SB384: Bill Text

SB384,110,4 (a) If the trust protector is also the settlor, the trust protector is not liable for any loss that results from a breach of the trust protector's duties.

SB384,110,7 (b) If the trust protector is also a qualified beneficiary, the trust protector is not liable for any loss that results from a breach of the trust protector's duties for a power that is exercised in a nonfiduciary capacity.

SB384,110,10 (5)   Resignation and release of powers. A trust protector may resign or release a power granted to the trust protector by giving written notice to the trustee and to any successor trust protector.

SB384,110,12 (6) Prohibited actions. A trust protector may not exercise a power granted to the trust protector to do any of the following:

SB384,110,17 (a) Except as provided in sub. (2) (b) 3. and 4., create or expand any beneficial interest, power of appointment, right of withdrawal, or right to receive trust property as a result of the exercise of a power of appointment if the creation or expansion would benefit the trust protector, the trust protector's estate, the trust protector's creditors, or creditors of the trust protector's estate.

SB384,110,18 (b) Modify or amend a trust to do any of the following:

SB384,110,21 1. Remove a requirement pursuant to 42 USC 1396p (d) (4) to pay back a governmental entity for benefits provided to the permissible beneficiary at the death of that beneficiary.

SB384,110,23 2. Reduce or eliminate an income interest of an income beneficiary of any of the following trusts:

SB384,111,2 a. A trust for which a marital deduction has been taken for federal or state estate tax purposes under section 2056, 2056A, or 2523 of the Internal Revenue Code or any comparable provision of applicable state law, during the life of the settlor's spouse.

SB384,111,4 b. A charitable remainder trust under section 664 of the Internal Revenue Code, during the life of the noncharitable beneficiary.

SB384,111,6 c. A trust in which the settlor has a qualified interest under section 2702 (b) of the Internal Revenue Code, during any period in which the settlor is a beneficiary.

SB384,111,8 d. A trust for which an election as a qualified Subchapter S Trust under section 1361(d) of the Internal Revenue Code is in place.

SB384,111,11 (c) Modify any beneficial interest in a trust that qualified for a marital deduction or charitable deduction from federal or state estate tax in a manner that would have caused the trust not to qualify for the deduction.

SB384,111,16 (7) Settlor rights. A trust protector is not subject to the direction of the settlor and the settlor may not bring a cause of action against the trust protector. A trust protector may consider a settlor's goals, objectives, and philosophies in establishing the trust and the trust's structure when exercising the powers granted to the trust protector and may do so regardless of whether the settlor is deceased.

SB384,111,24 (8) Duties of a trustee and a directing party. (a)   A trustee and a directing party shall act in accordance with a trust protector's exercise of a power granted to the trust protector. A trustee and a directing party are not liable for acting in accordance with the trust protector's exercise of a power granted to the trust protector unless the attempted exercise is manifestly contrary to the power granted to the trust protector or the trustee or the directing party knows that the attempted exercise would constitute a serious breach of a duty that the trust protector owes to the beneficiaries of the trust.

SB384,112,6 (b) A trustee and a directing party do not have a duty to monitor the conduct of the trust protector, provide advice to or consult with the trust protector, or communicate with, warn, or apprise any beneficiary concerning instances in which the trustee or the directing party would or might have exercised the trustee's or the directing party's discretion in a manner different from the manner in which the trust protector exercised its discretion.

SB384,112,15 (9)   Right to information. (a) A trust protector may request information about the trust from the trustee and, if the requested information is related to a power granted to the trust protector, the trustee shall provide the requested information to the trust protector. If a trustee is bound by any confidentiality restrictions with respect to information requested by a trust protector, the trustee may require that the trust protector agree to be bound by the confidentiality restrictions before delivering such information to the trust protector. A trustee is not liable to any beneficiary for any loss or damages resulting from the trustee providing information to the trust protector that is related to the power granted to the trust protector.

SB384,112,18 (b) Except as otherwise provided in this chapter, a trustee does not have to provide any information to the trust protector that the trust protector does not request.

SB384,112,21 (10)   Payment or reimbursement of attorney fees and costs. A trustee shall, in accordance with s. 701.1004, pay or reimburse a trust protector for attorney fees and costs to defend any claim made against the trust protector.

SB384,112,24 (11)   Application of other sections to trust protectors. Sections 701.0701, 701.0708, 701.0709, 701.1001 to 701.1003, and 701.1005 to 701.1010 apply to a trust protector as if the trust protector is the trustee.

SB384,113,3 (12)   Jurisdiction. A person who accepts an appointment as a trust protector of a trust submits to the jurisdiction of the courts of this state, as provided in s. 701.0202 (1).

SB384,152 Section 152. 701.0819 of the statutes is created to read:

SB384,113,8 701.0819 Marital deduction transfers. (1) For purposes of this section, "marital deduction transfer" means a lifetime or testamentary transfer of property that is intended to qualify for the marital deduction as indicated by the terms of the trust.

SB384,113,11 (2) In interpreting, construing, or administering a trust instrument, absent a clear expression of intent by the settlor to the contrary, a trustee shall apply the following presumptions that may only be rebutted by clear and convincing evidence:

SB384,113,13 (a) The settlor intended to take advantage of tax deductions, exemptions, exclusions, and credits.

SB384,113,16 (b) The settlor intended that any transfer made to a spouse outright and free of trust qualify for the gift or estate tax marital deduction and is a marital deduction transfer.

SB384,113,23 (c) If the trust instrument refers to a trust as a marital trust, qualified terminable interest property trust, or spousal trust, or refers to qualified terminable interest property, section 2044, 2056, 2056A, or 2523 of the Internal Revenue Code, or a similar provision of applicable state law, the settlor intended that the trust and property passing to the trust qualify for the applicable gift or estate tax marital deduction and that the transfer qualifies for the marital deduction for federal and state gift or estate tax purposes.

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).