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701.04(3) (3) Nothing in this section shall affect the right to enforce a valid express trust or to establish a constructive trust based on fraud, undue influence, breach of confidential relationship or other appropriate grounds.
701.05 701.05 Title of trustee; interest of beneficiaries.
701.05(1)(1) Unless the creating instrument expressly limits the trustee to a lesser title or to a power, the trustee takes all title of the settlor or other transferor and holds such title subject to the trustee's fiduciary duties as trustee.
701.05(2) (2) If a trustee of a private trust has title to the trust property, a beneficiary has both a right to have the trustee perform the trustee's fiduciary duties and an equitable interest, present or future, in the trust property. If a trustee of a private trust holds only a power over property, a beneficiary has a right to have such trustee perform the trustee's fiduciary duties.
701.05(3) (3) In a private or charitable trust where the trustee takes all title of the settlor or other transferor and holds such title subject to the trustee's fiduciary duties as trustee, any interest expressly retained by the settlor or not effectively disposed of to others remains in the settlor, or the settlor's successors in interest, as an equitable reversionary interest and to this extent the settlor, or the settlor's successors, are beneficiaries of the trust. In a private trust where the trustee takes all title of the settlor or other transferor and holds such title subject to the trustee's fiduciary duties as trustee, any interest, present or future, created by the settlor in any other person is an equitable interest and such person is a beneficiary of the trust.
701.05 History History: 1971 c. 66; 1991 a. 316.
701.06 701.06 Spendthrift provisions and rights of creditors of beneficiaries.
701.06(1)(1)Income beneficiaries. A settlor may expressly provide in the creating instrument that the interest in income of a beneficiary other than the settlor is not subject to voluntary or involuntary alienation. The income interest of such a beneficiary cannot be assigned and is exempt from claims against the beneficiary until paid over to the beneficiary pursuant to the terms of the trust.
701.06(2) (2)Principal beneficiaries. A settlor may expressly provide in the creating instrument that the interest in principal of a beneficiary other than the settlor is not subject to voluntary or involuntary alienation. The interest in principal of such a beneficiary cannot be assigned and is exempt from claims against the beneficiary, but a judgment creditor, after any payments of principal have become due or payable to the beneficiary pursuant to the terms of the trust, may apply to the court for an order directing the trustee to satisfy the judgment out of any such payments and the court in its discretion may issue an order for payment of part or all of the judgment.
701.06(3) (3)Disclaimer or renunciation not an assignment. A disclaimer or renunciation by a beneficiary of part or all of his or her interest under a trust shall not be considered an assignment under sub. (1) or (2).
701.06(4) (4)Claims for child support. Notwithstanding any provision in the creating instrument or subs. (1) and (2), upon application of a person having a valid order directing a beneficiary to make payment for support of the beneficiary's child, the court may:
701.06(4)(a) (a) If the beneficiary is entitled to receive income or principal under the trust, order the trustee to satisfy part or all of the claim out of part or all of payments of income or principal as they are due, presently or in the future;
701.06(4)(b) (b) In the case of a beneficiary under a discretionary trust, order the trustee to satisfy part or all of the claim out of part or all of future payments of income or principal which are to be made pursuant to the exercise of the trustee's discretion in favor of such beneficiary.
701.06(5) (5)Claims for public support. Notwithstanding any provision in the creating instrument or subs. (1) and (2), if the settlor is legally obligated to pay for the public support of a beneficiary under s. 46.10 or the beneficiary is legally obligated to pay for the beneficiary's public support or that furnished the beneficiary's spouse or minor child under s. 46.10, upon application by the appropriate state department or county official, the court may:
701.06(5)(a) (a) If such beneficiary is entitled to receive income or principal under the trust, order the trustee to satisfy part or all of the liability out of part or all of payments of income or principal as they are due, presently or in the future;
701.06(5)(b) (b) Except as otherwise provided in par. (c), in the case of a beneficiary under a discretionary trust, order the trustee to satisfy part or all of the liability out of part or all of future payments of income or principal which are to be made pursuant to the exercise of the trustee's discretion in favor of such beneficiary;
701.06(5)(c) (c) In the case of a beneficiary under a discretionary trust who is a settlor or a spouse or minor child of the settlor, order the trustee to satisfy part or all of the liability without regard to whether the trustee has then exercised or may thereafter exercise the trustee's discretion in favor of the beneficiary.
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.
701.06(6) (6)Settlor as beneficiary. 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.
701.06(7) (7)Subsequent modification of court's order. Any order entered by a court under sub. (4), (5) or (6) is subject to modification upon application of an interested person.
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).
701.06 History History: 1971 c. 66; 1977 c. 309, 418; 1985 a. 176; 1991 a. 316.
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 which 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 W (2d) 532, 525 NW (2d) 261 (1995).
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 employe 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 employe 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, employe 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.
701.07 History History: 1971 c. 66; 1979 c. 110 s. 60 (4); 1991 a. 316.
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 W (2d) 565, 550 NW (2d) 727 (Ct. App. 1996).
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 employe 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.
701.08 History History: 1971 c. 66; 1991 a. 316.
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.
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.
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.
701.09(4) (4)Employe benefits transferred to trust of employe. A trustee named or to be named in the will of an employe covered by any employe 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 employe if the designation is made in accordance with the terms of the plan or contract. After admission of the employe'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 employe, 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 employe'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 employe's estate to any greater extent than if the benefits were payable to a beneficiary other than the employe's estate.
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.
701.09 History History: 1971 c. 66; Sup. Ct. Order, 67 W (2d) 585, 777 (1975); 1975 c. 218; 1987 a. 27; 1989 a. 278; 1991 a. 316.
701.10 701.10 Charitable trusts.
701.10(1)(1)Validity. 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.
701.10(2) (2)Modification and termination.
701.10(2)(a)(a) 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.
701.10(2)(b) (b) 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.
701.10(2)(c) (c) 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.
701.10(2)(d) (d) 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.
701.10(2)(e) (e) 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.
701.10(3) (3)Enforcement; notice to attorney general.
701.10(3)(a)(a) A proceeding to enforce a charitable trust may be brought by:
701.10(3)(a)1. 1. 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;
701.10(3)(a)2. 2. 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;
701.10(3)(a)3. 3. Any settlor or group of settlors who contributed half or more of the principal; or
701.10(3)(a)4. 4. A cotrustee.
701.10(3)(b) (b) 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.
701.10(4) (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).
701.10 History History: 1971 c. 66; 1991 a. 316; 1993 a. 160.
701.10 Cross-reference Cross-reference: See s. 879.03 (2) (c) on notice to the attorney general of probate proceedings affecting a charitable trust.
701.10 Annotation 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 W (2d) 432, 213 NW (2d) 54.
701.10 Annotation Construction of the trust terms to allow the majority of the proceeds to be used for a college seminar series for clergymen was impermissible where such a construction would increase the class of beneficiaries and would divert the trust purpose from one providing living facilities for the original beneficiaries into one primarily for the educational benefit of clergymen. In re Petition of Downer Home, 67 W (2d) 55, 226 NW (2d) 444.
701.105 701.105 Private foundations.
701.105(1)(1)
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:
701.105(1)(a)1. 1. 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.
701.105(1)(a)2. 2. 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.
701.105(1)(a)3. 3. 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.
701.105(1)(a)4. 4. 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.
701.105(1)(b) (b) 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.
701.105(2) (2) 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.
701.105(3) (3)Subsections (1) and (2) 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.
701.105(4) (4) 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.
701.105 History History: 1971 c. 66; 1991 a. 39.
701.11 701.11 Honorary trusts; cemetery trusts.
701.11(1) (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.
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