AB490,141,2319
701.1106
(1) (b) 1. The trustee or
qualified beneficiary has provided notice
20under
sub. (4c) s. 701.1105 of the intention to request the court to convert the trust
21to a unitrust, and the notice advises how the unitrust will operate, including the fixed
22percentage under
par. (c) 1. sub. (3) (a) and any other initial determinations under
23par. (c) 4. sub. (3) (d) that will be requested.
AB490,241
24Section
241. 701.20 (4g) (a) 2. b. of the statutes is renumbered 701.1106 (1)
25(b) 2.
AB490,242
1Section
242. 701.20 (4g) (b), (c), (d) and (e) of the statutes are renumbered
2701.1106 (2), (3), (4) and (5), and 701.1106 (2), (3) (a), (b), (c), (d) 7., (f) (intro.) and 2.,
3(g) (intro.), 1. and 3. and (h), (4) (a) (intro.) and 1. and (b) and (5), as renumbered, are
4amended to read:
AB490,142,85
701.1106
(2) In deciding whether to convert the trust to a unitrust under
par.
6(a) 1. sub. (1) (a) and in determining the fixed percentage under sub. (3) (b) 1., the
7trustee shall consider all relevant factors under
sub. (4) (b) 1. to 9. s. 701.1104 (2) (a)
8to (i).
AB490,142,17
9(3) (a) If a trust is converted to a unitrust under this
subsection section by the
10trustee or a court, notwithstanding
sub. (3) (a) 1.
s. 701.1103 (1) (a) and
4. (d) and
11s.
701.21 701.1136 (4) the trustee shall make distributions in accordance with the
12creating trust instrument, except that any reference in the
creating trust instrument
13to "income" means a fixed percentage of the net fair market value of the unitrust's
14assets, whether such assets otherwise would be considered income or principal under
15this
section subchapter, averaged over a preceding period determined by the trustee,
16which is at least 3 years but not more than 5 years, or the period since the original
17trust was created, whichever is less.
AB490,142,2218
(b) 1. Subject to subd. 2.
b., if the trust is converted to a unitrust under
par. (a)
191. sub. (1) (a), the trustee shall determine the fixed percentage to be applied under
20subd. 1. par. (a), and the notice under
par. (a) 1. b. sub. (1) (a) 2. must state the fixed
21percentage. If the trust is converted to a unitrust under
par. (a) 2. sub. (1) (b), the
22court shall determine the fixed percentage to be applied under
subd. 1. par. (a).
AB490,142,2423
2. Any fixed percentage under
subd. 1. par. (a) that is determined by a trustee
24may not be less than 3 percent nor more than 5 percent.
AB490,143,3
1(c) After a trust is converted to a unitrust, the trustee may, subject to the notice
2requirement under
sub. (4c) s. 701.1105 and with the consent of every
sui juris 3qualified beneficiary, do any of the following:
AB490,143,54
1. Convert the unitrust back to the original trust under the
creating trust 5instrument.
AB490,143,76
2. Change the fixed percentage under
subd. 1. par. (a), subject to
subd. 2. b. par.
7(b) 2.
AB490,143,98
(d) 7. The averaging under
subd. 1. par. (a) to a different preceding period,
9which is at least 3 years but not more than 5 years.
AB490,143,1210
(f) (intro.) Unless otherwise provided by the
creating trust instrument, the
11unitrust distribution is considered to have been paid from the following sources in
12the order of priority:
AB490,143,1413
2. Ordinary income for federal income tax purposes that is not net income
14under subd.
6. a. 1.
AB490,143,1615
(g) (intro.) A court may, on the petition of the trustee or a
qualified beneficiary,
16do any of the following:
AB490,143,1817
1. Change the fixed percentage that was determined under
subd. 2. par. (b) by
18the trustee or by a prior court order.
AB490,143,2019
3. Average the valuation of the unitrust's assets over a period other than that
20specified in
subd. 1. par. (a).
AB490,143,2421
(h) Conversion to a unitrust under this
subsection
section does not affect a
22provision in the
creating trust instrument that directs or authorizes the trustee to
23distribute principal or that authorizes a beneficiary to withdraw a portion or all of
24the principal.
AB490,144,2
1(4) (a) (intro.) A trust may not be converted under this
subsection section to a
2unitrust if any of the following applies:
AB490,144,33
1. The
creating trust instrument specifically prohibits the conversion.
AB490,144,94
(b) Notwithstanding
subd. 1. par. (a), if a trust may not be converted to a
5unitrust solely because
subd. 1. g. par. (a) 7. applies to a trustee, a cotrustee, if any,
6to whom
subd. 1. g. par. (a) 7. does not apply may convert the trust to a unitrust under
7par. (a) 1. sub. (1) (a), unless prohibited by the creating instrument, or a court may
8convert the trust to a unitrust under
par. (a) 2.
sub. (1) (b) on the petition of a trustee
9or
qualified beneficiary.
AB490,144,16
10(5) A trustee may release the power conferred by
par. (a) 1. sub. (1) (a) if the
11trustee is uncertain about whether possessing or exercising the power will cause a
12result described in
par. (d) 1. b. sub. (4) (a) 2. to
f. 6. or if the trustee determines that
13possessing or exercising the power will or may deprive the trust of a tax benefit or
14impose a tax burden not described in
par. (d) 1.
sub. (4) (a). The release may be
15permanent or for a specified period, including a period measured by the life of an
16individual.
AB490,243
17Section
243. 701.20 (4j) of the statutes is renumbered 701.1107, and 701.1107
18(1) and (2) (a), (e), (f) 2., (g) and (h), as renumbered, are amended to read:
AB490,144,2419
701.1107
(1) In this
subsection section, "express unitrust" means any trust that
20by its
governing trust instrument requires the distribution at least annually of a
21unitrust amount equal to a fixed percentage of the net fair market value of the trust's
22assets, valued at least annually, other than a trust solely for charitable purposes or
23a charitable split-interest trust under section
664 (d) or
170 (f) (2) (B) of the Internal
24Revenue Code.
AB490,145,5
1(2) (a) To the extent not otherwise provided for in the
governing trust 2instrument, the unitrust amount of not less than 3 percent nor more than 5 percent
3may be determined by reference to the net fair market value of the trust's assets
4averaged over a preceding period determined by the trustee, which is at least 3 years
5but not more than 5 years.
AB490,145,96
(e) The
governing trust instrument may grant discretion to the trustee to adopt
7a consistent practice of treating capital gains as part of the unitrust distribution, to
8the extent that the unitrust distribution exceeds the income determined as if the
9trust were not a unitrust, or it may specify the ordering of such classes of income.
AB490,145,1110
(f) 2. Ordinary income for federal income tax purposes that is not net income
11under subd.
6. a. 1.
AB490,145,1512
(g) The trust
document instrument may provide that assets used by the trust
13beneficiary, such as a residence or tangible personal property, may be excluded from
14the net fair market value for computing the unitrust amount. Such use may be
15considered equivalent to the income or unitrust amount.
AB490,145,1816
(h) In the absence of contrary provisions in the
governing document trust
17instrument of an express unitrust, the provisions of
sub. (4g) (c) 1., 4. s. 701.1106 (3)
18(a), (d), and
5. (e) apply.
AB490,244
19Section
244. 701.20 (4k) of the statutes is renumbered 701.1108 and amended
20to read:
AB490,146,2
21701.1108 Power to treat capital gains as part of a distribution. Unless
22prohibited by the
governing instrument will or trust instrument, a
trustee fiduciary 23may cause gains from the sale or exchange of
estate or trust
assets property, as
24determined for federal income tax purposes, to be taxed for federal income tax
25purposes as part of a distribution of income that has been increased by an adjustment
1from principal to income under
sub. (4)
s. 701.1104, of a unitrust distribution, of a
2fixed annuity distribution, or of a principal distribution to a beneficiary.
AB490,245
3Section
245. 701.20 (4m) (title) of the statutes is renumbered 701.1109 (title).
AB490,246
4Section
246. 701.20 (4m) (a) of the statutes is renumbered 701.1109 (1) and
5amended to read:
AB490,146,116
701.1109
(1) Nothing in this
section
subchapter creates a duty to make an
7adjustment under
sub. (4) s. 701.1104 or to convert a trust to a unitrust under
sub.
8(4g) s. 701.1106. Unless it determines that the decision to make an adjustment or
9to convert to a unitrust was an abuse of the fiduciary's discretion, a court may not
10grant relief from any decision a fiduciary makes regarding the exercise of a
11discretionary power conferred by
sub. (4) s. 701.1104 or
(4g) 701.1106.
AB490,247
12Section
247. 701.20 (4m) (am) of the statutes is renumbered 701.1109 (2) and
13amended to read:
AB490,146,1814
701.1109
(2) An action taken under
sub. (4) s. 701.1104 or
(4g) 701.1106 is not
15an abuse of a fiduciary's discretion if the fiduciary gave written notice of the proposed
16action under
sub. (4c) s. 701.1105 and did not receive a timely written objection to
17the notice. It is not an abuse of discretion not to exercise the power to adjust under
18sub. (4) s. 701.1104 or to convert under
sub. (4g) s. 701.1106.
AB490,248
19Section
248. 701.20 (4m) (b) of the statutes is renumbered 701.1109 (3).
AB490,249
20Section
249. 701.20 (4m) (c) of the statutes is renumbered 701.1109 (4), and
21701.1109 (4) (c), as renumbered, is amended to read:
AB490,147,222
701.1109
(4) (c) To the extent that the court is unable, after applying
subds. 1.
23pars. (a) and
2. (b), to place the beneficiaries, the trust, or both in the positions that
24they would have occupied had the discretion not been abused, the court may order
1the fiduciary to pay an appropriate amount from its own funds to one or more of the
2beneficiaries, the trust, or both.
AB490,250
3Section
250. 701.20 (4m) (d) of the statutes is renumbered 701.1109 (5).
AB490,251
4Section
251. 701.20 (5) of the statutes is renumbered 701.1110, and 701.1110
5(1), (2) (intro.), (3), (4) and (5), as renumbered, are amended to read:
AB490,147,116
701.1110
(1) A fiduciary of an estate or of a terminating income interest shall
7determine the amount of net income and net principal receipts received from
8property specifically given to a beneficiary under the rules in
subs. (7) ss. 701.1112 9to
(30) 701.1135 that apply to trustees and the rules in
par. (e) sub. (5). The fiduciary
10shall distribute the net income and net principal receipts to the beneficiary who is
11to receive the specific property.
AB490,147,14
12(2) (intro.) A fiduciary shall determine the remaining net income of a decedent's
13estate or a terminating income interest under the rules in
subs. (7) ss. 701.1112 to
14(30) 701.1135 that apply to trustees and by:
AB490,147,24
15(3) A fiduciary shall distribute to a beneficiary, including a trustee, who
16receives a pecuniary amount not determined by a pecuniary formula
related to a
17transfer tax interest at the legal rate set forth in s. 138.04 on any unpaid portion of
18the pecuniary amount for the period commencing one year after the decedent's death
19or after the income interest in the trust ends. The interest under this
paragraph 20subsection shall be distributed from net income determined under
par. (b) sub. (2) or
21from principal to the extent that net income is insufficient. For purposes of this
22paragraph subsection, the deferred marital property elective share amount elected
23by a surviving spouse under s. 861.02 (1) is a bequest of a
specific pecuniary amount
24of money not determined by a pecuniary formula
related to a transfer tax.
AB490,148,4
1(4) A fiduciary shall distribute the net income remaining after distributions
2required
by par. (c) under subs. (1) to (3) in the manner described in
sub. (6) s.
3701.1111 to all other beneficiaries, including a beneficiary who receives a pecuniary
4amount determined by a pecuniary formula
related to a transfer tax.
AB490,148,16
5(5) A fiduciary may not reduce principal or income receipts from property
6described in
par. (a) sub. (1) because of a payment described in
sub. (25) s. 701.1130 7or
(26) 701.1131 to the extent that the will, the terms of the trust, or applicable law
8requires the fiduciary to make the payment from assets other than the property or
9to the extent that the fiduciary recovers or expects to recover the payment from a 3rd
10party. The net income and principal receipts from the property are determined by
11including all of the amounts the fiduciary receives or pays with respect to the
12property, whether those amounts accrued or became due before, on, or after the date
13of a decedent's death or an income interest's terminating event, and by making a
14reasonable provision for amounts that the fiduciary believes the estate or
15terminating income interest may become obligated to pay after the property is
16distributed.
AB490,252
17Section
252. 701.20 (6) of the statutes is renumbered 701.1111, and 701.1111
18(1), (2) (d) and (4), as renumbered, are amended to read:
AB490,149,219
701.1111
(1) Each beneficiary described in
sub. (5) (d) s. 701.1110 (4) is entitled
20to receive a portion of the net income equal to the beneficiary's fractional interest in
21undistributed principal assets, using values as of the distribution date. If a fiduciary
22makes more than one distribution of assets to beneficiaries to whom this
subsection 23section applies, each beneficiary, including one who does not receive part of the
24distribution, is entitled, as of each distribution date, to the net income the fiduciary
1has received after the date of death or terminating event or earlier distribution date
2but has not distributed as of the current distribution date.
AB490,149,5
3(2) (d) The distribution date for purposes of this
subsection section may be the
4date as of which the fiduciary calculates the value of the assets if that date is
5reasonably near the date on which assets are actually distributed.
AB490,149,9
6(4) A trustee may apply the rules in this
subsection section, to the extent that
7the trustee considers it appropriate, to net gain or loss realized after the date of death
8or terminating event or earlier distribution date from the disposition of a principal
9asset if this
subsection section applies to the income from the asset.
AB490,253
10Section
253. 701.20 (7) of the statutes is renumbered 701.1112, and 701.1112
11(3), as renumbered, is amended to read:
AB490,149,1512
701.1112
(3) An asset becomes subject to a successive income interest on the
13day after the preceding income interest ends, as determined under
par. (d) sub. (4),
14even if there is an intervening period of administration to wind up the preceding
15income interest.
AB490,254
16Section
254. 701.20 (8) of the statutes is renumbered 701.1113, and 701.1113
17(1) and (3), as renumbered, are amended to read:
AB490,149,2118
701.1113
(1) A trustee shall allocate to principal an income receipt or
19disbursement other than one to which
sub. (5) (a)
s. 701.1110 (1) applies if its due date
20occurs before a decedent dies in the case of an estate or before an income interest
21begins in the case of a trust or successive income interest.
AB490,150,4
22(3) An item of income or an obligation is due on the date the payer is required
23to make a payment. If a payment date is not stated, there is no due date for the
24purposes of this section. Distributions to shareholders or other owners from an
25entity, as defined in
sub. (10) s. 701.1115, are due on the date fixed by the entity for
1determining who is entitled to receive the distribution or, if no date is fixed, on the
2declaration date for the distribution. A due date is periodic for receipts or
3disbursements that must be paid at regular intervals under a lease or an obligation
4to pay interest or if an entity customarily makes distributions at regular intervals.
AB490,255
5Section
255. 701.20 (9) (a) of the statutes is renumbered 701.1114, and
6701.1114 (1), as renumbered, is amended to read:
AB490,150,11
7701.1114 (1) In this
subsection section, "undistributed income" means net
8income received before the date on which an income interest ends. "Undistributed
9income" does not include an item of income or expense that is due or accrued or net
10income that has been added or is required to be added to principal under the terms
11of the trust.
AB490,256
12Section
256. 701.20 (10) of the statutes is renumbered 701.1115, and 701.1115
13(1), (2) and (5), as renumbered, is amended to read:
AB490,150,1914
701.1115
(1) In this
subsection section, "entity" means a corporation,
15partnership, limited liability company, regulated investment company, real estate
16investment trust, common trust fund, or any other organization in which a trustee
17has an interest other than a trust or estate to which
sub. (11) s. 701.1116 applies, a
18business or activity to which
sub. (12) s. 701.1117 applies, or an asset-backed
19security to which
sub. (24) s. 701.1129 applies.
AB490,150,21
20(2) Except as otherwise provided in this
subsection section, a trustee shall
21allocate to income money received from an entity.
AB490,150,25
22(5) Money is not received in partial liquidation, nor may it be taken into account
23under
par. (d) 2. sub. (4) (b), to the extent that it does not exceed the amount of income
24tax that a trustee or beneficiary must pay on taxable income of the entity that
25distributes the money.
AB490,257
1Section
257. 701.20 (11) of the statutes is renumbered 701.1116 and amended
2to read:
AB490,151,9
3701.1116 Distribution from trust or estate. A trustee shall allocate to
4income an amount received as a distribution of income from a trust or an estate in
5which the trust has an interest other than a purchased interest, and shall allocate
6to principal an amount received as a distribution of principal from such a trust or
7estate. If a trustee purchases an interest in a trust that is an investment entity, or
8a decedent or donor transfers an interest in such a trust to a trustee,
sub. (10) s.
9701.1115 or
(24) 701.1129 applies to a receipt from the trust.
AB490,258
10Section
258. 701.20 (12) of the statutes is renumbered 701.1117 and 701.1117
11(3) (g), as renumbered, is amended to read:
AB490,151,1212
701.1117
(3) (g) Activities to which
sub. (23) s. 701.1128 applies.
AB490,259
13Section
259. 701.20 (13) of the statutes is renumbered 701.1118, and 701.1118
14(1), (2), (3) and (6), as renumbered, are amended to read:
AB490,151,1815
701.1118
(1) To the extent not allocated to income under this
section 16subchapter, assets received from a transferor during the transferor's lifetime, a
17decedent's estate, a trust with a terminating income interest, or a payer under a
18contract naming the trust or its trustee as beneficiary.
AB490,151,21
19(2) Money or other property received from the sale, exchange, liquidation, or
20change in form of a principal asset, including realized profit, subject to
subs. (10) ss.
21701.1115 to
(24) 701.1129.
AB490,151,24
22(3) Amounts recovered from 3rd parties to reimburse the trust because of
23disbursements described in
sub. (26) (a) 7. s. 701.1131 (1) (g) or for other reasons to
24the extent not based on the loss of income.
AB490,151,25
25(6) Other receipts as provided in
subs. (17) ss. 701.1122 to
(24) 701.1129.
AB490,260
1Section
260. 701.20 (14) of the statutes is renumbered 701.1119 and amended
2to read:
AB490,152,10
3701.1119 Rental property. To the extent that a trustee accounts for receipts
4from rental property in accordance with this
subsection section, the trustee shall
5allocate to income an amount received as rent of real or personal property, including
6an amount received for cancellation or renewal of a lease. An amount received as a
7refundable deposit, including a security deposit or a deposit that is to be applied as
8rent for future periods, must be added to principal and held subject to the terms of
9the lease and is not available for distribution to a beneficiary until the trustee's
10contractual obligations have been satisfied with respect to that amount.
AB490,261
11Section
261. 701.20 (15) of the statutes is renumbered 701.1120, and 701.1120
12(3), as renumbered, is amended to read:
AB490,152,1513
701.1120
(3) This
subsection section does not apply to an obligation to which
14sub. (18), (19), (20), (21), (23) s. 701.1123, 701.1124, 701.1125, 701.1126, 701.1128, or
15(24) 701.1129 applies.
AB490,262
16Section
262. 701.20 (16) of the statutes is renumbered 701.1121 and amended
17to read:
AB490,152,24
18701.1121 Insurance policies and similar contracts. (1) Except as
19provided in
par. (b) sub. (2), a trustee shall allocate to principal the proceeds of a life
20insurance policy or other contract in which the trust or its trustee is named as
21beneficiary, including a contract that insures the trust or its trustee against loss for
22damage to, destruction of, or loss of title to, a trust asset. The trustee shall allocate
23dividends on an insurance policy to income if the premiums on the policy are paid
24from income, and to principal if the premiums are paid from principal.
AB490,153,3
1(2) A trustee shall allocate to income proceeds of a contract that insures the
2trustee against loss of occupancy or other use by an income beneficiary, loss of
3income, or, subject to
sub. (12) s. 701.1117, loss of profits from a business.
AB490,153,5
4(3) This
subsection section does not apply to a contract to which
sub. (18)
s.
5701.1123 applies.
AB490,263
6Section
263. 701.20 (17) of the statutes is renumbered 701.1122, and 701.1122
7(intro.), as renumbered, is amended to read:
AB490,153,16
8701.1122 Insubstantial allocations not required. (intro.) If a trustee
9determines that an allocation between principal and income required by
sub. (15) (b),
10(18), (19), (20), (21) s. 701.1120 (2), 701.1123, 701.1124, 701.1125, 701.1126, or
(24) 11701.1129 is insubstantial, the trustee may allocate the entire amount to principal
12unless one of the circumstances described in
sub. (4) (c) s. 701.1104 (3) applies to the
13allocation. This power may be exercised by a cotrustee in the circumstances
14described in
sub. (4) (d) s. 701.1104 (4) and may be released for the reasons and in
15the manner described in
sub. (4) (e) s. 701.1104 (5). An allocation is presumed to be
16insubstantial if:
AB490,264
17Section
264. 701.20 (18) (title) of the statutes is renumbered 701.1123 (title).
AB490,265
18Section
265. 701.20 (18) (a) of the statutes is repealed.
AB490,266
19Section
266. 701.20 (18) (b) of the statutes is renumbered 701.1123 (2) and
20amended to read:
AB490,154,221
701.1123
(2) To the extent that a payment is characterized as interest
or, a
22dividend
, or a payment made in lieu of interest or a dividend, a trustee shall allocate
23it the payment to income. The trustee shall allocate to principal the balance of the
24payment and any other payment received in the same accounting period that is not
1characterized as interest, a dividend, or
an equivalent a payment
in lieu of interest
2or a dividend.
AB490,267
3Section
267. 701.20 (18) (c) 1. of the statutes is renumbered 701.1123 (1) (d)
4and amended to read:
AB490,154,65
701.1123
(1) (d)
In this paragraph "plan "Plan income" means any of the
6following:
AB490,154,177
1. With respect to payments received from a plan that maintains separate
8accounts
or funds for its participants or account holders,
such as defined contribution
9retirement plans, individual retirement accounts, Roth individual retirement
10accounts, and some types of deferred compensation plans, either the amount of the
11plan separate account
or fund held for the benefit of the trust that, if the
plan 12separate account
or fund were a trust, would be allocated to income
under pars. (b)
13and (d) for that accounting period, or 4 percent of the value of the plan account
or fund 14on the first day of the accounting period. The trustee shall
, in his or her discretion, 15choose the method of determining "plan income" under this
subd. 1. a. subdivision,
16and may change the method of determining "plan income" under this
subd. 1. a. 17subdivision for any subsequent accounting period.
AB490,154,2318
2. With respect to payments received from a plan that does not maintain
19separate accounts
or funds for its participants or account holders,
such as defined
20benefit retirement plans and some types of deferred compensation plans, 4 percent
21of the total present value of the trust's interest in the plan as of the first day of the
22accounting period, based on reasonable actuarial assumptions as determined by the
23trustee.
AB490,268
24Section
268. 701.20 (18) (c) 2. of the statutes is renumbered 701.1123 (3) and
25amended to read:
AB490,155,7
1701.1123
(3) For each accounting period of a trust in which the trust receives
2a payment but no part of any payment is allocated to income under
par. (b) sub. (2),
3the trustee shall allocate to income that portion of the aggregate value of all
4payments received by the trustee in that accounting period that is equal to the
5amount of plan income that is attributable to the trust's interest in the plan from
6which payment is received for that accounting period. The trustee shall allocate the
7balance of any payments to principal.