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;
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;
To control the administration of the trust in whole or in part;
To add property or cause additional employee benefits, life insurance, or other interests to be made payable to the trust at any time.
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
The principal consists of assets of nominal value.
(2) Eligibility to receive assets.
A living trust shall be eligible to receive property from any source.
(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.
See s. 701.06 (6)
which deals with creditors' rights where the settlor is a beneficiary of the trust.
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
Understanding Living Trusts. Moschella. Wis. Law. March 1992.
Informing the Public About Living Trusts. Twohig. Wis. Law. March 1992.
Transfers to living trusts. 701.08(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.
(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.
(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:
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;
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)
History: 1971 c. 66
; 1991 a. 316
Transfers to testamentary trusts. 701.09(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.
(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.
(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.
(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.
(5) Transfer of other property.
Property other than that described in subs. (3)
may be made payable to or transferred to a trustee named or to be named in the will of the transferor.
History: 1971 c. 66
; Sup. Ct. Order, 67 Wis. 2d 585, 777 (1975); 1975 c. 218
; 1987 a. 27
; 1989 a. 278
; 1991 a. 316
Charitable trusts. 701.10(1)(1)
A charitable trust may be created for any of the following charitable purposes: relief of poverty, advancement of education, advancement of religion, promotion of health, governmental or municipal purposes or any other purpose the accomplishment of which is beneficial to the community. No gift to charity, in trust or otherwise, is invalid because of indefiniteness. If a particular charitable purpose is not indicated and the trustee is not expressly authorized by the creating instrument to select such a purpose, the trustee has an implied power to select one or more charitable purposes. If a particular charitable purpose is not indicated and no trustee is named in the creating instrument, the court may appoint a trustee with such an implied power to select or may direct that the property be transferred outright to one or more established charitable entities.
If a purpose of a charitable trust is or becomes impractical, unlawful or impossible, the court may order the trust continued for one or more other charitable purposes designated by the settlor or, in the absence of such designation, order the property devoted to one or more other charitable purposes either by continuing the trust or by distributing the property to one or more established charitable entities. In determining the alternative plan for disposition of the property, the court shall take into account current and future community needs in the general field of charity within which the original charitable purpose falls, other charitable interest of the settlor, the amount of principal and income available under the trust and other relevant factors. The provisions of this subsection do not apply insofar as the settlor expressly provides in the creating instrument for an alternative disposition if the original trust fails; nor do they apply to gifts by several persons to a charitable entity on a subscription basis if the court finds that the donors intended their gifts to be limited to the original purpose and such purpose fails initially.
If any administrative provision of a charitable trust or part of a plan set forth by the settlor to achieve the settlor's charitable purpose is or becomes impractical, unlawful, inconvenient or undesirable, and a modification of such provision or plan will enable the trustee to achieve more effectively the basic charitable purpose, the court may by appropriate order modify the provision or plan.
If a charitable trust is or becomes uneconomic when principal and probable income, cost of administration and other relevant factors are considered, or in any event if the trust property is valued at less than $50,000, the court may terminate the trust and order outright distribution to an established charitable entity in the general field of charity within which the charitable purpose falls.
It is the purpose of this subsection to broaden the power of the courts to make charitable gifts more effective. In any situation not expressly covered the court shall liberally apply the cy pres doctrine.
The settlor if living, the trustee, the attorney general and an established charitable entity to which income or principal must be paid under the terms of the trust shall be persons interested in any proceeding under this subsection.
(3) Enforcement; notice to attorney general. 701.10(3)(a)(a)
A proceeding to enforce a charitable trust may be brought by:
An established charitable entity named in the governing instrument to which income or principal must or may be paid under the terms of the trust;
The attorney general in the name of the state upon the attorney general's own information or, in the attorney general's discretion, upon complaint of any person;
Any settlor or group of settlors who contributed half or more of the principal; or
In a proceeding affecting a charitable trust, notice must be given to the attorney general, but, except as provided in sub. (2)
, notice need not be given where the income or principal must be paid exclusively to one or more established charitable entities named in the governing instrument.
(4) Established charitable entity.
As used in this section, "established charitable entity" means a corporation, unincorporated association or trust operated exclusively for a charitable purpose defined in sub. (1)
See s. 879.03 (2) (c)
on notice to the attorney general of probate proceedings affecting a charitable trust.
A trust for residents of a city cannot be enlarged as to the area only because the trustees believe the original restriction has become unfair. In re Charitable Trust, Oshkosh Foundation, 61 Wis. 2d 432
, 213 N.W.2d 54
Construction of a trust's terms to allow the majority of the proceeds to be used for a college seminar series for clergy was impermissible when that construction would increase the class of beneficiaries and divert the trust purpose from one providing living facilities for the original beneficiaries into one primarily for the educational benefit of clergy. In re Petition of Downer Home, 67 Wis. 2d 55
, 226 N.W.2d 444
If a trust instrument provides a specified procedure for altering administrative provisions of the trust, there is no reason to suppose the legislature intended that sub. (2) (b) be used to override such a procedure. League of Women Voters v. Madison Community Foundation, 2005 WI App 239
, 288 Wis. 2d 128
, 707 N.W.2d 285
Private foundations. 701.105(1)(a)(a)
In the administration of any trust which is a private foundation, as defined in section 509
of the internal revenue code, a charitable trust, as defined in section 4947
(a) (1) of the internal revenue code, or a split-interest trust as defined in section 4947
(a) (2) of the internal revenue code, all of the following acts shall be prohibited:
Engaging in any act of self-dealing as defined in section 4941
(d) of the internal revenue code, which would give rise to any liability for the tax imposed by section 4941
(a) of the internal revenue code.
Retaining any excess business holdings as defined in section 4943
(c) of the internal revenue code, which would give rise to any liability for the tax imposed by section 4943
(a) of the internal revenue code.
Making any investments which would jeopardize the carrying out of any of the exempt purposes of the trust, within the meaning of section 4944
of the internal revenue code, so as to give rise to any liability for the tax imposed by section 4944
(a) of the internal revenue code.
Making any taxable expenditures as defined in section 4945
(d) of the internal revenue code, which would give rise to any liability for the tax imposed by section 4945
(a) of the internal revenue code.
This subsection shall not apply either to those split-interest trusts or to amounts thereof which are not subject to the prohibitions applicable to private foundations by reason of the provisions of section 4947
of the internal revenue code.
In the administration of any trust which is a private foundation as defined in section 509
of the internal revenue code, or which is a charitable trust as defined in section 4947
(a) (1) of the internal revenue code, there shall be distributed, for the purposes specified in the trust instrument, for each taxable year, amounts at least sufficient to avoid liability for the tax imposed by section 4942
(a) of the internal revenue code.
(3) Subsections (1)
shall not apply to any trust to the extent that a court of competent jurisdiction shall determine that such application would be contrary to the terms of the instrument governing such trust and that the same may not properly be changed to conform to such subsections.
Nothing in this section shall impair the rights and powers of the courts or the attorney general of this state with respect to any trust.
History: 1971 c. 66
; 1991 a. 39
Honorary trusts; cemetery trusts. 701.11(1)
Except under sub. (2)
, where the owner of property makes a testamentary transfer in trust for a specific noncharitable purpose, and there is no definite or definitely ascertainable human beneficiary designated, no enforceable trust is created; but the transferee has power to apply the property to the designated purpose, unless the purpose is capricious. If the transferee refuses or neglects to apply the property to the designated purpose within a reasonable time and the transferor has not manifested an intention to make a beneficial gift to the transferee, a resulting trust arises in favor of the transferor's estate and the court is authorized to order the transferee to retransfer the property.
A trust may be created for maintaining, keeping in repair and preserving any grave, tomb, monument, gravestone or any cemetery. Any cemetery company, association or corporation may receive property in trust for any of those purposes and apply the income from the trust to the purpose stated in the creating instrument.
A trust described in sub. (2)
is invalid to the extent it was created for a capricious purpose or the purpose becomes capricious.
If the assets of any trust described in sub. (2)
are valued at less than $5,000 and the court finds that the cost of operating the trust will probably defeat the intent of the settlor or if the trustee, including a cemetery company, association or corporation, named in the creating instrument is improperly described, the court may order distribution of the assets on terms which will as nearly as possible carry out the settlor's intention.
History: 1989 a. 307
Future interests in revocable trusts. 701.115(1)(a)
In par. (b)
, "revocable trust" means a trust that the grantor, at the time of death, was alone empowered to change or revoke, by law or under the instrument creating the trust, regardless of whether the grantor then had the capacity to exercise the power.
Unless a contrary intention is found, if a person has a future interest in property under a revocable trust and, under the terms of the trust, the person has the right to possession and enjoyment of the property at the grantor's death, the right to possession and enjoyment is contingent on the person's surviving the grantor. Extrinsic evidence may be used to show contrary intent.
History: 1997 a. 188
; 2005 a. 216
Revocation, modification and termination of trusts with consent of settlor. 701.12(1)
By written consent of the settlor and all beneficiaries of a trust or any part thereof, such trust or part thereof may be revoked, modified or terminated, except as provided under s. 445.125 (1) (a) 2.
For purposes of this section such consent may be given on behalf of a legally incapacitated, unascertained or unborn beneficiary by the court after a hearing in which the interests of such beneficiary are represented by a guardian ad litem. A guardian ad litem for such beneficiary may rely on general family benefit accruing to living members of the beneficiary's family as a basis for approving a revocation, modification or termination of a trust or any part thereof.
Nothing in this section shall prevent revocation, modification, or termination of a trust pursuant to its terms or otherwise in accordance with law or prevent conversion of a trust to a unitrust under s. 701.20 (4g)
That s. 701.18 allows removing a trustee for cause does not prevent removal of a trustee under this section with the approval of the settlor and all beneficiaries, without showing cause. Weinberger v. Bowen, 2000 WI App 264
, 240 Wis. 2d 55
, 622 N.W.2d 471
Modification and termination of trusts by court action. 701.13(1)(1)
Anticipation of directed accumulation of income.
When an accumulation of income is directed for the benefit of a beneficiary without other sufficient means to support or educate himself or herself, the court on the application of the beneficiary or the beneficiary's guardian may direct that a suitable sum from the income accumulated or to be accumulated be applied for the support or education of such person.
(2) Application of principal to income beneficiary.
Unless the creating instrument provides to the contrary, if a beneficiary is entitled to income or to have it applied for the beneficiary's benefit, the court may make an allowance from principal to or for the benefit of such beneficiary if the beneficiary's support or education is not sufficiently provided for, taking into account all other resources available to the beneficiary.
In the case of a living trust whose settlor is deceased and in the case of any testamentary trust, regardless in either case of spendthrift or similar protective provisions, a court with the consent of the trustee may order termination of the trust, in whole or in part, and the distribution of the assets that it considers appropriate if the court is satisfied that because of any substantial reason existing at the inception of a testamentary trust or, in the case of any trust, arising from a subsequent change in circumstances, including but not limited to the amount of principal in the trust, income produced by the trust and the cost of administering the trust, continuation of the trust, in whole or in part, is impractical. In any event, if the trust property is valued at less than $50,000, the court may order termination of the trust and the distribution of the assets that it considers appropriate.
(4) Marital deduction trusts.
In a trust where the income beneficiary also has a general power of appointment as defined in s. 702.01 (3)
or where all accumulated income and principal are payable to such beneficiary's estate, any termination, in whole or in part, of the trust under sub. (3)
can only be ordered in favor of such beneficiary.
In this subsection, "participate or intervene in any political campaign" includes the publishing or distributing of statements.
(b) Subsections (2)
do not apply to a trust under which a future interest is indefeasibly vested in any of the following: