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701.06(5m) (5m)Trust for disabled individual. Subsection (5) does not apply to any trust that is established for the benefit of an individual who has a disability which has continued or can be expected to continue indefinitely, substantially impairs the individual from adequately providing for his or her own care or custody, and constitutes a substantial handicap to the afflicted individual if the trust does not result in ineligibility for public assistance under ch. 49. A trustee of a trust which is exempt from claims for public support under this subsection shall notify the county department under s. 46.215 or 46.22 in the county where the disabled beneficiary resides of the existence of the trust.
Effective date note NOTE: Sub. (5m) is renumbered to s. 701.0503 (3) and amended, eff. 7-1-14, by 2013 Wis. Act 92.
701.06(6) (6)Settlor as beneficiary.
701.06(6)(a)(a) Notwithstanding any provision in the creating instrument and in addition to the remedies available under subs. (4) and (5) where the settlor is a beneficiary, upon application of a judgment creditor of the settlor, the court may, if the terms of the instrument require or authorize the trustee to make payments of income or principal to or for the benefit of the settlor, order the trustee to satisfy part or all of the judgment out of part or all of the payments of income or principal as they are due, presently or in the future, or which are payable in the trustee's discretion, to the extent in either case of the settlor's proportionate contribution to the trust.
Effective date note NOTE: Sub. (6) (title) and (a) are repealed eff. 7-1-14 by 2013 Wis. Act 92.
701.06(6)(b) (b) A beneficiary of a trust may not be considered a settlor solely because of a lapse, waiver, or release of any of the following:
701.06(6)(b)1. 1. A power described under par. (c).
701.06(6)(b)2. 2. The beneficiary's right to withdraw part of the trust property, to the extent that the value of the property affected by the lapse, waiver, or release in any year does not exceed the greater of the amount in:
701.06(6)(b)2.a. a. Section 2041 (b) (2) or 2514 (e), Internal Revenue Code of 1986.
701.06(6)(b)2.b. b. Section 2503 (b), Internal Revenue Code of 1986.
Effective date note NOTE: Par. (b) is renumbered to s. 701.0505 (2) (b) and amended, eff. 7-1-14, by 2013 Wis. Act 92.
701.06(6)(c) (c) A beneficiary of a trust is not a settlor, has not made a voluntary or involuntary transfer of the beneficiary's interest in the trust, or does not have the power to make a voluntary or involuntary transfer of the beneficiary's interest in the trust solely because the beneficiary holds or exercises, in any capacity, any of the following:
701.06(6)(c)1. 1. A presently exercisable power to consume, invade, appropriate, or distribute property to or for the benefit of the beneficiary if the power is any of the following:
701.06(6)(c)1.a. a. Exercisable only on consent of another person holding an interest adverse to the beneficiary's interest.
701.06(6)(c)1.b. b. Limited by an ascertainable standard, such as health, education, support, or maintenance of the beneficiary.
701.06(6)(c)2. 2. A presently exercisable power to appoint any property of the trust to or for the benefit of a person other than the beneficiary, a creditor of the beneficiary, the beneficiary's estate, or a creditor of the beneficiary's estate.
701.06(6)(c)3. 3. A testamentary power of appointment.
701.06(6)(c)4. 4. A presently exercisable right described in par. (b) 2.
Effective date note NOTE: Par. (c) is renumbered to s. 701.0505 (2) (c) and amended, eff. 7-1-14, by 2013 Wis. Act 92.
701.06(6)(d) (d) A beneficiary of a trust is not a settlor solely because the beneficiary is entitled to nondiscretionary distributions from the trust.
Effective date note NOTE: Par. (d) is renumbered to s. 701.0505 (2) (d) and amended, eff. 7-1-14, by 2013 Wis. Act 92.
701.06(7) (7)Subsequent modification of court's order. Any order entered by a court under sub. (4), (5) or (6) (a) is subject to modification upon application of an interested person.
Effective date note NOTE: Sub. (7) is renumbered to s. 701.0503 (4) and amended, eff. 7-1-14, by 2013 Wis. Act 92.
701.06(8) (8)Exempt assets. Assets of a trust, to the extent they are exempt from claims of creditors under other statutes, shall not be subject to sub. (4), (5), or (6) (a).
Effective date note NOTE: Sub. (8) is renumbered to s. 701.0503 (5) and amended, eff. 7-1-14, by 2013 Wis. Act 92.
701.06 Cross-reference Cross-reference: See s. 701.07 (3) which deals with creditors' rights where a settlor retains powers over a living trust.
701.06 Annotation Trust income that is income to the beneficiary under federal tax law is subject to a child support order regardless of whether a distribution is made to the beneficiary. Grohmann v. Grohmann, 189 Wis. 2d 532, 525 N.W.2d 261 (1995).
701.06 Annotation In not revealing that he was a trust beneficiary, a father failed to make proper financial disclosure at the time of a divorce as was required by s. 767.127. The rationale of Grohmann is applicable to both grantor and nongrantor trusts if there is an obligation to report that trust's income as one's own because it is the obligation to report the income that makes the income reachable for calculations of a child support obligation. Stevenson v. Stevenson, 2009 WI App 29, 316 Wis. 2d 442, 765 N.W.2d 811, 07-2143.
701.065 701.065 Debts of decedents.
701.065(1)(1) Limitations on claims.
701.065(1)(a)1.1. A trustee who has a duty or power to pay the debts of a decedent may publish in the county in which the decedent resided, as a class 3 notice, under ch. 985, a deadline for filing claims with the trustee. The deadline shall be the date that is 4 months after the date of the first insertion of the notice.
701.065(1)(a)2. 2. Except as provided in pars. (b) and (c), if the trustee satisfies the requirements for the publication of the notice under subd. 1., all claims, including claims of the state and any subdivision thereof, whether due or to become due, absolute or contingent, liquidated or unliquidated, are barred against the trustee, the trust property and any recipient of trust property unless filed with the trustee on or before the date specified in the notice under subd. 1.
701.065(1)(b) (b) Notwithstanding par. (a) 2., a claim that is not filed on or before the date specified in the notice under par. (a) 1. is not barred if any of the following apply:
701.065(1)(b)1. 1. The claim is a claim based on tort, on a marital property agreement that is subject to the time limitations under s. 766.58 (13) (b) or (c), on Wisconsin income, franchise, sales, withholding, gift, or death taxes, or on unemployment compensation contributions due or benefits overpaid; a claim for funeral or administrative expenses; a claim of this state under s. 46.27 (7g), 49.496, 49.682, or 49.849; or a claim of the United States.
701.065(1)(b)2. 2. All of the following circumstances exist:
701.065(1)(b)2.a. a. On or before the date specified in the notice under par. (a) 1., the trustee knew, or in the exercise of reasonable diligence should have known, of the existence of the potential claim and of the identity and mailing address of the potential claimant.
701.065(1)(b)2.b. b. At least 30 days before the date specified in the notice under par. (a) 1., the trustee had not given notice to the potential claimant of the final day for filing his or her claim.
701.065(1)(b)2.c. c. At least 30 days before the date specified in the notice under par. (a) 1., the claimant did not have actual knowledge of the date on which the claim would be barred.
701.065(1)(c) (c) If an action is pending against a decedent at the time of his or her death and the action survives, the plaintiff in that action may serve a notice of substitution of party defendant on the trustee and file proof of service of notice in the court. Filing of proof of service on or before the deadline for filing a claim under par. (a) 1. gives the plaintiff the same rights against the trust as the filing of a claim. A judgment in any such action constitutes an adjudication for or against the trust.
701.065(2) (2)Effect of statute of limitations. A trustee shall not pay a claim that was barred by a statute of limitations at the time of the decedent's death. A claim not barred by a statute of limitations at the time of the decedent's death shall not be barred thereafter by a statute of limitations if the claim is filed with the trustee on or before the deadline for filing a claim under sub. (1) (a) 1.
701.065(3) (3)Claims of creditors without notice.
701.065(3)(a)(a) A claim not barred by sub. (1) (a) 2. because of the operation of sub. (1) (b) 2. may be enforced against trust property only as provided in this subsection.
701.065(3)(b) (b) The claimant shall file the claim with the trustee within one year after the decedent's death and within 30 days after the earlier of the following:
701.065(3)(b)1. 1. The date that the trustee gives notice to the potential claimant of the deadline for filing a claim under sub. (1) (a) 1.
701.065(3)(b)2. 2. The date that the claimant first acquires actual knowledge of the deadline for filing a claim under sub. (1) (a) 1.
701.065(3)(c) (c) The claimant shall have the burden of establishing by the greater weight of the credible evidence that all of the circumstances under sub. (1) (b) 2. existed.
701.065(3)(d) (d) This subsection does not extend the time for commencement of a claim beyond the time provided by any statute of limitations applicable to that claim.
701.065(4) (4)Satisfaction of claim from other property. Failure of a claimant timely to file a claim as provided in this section does not bar the claimant from satisfying the claim, if not otherwise barred, from property other than trust property.
Effective date note NOTE: This section is renumbered to s. 701.0508 and amended eff. 7-1-14 by 2013 Wis. Act 92.
701.065 History History: 1997 a. 188; 1999 a. 9; 2013 a. 20, 92.
701.07 701.07 Living trusts.
701.07(1)(1) Validity. A living trust, otherwise valid, shall not be held invalid as an attempted testamentary disposition, a passive trust under s. 701.03, or a trust lacking a sufficient principal because:
701.07(1)(a) (a) It contains any or all of the following powers, whether exercisable by the settlor, another person or both:
701.07(1)(a)1. 1. To revoke, modify or terminate the trust in whole or in part;
701.07(1)(a)2. 2. To exercise a power or option over property in the trust or over interests made payable to the trust under an employee benefit plan, life insurance policy, or otherwise;
701.07(1)(a)3. 3. To direct, during the lifetime of the settlor or another, the person to whom or on whose behalf the income or principal shall be paid or applied;
701.07(1)(a)4. 4. To control the administration of the trust in whole or in part;
701.07(1)(a)5. 5. To add property or cause additional employee benefits, life insurance, or other interests to be made payable to the trust at any time.
701.07(1)(b) (b) The principal consists of a designation of the trustee as a primary or direct, secondary or contingent beneficiary under a will, employee benefit plan, life insurance policy or otherwise; or
701.07(1)(c) (c) The principal consists of assets of nominal value.
701.07(2) (2)Eligibility to receive assets. A living trust shall be eligible to receive property from any source.
701.07(3) (3)Creditors' rights. If a settlor retains a power to revoke, modify or terminate which is exercisable in the settlor's favor, except when such power is exercisable only in conjunction with a person having a substantial adverse interest, the trust property to the extent it is subject to such power is also subject to the claim of a creditor of the settlor. This subsection shall not apply to trust property to the extent it is exempt from claims of creditors under other statutes.
Effective date note NOTE: This section is repealed eff. 7-1-14 by 2013 Wis. Act 92.
701.07 History History: 1971 c. 66; 1979 c. 110 s. 60 (4); 1991 a. 316; 2013 a. 92.
701.07 Cross-reference Cross-reference: See s. 701.06 (6) which deals with creditors' rights where the settlor is a beneficiary of the trust.
701.07 Annotation Section 701.03, which prohibits passive trusts, does not apply to living trusts. This statute, which provides that a living trust cannot be deemed passive, controls. McMahon v. Standard Bank & Trust Co. 202 Wis. 2d 564, 550 N.W.2d 727 (Ct. App. 1996), 95-1303.
701.07 Annotation Understanding Living Trusts. Moschella. Wis. Law. March 1992.
701.07 Annotation Informing the Public About Living Trusts. Twohig. Wis. Law. March 1992.
701.08 701.08 Transfers to living trusts.
701.08(1) (1) Validity and effect. The order of execution of a living trust instrument and a will or other instrument purporting to transfer or appoint property to the trust evidenced by the trust instrument shall be disregarded in determining the validity of the transfer or appointment. No reference in any will to a living trust shall cause assets in such trust to be included in property administered as part of the testator's estate; nor shall it cause the trust or any portion thereof to be treated as a testamentary trust.
701.08(2) (2)Governing terms. Property transferred or appointed by a will or by a beneficiary designation under an employee benefit plan, life insurance policy or other instrument permitting designation of a beneficiary to a living trust, the terms of which the testator or designator was the sole holder of a power to modify, shall be administered in accordance with the terms of the trust as they may have been modified prior to the testator's or designator's death, even though the will or beneficiary designation was not reexecuted or republished after exercise of the power to modify, unless the will or beneficiary designation expressly provides otherwise. Such property transferred or appointed to a living trust, which is subject to a power of modification requiring action or consent of a person other than the testator or designator, shall be administered in accordance with the terms of the trust instrument as they exist at the execution of the will or beneficiary designation, unless expressly otherwise provided. If the will or beneficiary designation expressly provides that the property shall be administered in accordance with the terms of the trust instrument as they may be modified thereafter, the will or beneficiary designation need not be reexecuted or republished after exercise of the power to modify.
701.08(3) (3)Disposition when no existing living trust. If at the death of a testator a living trust has been completely revoked, or otherwise terminated, a provision in the testator's will purporting to transfer or appoint property to such trust shall have the following effect, unless the will provides otherwise:
701.08(3)(a) (a) If the testator was a necessary party to the revocation or other termination of such trust, the provision in the testator's will shall be invalid;
701.08(3)(b) (b) If the testator was not a necessary party to the revocation or other termination of such trust, the provision in the testator's will shall be deemed to create a testamentary trust upon the terms of the living trust instrument at the time the will was executed or as otherwise provided where sub. (2) is applicable.
Effective date note NOTE: This section is renumbered to s. 701.0419 and amended eff. 7-1-14 by 2013 Wis. Act 92.
701.08 History History: 1971 c. 66; 1991 a. 316; 2013 a. 92.
701.09 701.09 Transfers to testamentary trusts.
701.09(1) (1) Testamentary transfer to trust of another. A transfer or appointment by will shall not be held invalid because it is made to a trust created, or to be created, under the will of another person if the will of such other person was executed, or was last modified with respect to the terms of such trust, prior to the death of the person making the transfer or appointment and such other person's will is admitted to probate prior to, or within 2 years after, the death of the person making the transfer or appointment. Property included in such a transfer or appointment shall not be considered property subject to administration as part of the other person's estate but shall pass directly to that other person's testamentary trustee, be added to the designated trust and administered as a part thereof.
Effective date note NOTE: Section 701.09 (title) and (1) are renumbered to s. 853.34 (title) and (1) eff. 7-1-14 by 2013 Wis. Act 92.
701.09(2) (2)Invalid testamentary transfer. If such a transfer or appointment by will is not accepted by the testamentary trustee of such other person or if no will of such other person which meets the conditions specified in sub. (1) is admitted to probate within the period therein limited, and if the will containing such transfer or appointment by will makes no alternative disposition of the assets, the will shall be construed as creating a trust upon the terms contained in the documents constituting the will of such other person as of the date of death of the person making the transfer or appointment by will.
Effective date note NOTE: Sub. (2) is renumbered to s. 853.34 (2) eff. 7-1-14 by 2013 Wis. Act 92.
701.09(3) (3)Life insurance proceeds transferred to trust of insured. A trustee named or to be named in the will of an insured person may be designated beneficiary of an insurance policy on the life of the insured if the designation is made in accordance with the terms of the policy. After admission of the insured's will to probate and issuance of letters to such trustee, the insurance proceeds shall be paid to the trustee to be administered in accordance with the terms of the trust as they exist at the death of the insured, and the proceeds may be commingled with other assets passing to the trust. Insurance proceeds paid to a testamentary trustee because of his or her designation as life insurance beneficiary shall not be subject to death tax to any greater extent than if the proceeds were payable to a beneficiary other than the insured's estate. The proceeds shall be inventoried for tax purposes only and shall not be subject to taxes, debts or charges enforceable against the estate or otherwise considered assets of the insured's estate to any greater extent than if the proceeds were payable to a beneficiary other than the insured's estate.
Effective date note NOTE: Sub. (3) is repealed eff. 7-1-14 by 2013 Wis. Act 92.
701.09(4) (4)Employee benefits transferred to trust of employee. A trustee named or to be named in the will of an employee covered by any employee benefit plan or contract described in s. 815.18 (3) (j) or any annuity or insurance contract purchased by an employer that is a religious, scientific, educational, benevolent or other corporation or association not organized or conducted for pecuniary profit may be designated payee of any benefits payable after the death of the employee if the designation is made in accordance with the terms of the plan or contract. After admission of the employee's will to probate and issuance of letters to the trustee, the death benefits shall be paid to the trustee to be administered in accordance with the terms of the trust as they exist at the death of the employee, and the benefits may be commingled with other assets passing to the trust. Death benefits paid to a testamentary trustee because of his or her designation as payee are not subject to the death tax to any greater extent than if the benefits were payable to a beneficiary other than the employee's estate. The benefits shall be inventoried for tax purposes only and are not subject to taxes, debts or charges enforceable against the estate or otherwise considered assets of the employee's estate to any greater extent than if the benefits were payable to a beneficiary other than the employee's estate.
Effective date note NOTE: Sub. (4) is repealed eff. 7-1-14 by 2013 Wis. Act 92.
701.09(5) (5)Transfer of other property. Property other than that described in subs. (3) and (4) may be made payable to or transferred to a trustee named or to be named in the will of the transferor.
Effective date note NOTE: Sub. (5) is repealed eff. 7-1-14 by 2013 Wis. Act 92.
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2011-12 Wisconsin Statutes updated though 2013 Wis. Act 200 and all Supreme Court Orders entered before April 18, 2014. Published and certified under s. 35.18. Changes effective after April 18, 2014 are designated by NOTES. (Published 4-18-14)