosecutes any proceeding in good faith, whether successful or not, the trustee, directing party, or trust protector is entitled to receive from the trust the necessary expenses and disbursements, including reasonable attorney fees, incurred. This subsection does not preclude a court from ordering another party to reimburse the trust for these expenses and disbursements as provided in sub. (1).

SB384,119,18 (3) (a) A trustee may pay costs or attorney fees incurred in any proceeding from the trust property without the approval of any person and without court authorization, unless the court orders otherwise as provided in par. (c).

SB384,120,5 (b) If a claim or defense based upon a breach of trust is made against a trustee, directing party, or trust protector in a proceeding, the trustee shall provide notice to each qualified beneficiary, directing party, and trust protector of the trustee's intention to pay costs or attorney fees incurred in the proceeding from the trust prior to making payment. The notice shall inform each qualified beneficiary, directing party, and trust protector of the right to apply to the court for an order prohibiting the trustee from paying attorney fees or costs from trust property. If a trustee is served with a motion for an order prohibiting the trustee from paying from the trust attorney fees or costs in the proceeding and the trustee pays attorney fees or costs from the trust before an order is entered on the motion, the trustee, directing party, or trust protector and their respective attorneys who have been paid attorney fees or costs from trust property are subject to the remedies in pars. (c) and (d).

SB384,120,8 (c) 1. If a claim or defense based upon breach of trust is made against a trustee, directing party, or trust protector in a proceeding, a party may move the court for an order to prohibit the trustee from paying costs or attorney fees from trust property.

SB384,120,16 2. Except as provided in subd. 3., if the moving party demonstrates to the court that there is a reasonable basis for the court to find that a breach of trust occurred, the court shall enter an order prohibiting the payment of further attorney fees and costs from trust property and shall order attorney fees or costs previously paid from trust property in such proceeding to be refunded, unless the court finds good cause to allow attorney fees and costs to be paid from the trust. A trustee, directing party, or trust protector may offer evidence to rebut the evidence submitted to the court by the moving party.

SB384,120,18 3. The court may defer ruling on a motion to prohibit a trustee from paying costs or attorney fees from trust property until discovery is taken by the parties.

SB384,121,3 4. An order entered under this paragraph does not limit a trustee's, directing party's, or trust protector's right to seek an order allowing the payment of some or all of the attorneys fees or costs incurred in the proceeding from trust property, including any fees required to be refunded, after the claim or defense is finally determined by the court. If a claim or defense based upon a breach of trust is withdrawn, dismissed, or resolved without a determination by the court that the trustee committed a breach of trust, after the entry of an order prohibiting payment of attorney fees and costs pursuant to this paragraph, the trustee may pay costs or attorney fees incurred in the proceeding from the trust property without further court authorization.

SB384,121,8 (d) If the court orders a refund under par. (c), the court may enter sanctions as are appropriate if a refund is not made as directed by the court, including striking defenses or pleadings filed by the trustee, directing party, or trust protector. Nothing in this paragraph limits other remedies and sanctions the court may employ for the failure to refund the trust in a timely manner.

SB384,121,11 (e) Subject to s. 701.1005, nothing in this subsection limits the power of the court to review fees and costs or the right of any interested persons to challenge fees and costs after payment, after an accounting, or after conclusion of the litigation.

SB384,121,15 (f) Notice under par. (b) is not required if the action or defense is later withdrawn or dismissed by the party that is alleging a breach of trust or resolved without a determination by the court that the trustee has not committed a breach of trust.

SB384,121,23 (4) A provision of a trust instrument drafted or caused to be drafted by a trustee, directing party, or trust protector that modifies the application of this section in a manner favorable to the trustee, directing party, or trust protector and potentially detrimental to a beneficiary is invalid with respect to the trustee, directing party, or trust protector unless the trustee, directing party, or trust protector proves that the provision was fair under the circumstances existing at the time the trust instrument was signed and that the existence and contents of the provision were adequately communicated to the settlor.

SB384,165 Section 165. 701.1005 of the statutes is created to read:

SB384,122,4 701.1005 Limitation of action against trustee. (1) A beneficiary may not commence a proceeding against a trustee for breach of trust more than one year after the date on which the beneficiary or a representative of the beneficiary was sent a report that adequately disclosed the existence of a potential claim for breach of trust.

SB384,122,7 (2) A report adequately discloses the existence of a potential claim for breach of trust if it provides sufficient information so that the beneficiary or representative knows of the potential claim or should have inquired into its existence.

SB384,122,10 (3) If sub. (1) does not apply, a proceeding by a beneficiary against a trustee for breach of trust must be commenced within 5 years after the first to occur of the following:

SB384,122,11 (a) The removal, resignation, or death of the trustee.

SB384,122,12 (b) The termination of the beneficiary's interest in the trust.

SB384,122,13 (c) The termination of the trust.

SB384,122,15 (4) Subsections (1) and (3) do not apply to a claim for fraud. The time for asserting a claim for fraud is governed by applicable law.

SB384,166 Section 166. 701.1006 of the statutes is created to read:

SB384,122,20 701.1006 Reliance on trust instrument. A trustee who acts in reasonable reliance on the terms of the trust as expressed in the trust instrument is not liable to a beneficiary for a breach of trust to the extent the breach resulted from the reliance.

SB384,167 Section 167. 701.1007 of the statutes is created to read:

SB384,123,2 701.1007 Event affecting administration or distribution. If the happening of an event, including marriage, divorce, performance of educational requirements, or death, affects the administration or distribution of a trust, a trustee who has exercised reasonable care to ascertain the happening of the event is not liable for a loss resulting from the trustee's lack of knowledge.

SB384,168 Section 168. 701.1008 of the statutes is created to read:

SB384,123,6 701.1008 Exculpation of trustee. (1) A term of a trust relieving a trustee of liability for breach of trust is unenforceable to the extent that it does any of the following:

SB384,123,9 (a) Relieves the trustee of liability for breach of trust committed in bad faith or with reckless indifference to the purposes of the trust or the interests of a beneficiary.

SB384,123,11 (b) Was inserted as the result of an abuse by the trustee of a fiduciary or confidential relationship with the settlor.

SB384,123,16 (2) An exculpatory term drafted or caused to be drafted by the trustee is invalid as an abuse of a fiduciary or confidential relationship unless the trustee proves that the exculpatory term was fair under the circumstances existing at the time the trust instrument was signed and that the existence and contents of the exculpatory term were adequately communicated to the settlor.

SB384,169 Section 169. 701.1009 of the statutes is created to read:

SB384,123,21 701.1009 Beneficiary's consent, release, or ratification. A trustee is not liable to a beneficiary for breach of trust if the beneficiary consented to the conduct constituting the breach, released the trustee from liability for the breach, or ratified the transaction constituting the breach, unless any of the following applies: