AB490: Bill Text

AB490,56,9 701.0412 Modification or termination because of unanticipated circumstances or inability to administer trust effectively. (1) The court may modify the administrative or dispositive terms of a trust or terminate the trust if, because of circumstances not anticipated by the settlor, modification or termination will further the purposes of the trust. To the extent practicable, the court shall make the modification in accordance with the settlor's probable intention.

AB490,56,12 (2) The court may modify the administrative terms of a trust if continuation of the trust on its existing terms would be impracticable or wasteful or impair the trust's administration.

AB490,56,14 (3) Upon termination of a trust under this section, the trustee shall distribute the trust property in a manner consistent with the purposes of the trust.

AB490,56,17 (4) A party petitioning the court for action under this section shall give notice of the proceeding to the settlor, if living, the trustee, each trust protector, each directing party, and the qualified beneficiaries.

AB490,87 Section 87. 701.0413 of the statutes is created to read:

AB490,56,21 701.0413 Cy pres. (1) The purpose of this section is to broaden the power of the courts to make charitable gifts more effective. The court shall liberally apply the cy pres doctrine.

AB490,56,23 (2) Except as provided in sub. (3), if a particular charitable purpose becomes unlawful, impracticable, impossible to achieve, or wasteful, all of the following apply:

AB490,56,24 (a) The trust does not fail, in whole or in part.

AB490,57,2 (b) The trust property does not revert to the settlor or the settlor's successors in interest.

AB490,57,12 (c) The court may apply the cy pres doctrine to modify or terminate the trust by directing that the trust property be applied or distributed, in whole or in part, in a manner consistent with the settlor's charitable purposes. In determining the alternative plan for disposition of the property under this paragraph, 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 interests of the settlor, the amount of principal and income available under the trust, and other relevant factors. A person with standing to enforce the terms of a charitable trust under s. 701.0405 (3) has standing to commence a proceeding under this paragraph. The attorney general is a necessary party in all proceedings under this paragraph.

AB490,57,17 (3) A provision in the terms of a charitable trust that would result in distribution of the trust property to a noncharitable beneficiary prevails over the power of the court under sub. (2) to apply the cy pres doctrine to modify or terminate the trust only if, when the provision takes effect, the trust property is to revert to the settlor and the settlor is still living.

AB490,57,21 (4) A party petitioning the court for action under this section shall give notice to the settlor, if living, the trustee, each trust protector, each directing party, the qualified beneficiaries, and any person with standing to enforce the terms of a charitable trust under s. 701.0405 (3).

AB490,88 Section 88. 701.0414 of the statutes is created to read:

AB490,57,24 701.0414 Modification or termination of uneconomic trust. (1) In this section:

AB490,58,4 (a) "Adjustment reference number" means the consumer price index for all urban consumers, as published by the United States bureau of labor statistics, in effect on January 1 of the year in which an adjustment is to be made in accordance with sub. (3).

AB490,58,7 (b) "Base reference number" means the consumer price index for all urban consumers, as published by the United States bureau of labor statistics, in effect on January 1 of the base year.

AB490,58,9 (c) "Base year" means the year in which this paragraph takes effect .... [LRB inserts date].

AB490,58,14 (2) After notice to the settlor, if living, each trust protector, each directing party, and the qualified beneficiaries, the trustee of a trust consisting of trust property having a total value less than $100,000 or a revised applicable figure, as determined under sub. (3), may terminate the trust if the trustee concludes that the value of the trust property is insufficient to justify the cost of administration.

AB490,58,18 (3) The dollar amount specified in sub. (2) shall be adjusted to a revised applicable figure on the 5th anniversary of the effective date of this subsection .... [LRB inserts date], and every 5 years thereafter. The revised applicable figure shall be determined as follows:

AB490,58,21 (a) Calculate the percentage change between the base reference number and the adjustment reference number for the year in which the adjustment is being made.

AB490,58,23 (b) 1. If the percentage change determined in par. (a) is a positive number, determine the revised applicable figure as follows:

AB490,58,25 a. Multiply $100,000 by the percentage change determined in par. (a), expressed as a decimal.

AB490,59,1 b. Round the product under subd. 1. a. to the nearest $1,000.

AB490,59,2 c. Add the value determined under subd. 1. b. to $100,000.

AB490,59,4 2. If the percentage change determined in par. (a) is a negative number, determine the revised applicable figure as follows:

AB490,59,6 a. Multiply $100,000 by the absolute value of the percentage change determined in par. (a), expressed as a decimal.

AB490,59,7 b. Round the product under subd. 2. a. to the nearest $1,000.

AB490,59,8 c. Subtract the value determined under subd. 2. b. from $100,000.

AB490,59,12 (4) The court may modify or terminate a trust or remove the trustee and appoint a different trustee if it determines that the value of the trust property is insufficient to justify the cost of administration even if the trust property has a total value in excess of the amount described in sub. (2).

AB490,59,14 (5) Upon termination of a trust under this section, the trustee shall distribute the trust property in a manner consistent with the purposes of the trust.

AB490,59,15 (6) This section does not apply to an easement for conservation or preservation.

AB490,59,18 (7) A party petitioning the court for action under this section shall give notice of the proceeding to the settlor, if living, the trustee, each trust protector, each directing party, and the qualified beneficiaries.

AB490,89 Section 89. 701.0415 of the statutes is created to read:

AB490,60,2 701.0415 Reformation to correct mistakes. The court may reform the terms of a trust, even if unambiguous, to conform the terms to the settlor's intent if it is proved by clear and convincing evidence that both the settlor's intent and the terms of the trust were affected by a mistake of fact or law, whether in expression or inducement. A party petitioning the court for action under this section shall give notice of the proceeding to the settlor, if living, the trustee, each trust protector, each directing party, and the qualified beneficiaries.

AB490,90 Section 90. 701.0416 of the statutes is created to read:

AB490,60,9 701.0416 Modification to achieve settlor's tax objectives. To achieve the settlor's tax objectives, the court may modify the terms of a trust in a manner that is not contrary to the settlor's probable intent. The court may provide that the modification has retroactive effect. A party petitioning the court for action under this section shall give notice of the proceeding to the settlor, if living, the trustee, each trust protector, each directing party, and the qualified beneficiaries.

AB490,91 Section 91. 701.0417 of the statutes is created to read:

AB490,60,14 701.0417 Combination and division of trusts. (1) After notice to each trust protector, each directing party, and the qualified beneficiaries, a trustee may do any of the following if the result does not impair rights of any beneficiary or adversely affect achievement of any trust purposes:

AB490,60,15 (a) Combine 2 or more trusts into a single trust.

AB490,60,16 (b) Divide a trust into 2 or more separate trusts.

AB490,60,23 (2) Subject to the terms of the trust, the trustee may take into consideration differences in federal tax attributes and other pertinent factors in administering the trust property of any separate account or trust, in making applicable tax elections, and in making distributions. A separate trust created by severance under sub. (1) (b) is treated as a separate trust for all purposes from the date on which the severance is effective. The effective date of the severance may be retroactive to a date before the date on which the trustee exercises the power.

AB490,60,25 (3) If a trustee combines 2 or more trusts into a single trust, the trustee shall identify which trust is the surviving trust.

AB490,92 Section 92. 701.0418 of the statutes is created to read:

AB490,61,3 701.0418 Trustee's power to appoint assets to new trust. (1) Definitions. In this section:

AB490,61,8 (a) "Absolute power" means a power to invade trust assets for the benefit of a beneficiary that is not limited by a specific or ascertainable standard, whether or not the term "absolute" is used in the trust instrument. "Absolute power" includes a power to invade trust assets for the best interests, welfare, comfort, or happiness of a beneficiary.

AB490,61,10 (b) "First trust" means the trust from which assets are or may be appointed under sub. (2).

AB490,61,12 (c) "Second trust" means the trust or trusts to which assets are or may be appointed under sub. (2).

AB490,61,18 (2) Power to appoint. (a) Except as otherwise provided in this subsection and in subs. (3) and (5), a trustee who has the power to invade the principal of a first trust for the benefit of a beneficiary who is eligible to receive or entitled to the income of the first trust or entitled to an annuity or unitrust payment from the first trust may exercise the power by appointing part or all of the assets of the first trust in favor of a trustee of a 2nd trust if all of the following apply:

AB490,61,20 1. The appointment of assets does not reduce any fixed income, annuity, or unitrust interest of a beneficiary.

AB490,62,2 2. If the trustee's power to invade income or principal of the first trust is limited by a specific or ascertainable standard, the appointment of assets does not result in the trustee of the 2nd trust or any other person having a power to invade the income or principal of the 2nd trust that is broader than the trustee's power to invade income or principal of the first trust. This subdivision does not apply if the 2nd trust is a trust for an individual with a disability.

AB490,62,3 3. One of the following applies:

AB490,62,5 a. The beneficiaries of the first trust are the same as the beneficiaries of the 2nd trust.

AB490,62,7 b. If the first trust grants the trustee the absolute power to invade principal, the 2nd trust includes only all or some of the beneficiaries of the first trust.

AB490,62,10 (b) Paragraph (a) applies to a trustee whether or not the trustee has an absolute power to invade principal and whether or not there is a current need to invade principal under the terms of the first trust.

AB490,62,12 (3) Limitations on exercise of power. A trustee may not appoint assets to a 2nd trust under sub. (2) if any of the following applies:

AB490,62,15 (a) The trust instrument creating the first trust expressly prohibits the trustee from appointing assets of the first trust to a 2nd trust by reference to this section or by using the term "decanting."

AB490,62,18 (b) A contribution to the first trust qualified for a marital or charitable deduction for federal income, gift, or estate tax purposes under the Internal Revenue Code and one of the following applies:

AB490,62,21 1. The 2nd trust contains a provision that, if included in the first trust, would have prevented the first trust from qualifying for the deduction or would have reduced the amount of the deduction.

AB490,62,24 2. The 2nd trust does not contain a provision that was contained in the first trust that, if omitted from the first trust, would have prevented the first trust from qualifying for the deduction or would have reduced the amount of the deduction.

AB490,63,4 (c)   The trustee has a beneficial interest in the first trust unless the 2nd trust is a trust for an individual with a disability, the trustee's only beneficial interest in the first trust is as a remainder beneficiary, and the trustee's beneficial interest in the 2nd trust is not greater than the trustee's beneficial interest in the first trust.

AB490,63,6 (d)   The appointment of assets to a 2nd trust would impair currently exercisable withdrawal rights of a beneficiary of the first trust and one of the following applies:

AB490,63,9 1. The withdrawal rights were granted to the beneficiary in a manner designed to allow contributions subject to the withdrawal rights to qualify for the federal gift tax annual exclusion.

AB490,63,12 2. The terms of the 2nd trust would impair gifts previously made to the first trust from qualifying for the federal gift tax annual exclusion under section 2503 of the Internal Revenue Code.

AB490,63,16 (e)   The appointment of assets to the 2nd trust would violate a rule against perpetuities applicable to the first trust or suspend a trustee's power of alienation over assets of the first trust in a manner that would cause all or a portion of the 2nd trust to be void.

AB490,63,18 (f) The appointment of assets to the 2nd trust under sub. (2) would impair the essential purpose of a trust for an individual with a disability.

AB490,63,22 (4) Permissible terms of 2nd trust. (a) Subject to pars. (b) to (d) and subs. (2), (3), and (5), the trustee of the first trust may create a 2nd trust instrument that includes terms that are intended to achieve any purpose, including terms that are intended to do any of the following:

AB490,63,23 1. Correct a drafting error in the first trust.

AB490,63,24 2. Clarify potentially ambiguous terms contained in the first trust.

AB490,63,25 3. Change the age of distribution to a beneficiary of the first trust.

AB490,64,1 4. Extend the duration of the first trust.

AB490,64,3 5. Protect a beneficiary of the first trust, including protecting the beneficiary from self-destructive behavior.

AB490,64,8 6. Allow the trustee of the 2nd trust to transfer trust assets to a community trust. In this subdivision, "community trust" means a master trust that is established and managed by a nonprofit organization that maintains sub-accounts for individual beneficiaries that each satisfy the definition of a trust for an individual with a disability.

AB490,64,9 7. Add or remove a spendthrift trust provision to the first trust.

AB490,64,12 8. Modify investment provisions contained in the first trust, including those relating to permissible investments, use of investment advisors, or self-dealing transactions.

AB490,64,15 9. Change a present or future trustee of the first trust, including by defining the method by which a trustee or cotrustee may be appointed or removed and replaced.

AB490,64,17 10. Appoint a trust protector of the 2nd trust and define the powers of the trust protector.

AB490,64,19 11. Appoint a directing party of the 2nd trust and define the powers of the directing party.

AB490,64,20 12. Change the principal place of administration of the first trust.

AB490,64,21 13. Change the governing law of the first trust.

AB490,64,22 14. Allow for the division of the first trust into 2 or more trusts.

AB490,64,23 15. Allow for the merger of the first trust with one or more trusts.

AB490,64,25 16. Add or modify an exculpatory provision for a trustee, trust protector, or directing party.

AB490,65,4 17. Obtain desirable tax treatment, as determined by the trustee of the first trust, or to avoid adverse tax consequences, as determined by the trustee of the first trust, including provisions relating to grantor trust status under sections 671 to 679 of the Internal Revenue Code.

AB490,65,5 18. Modify a power in the first trust to invade income and principal.

AB490,65,7 19. Modify or eliminate a general or special power of appointment in the first trust.

AB490,65,10 (b) The trust instrument of the 2nd trust may include terms granting a beneficiary a general or special power of appointment only if the trustee of the first trust has the absolute power to invade income and principal.

AB490,65,14 (c) 1. The trust instrument of the 2nd trust may include terms that are intended to change terms of the first trust that are applicable to a beneficiary who is an individual with a disability only if the purpose of the change is to allow the beneficiary to qualify or continue to be qualified to receive public assistance.

AB490,65,16 2. Subdivision 1. applies regardless of whether the first trust includes specific or ascertainable standards for distribution.

AB490,65,19 (d) The trust instrument of the 2nd trust may include a term that adopts or expands an exculpatory provision relating to the trustee only if one of the following applies: