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11(3) Limitations on exercise of power. A trustee may not appoint assets to a
122nd trust under sub. (2) if any of the following applies:
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(a) The trust instrument creating the first trust expressly prohibits the trustee
14from appointing assets of the first trust to a 2nd trust by reference to this section or
15by using the term "decanting."
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(b) A contribution to the first trust qualified for a marital or charitable
17deduction for federal income, gift, or estate tax purposes under the Internal Revenue
18Code and one of the following applies:
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1. The 2nd trust contains a provision that, if included in the first trust, would
20have prevented the first trust from qualifying for the deduction or would have
21reduced the amount of the deduction.
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2. The 2nd trust does not contain a provision that was contained in the first
23trust that, if omitted from the first trust, would have prevented the first trust from
24qualifying for the deduction or would have reduced the amount of the deduction.
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1(c)
The trustee has a beneficial interest in the first trust unless the 2nd trust
2is a trust for an individual with a disability, the trustee's only beneficial interest in
3the first trust is as a remainder beneficiary, and the trustee's beneficial interest in
4the 2nd trust is not greater than the trustee's beneficial interest in the first trust.
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(d)
The appointment of assets to a 2nd trust would impair currently exercisable
6withdrawal rights of a beneficiary of the first trust and one of the following applies:
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1. The withdrawal rights were granted to the beneficiary in a manner designed
8to allow contributions subject to the withdrawal rights to qualify for the federal gift
9tax annual exclusion.
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2. The terms of the 2nd trust would impair gifts previously made to the first
11trust from qualifying for the federal gift tax annual exclusion under section
2503 of
12the Internal Revenue Code.
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(e)
The appointment of assets to the 2nd trust would violate a rule against
14perpetuities applicable to the first trust or suspend a trustee's power of alienation
15over assets of the first trust in a manner that would cause all or a portion of the 2nd
16trust to be void.
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(f) The appointment of assets to the 2nd trust under sub. (2) would impair the
18essential purpose of a trust for an individual with a disability.
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19(4) Permissible terms of 2nd trust. (a) Subject to pars. (b) to (d) and subs. (2),
20(3), and (5), the trustee of the first trust may create a 2nd trust instrument that
21includes terms that are intended to achieve any purpose, including terms that are
22intended to do any of the following:
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1. Correct a drafting error in the first trust.
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2. Clarify potentially ambiguous terms contained in the first trust.
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3. Change the age of distribution to a beneficiary of the first trust.
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14. Extend the duration of the first trust.
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5. Protect a beneficiary of the first trust, including protecting the beneficiary
3from self-destructive behavior.
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6. Allow the trustee of the 2nd trust to transfer trust assets to a community
5trust. In this subdivision, "community trust" means a master trust that is
6established and managed by a nonprofit organization that maintains sub-accounts
7for individual beneficiaries that each satisfy the definition of a trust for an individual
8with a disability.
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7. Add or remove a spendthrift trust provision to the first trust.
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8. Modify investment provisions contained in the first trust, including those
11relating to permissible investments, use of investment advisors, or self-dealing
12transactions.
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9. Change a present or future trustee of the first trust, including by defining
14the method by which a trustee or cotrustee may be appointed or removed and
15replaced.
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10. Appoint a trust protector of the 2nd trust and define the powers of the trust
17protector.
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11. Appoint a directing party of the 2nd trust and define the powers of the
19directing party.
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12. Change the principal place of administration of the first trust.
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13. Change the governing law of the first trust.
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14. Allow for the division of the first trust into 2 or more trusts.
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15. Allow for the merger of the first trust with one or more trusts.
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16. Add or modify an exculpatory provision for a trustee, trust protector, or
25directing party.
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117. Obtain desirable tax treatment, as determined by the trustee of the first
2trust, or to avoid adverse tax consequences, as determined by the trustee of the first
3trust, including provisions relating to grantor trust status under sections
671 to
679 4of the Internal Revenue Code.
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18. Modify a power in the first trust to invade income and principal.
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19. Modify or eliminate a general or special power of appointment in the first
7trust.
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(b) The trust instrument of the 2nd trust may include terms granting a
9beneficiary a general or special power of appointment only if the trustee of the first
10trust has the absolute power to invade income and principal.
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(c) 1. The trust instrument of the 2nd trust may include terms that are intended
12to change terms of the first trust that are applicable to a beneficiary who is an
13individual with a disability only if the purpose of the change is to allow the
14beneficiary to qualify or continue to be qualified to receive public assistance.
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2. Subdivision 1. applies regardless of whether the first trust includes specific
16or ascertainable standards for distribution.
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(d) The trust instrument of the 2nd trust may include a term that adopts or
18expands an exculpatory provision relating to the trustee only if one of the following
19applies:
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1. Any trustee of the first trust who would benefit from the adoption of the term
21in the 2nd trust abstains from the consideration and adoption of the term and the
22trustees of the first trust who would not benefit from the adoption of the term adopt
23the trust instrument of the 2nd trust.
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2. A court approves the trust instrument of the 2nd trust.
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1(5) Procedural matters. (a) A trustee shall appoint assets to a 2nd trust under
2sub. (2) by an instrument in writing that is signed and acknowledged by the trustee
3and shall include the written instrument with the records of the first and 2nd trusts.
4A trustee may appoint assets to a 2nd trust under sub. (2) upon notice, without court
5approval, under the procedure described in par. (b), or with court approval, under the
6procedure described in par. (c).
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(b) 1. If a trustee chooses to proceed without a court order, the trustee shall give
8notice of the manner in which the trustee intends to appoint assets to a 2nd trust
9under sub. (2) to all of the following:
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a. The qualified beneficiaries of the first trust.
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b. Each trust protector appointed under the terms of the first trust.
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c. Each directing party appointed under the terms of the first trust.
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d. The settlor of the first trust, if living.
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2. To satisfy the trustee's notice obligation under this paragraph, a trustee shall
15provide each person entitled to receive notice under subd. 1. all of the following:
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a. A copy of the proposed written instrument under which the trustee will
17appoint assets to a 2nd trust.
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b. The proposed effective date of the appointment.
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c. A copy of the trust instrument of the first trust.
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d. A copy of the trust instrument of the 2nd trust.
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3. A trustee may not appoint assets to the 2nd trust until 30 days after the
22trustee provides notice as required under this paragraph unless every person who
23is entitled to receive notice under subd. 1. waives the 30-day notice period by
24delivering a signed written instrument to the trustee. A person's waiver of the
130-day notice period does not constitute that person's consent to the trustee's
2appointment of assets to a 2nd trust.
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4. If a person entitled to receive notice under subd. 1. delivers a written
4objection to the trustee before the effective date of the appointment of assets to a 2nd
5trust, the trustee may not appoint the assets to a 2nd trust, as specified in the
6trustee's notice, without obtaining court approval under par. (c) unless the written
7objection is withdrawn.
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5. If the trustee does not receive a written objection from any person entitled
9to receive notice under subd. 1. before the effective date of the appointment of assets
10to the 2nd trust or all written objections to the proposed appointment of assets to the
112nd trust are withdrawn, the trustee may appoint the assets to a 2nd trust, as
12specified in the notice.
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(c) 1. If a trustee chooses to proceed with court approval, including after
14receiving a written objection to a proposed appointment of assets, the trustee shall
15petition a court to approve a proposed appointment of assets to a 2nd trust under sub.
16(2). The trustee shall provide notice of the petition to all qualified beneficiaries of the
17first trust, each trust protector appointed under the first trust, each directing party
18appointed under the first trust, and to the settlor of the first trust, if living. The
19trustee shall include in the notice of the petition the proposed effective date of the
20appointment of assets to a 2nd trust. The trustee shall also provide to each person
21who is entitled to receive notice under this paragraph a copy of the proposed
22instrument under which the trustee will appoint assets to a 2nd trust, the proposed
23effective date of the appointment, a copy of the trust instrument of the first trust, and
24a copy of the trust instrument of the 2nd trust.
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12. If a person who is entitled to receive notice under subd. 1. files an objection
2with the court, in determining whether to grant or deny a petition under subd. 1., the
3court shall consider all of the following:
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a. The purpose of the proposed appointment of assets under sub. (2).
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b. The reasons for any objection made by a person entitled to receive notice
6under subd. 1.
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c. Changes in circumstances that have occurred since the creation of the first
8trust.
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d.
Whether the appointment of assets under sub. (2) complies with the
10requirements of this section.
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3. If no person who is entitled to receive notice under subd. 1. files an objection
12with the court or any objection that has been filed with the court is withdrawn, the
13court shall enter an order approving the appointment of assets under sub. (2) as set
14forth in the trustee's notice unless the court determines that the appointment of
15assets does not comply with the requirements of this section.
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16(6) Subsequently discovered assets. (a) The appointment of all of the assets
17of the first trust in favor of the trustee of the 2nd trust includes subsequently
18discovered assets otherwise belonging to the first trust and assets paid to or acquired
19by the first trust subsequent to the appointment in favor of the 2nd trust.
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(b) Except as otherwise provided by the trustee of the first trust, the
21appointment of part but not all of the assets of the first trust in favor of the 2nd trust
22does not include subsequently discovered assets belonging to the first trust or assets
23paid to or acquired by the first trust subsequent to the appointment in favor of the
242nd trust, which remain the assets of the first trust.
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1(7) Liability. (a) This section does not create or imply a duty on a trustee to
2appoint assets to a 2nd trust under sub. (2). A trustee that does not appoint assets
3to a 2nd trust under sub. (2) is not liable for the failure to do so.
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(b)
A trustee who appoints assets to a 2nd trust under sub. (2) is not liable to
5any beneficiary for any loss related to the appointment unless the trustee did not
6appoint the assets in good faith.
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7(8) Miscellaneous provisions. (a) The appointment of assets to a 2nd trust
8under sub. (2) is not an exercise of a general power of appointment.
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(b) A trustee may appoint assets to a 2nd trust under sub. (2) even if the first
10trust includes a spendthrift clause or a provision that prohibits amendment or
11revocation of the trust.
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(c) This section does not limit a trustee who has a power to invade principal to
13appoint property in further trust to the extent the power arises under the terms of
14the first trust or under any other section of this chapter or under another provision
15of law or under common law.
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(d) The restriction relating to a trustee under sub. (3) (c) does not preclude a
17cotrustee who does not have a beneficial interest in the first trust from appointing
18assets to a 2nd trust under sub. (2) even if the terms of the first trust, applicable law,
19or other circumstances would otherwise require the majority or unanimous action of
20the trustees of the first trust.
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(e) For purposes of this section, if beneficiaries of a first trust are defined as a
22class of persons, the class shall include any person who falls within the class of
23persons after the trustee appoints assets to the 2nd trust.
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1(f) Notwithstanding s. 701.0103 (23), a trustee of a first trust who appoints
2assets to a 2nd trust under sub. (2) or creates a 2nd trust instrument under sub. (4)
3is not the settlor of the 2nd trust.
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(g) To the extent a directing party or trust protector has the power to invade
5the principal of a first trust, as described in sub. (2), this section applies to the
6directing party or trust protector as if the directing party or trust protector is a
7trustee.
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8Section
93. 701.05 of the statutes is repealed.
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9Section
94. Subchapter V (title) of chapter 701 [precedes 701.0501] of the
10statutes is created to read:
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chapter 701
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subchapter v
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creditor's claims; spendthrift
14
and discretionary trusts
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15Section
95. 701.0501 of the statutes is created to read:
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16701.0501 Rights of beneficiary's creditor or assignee. (1) (a) To the
17extent a beneficiary's interest is not protected by a spendthrift provision, the court
18may authorize a judgment creditor or an assignee of the beneficiary to reach the
19beneficiary's interest by attachment of present or future distributions to or for the
20benefit of the beneficiary or other means. The court may limit the award to such
21relief as is appropriate under the circumstances.
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(b) This subsection does not apply to a trust for an individual with a disability.
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23(2) A trustee is not liable to any creditor of a beneficiary for any distributions
24made to or for the benefit of the beneficiary if any of the following applies:
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(a) The beneficiary's interest is protected by a spendthrift provision.
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1(b) The trust is a trust for an individual with a disability.
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2Section
96. 701.0502 of the statutes is created to read:
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3701.0502 Spendthrift provision. (1) A spendthrift provision is valid only
4if any of the following applies:
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(a) The beneficiary is a person other than the settlor and is not treated as the
6settlor under s. 701.0505 (2).
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(b) The trust is a trust for an individual with a disability.
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8(2) Subject to sub. (1), a term of a trust providing that the interest of a
9beneficiary is held subject to a spendthrift trust, or words of similar import, restrains
10both a voluntary and involuntary transfer of the beneficiary's interest.
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11(3) A beneficiary may not transfer an interest in a trust in violation of a valid
12spendthrift provision and, except as otherwise provided in this subchapter, a creditor
13or assignee of the beneficiary may not attach, garnish, execute on, or otherwise reach
14the interest or a distribution by the trustee before its receipt by the beneficiary.
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15(4) Real property or tangible personal property that is owned by the trust but
16that is made available for a beneficiary's occupancy or use in accordance with the
17trustee's authority under the trust instrument may not be considered to have been
18distributed by the trustee or received by the beneficiary for purposes of allowing a
19creditor or assignee of the beneficiary to reach the property.
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20Section
97. 701.0503 (title) of the statutes is created to read:
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21701.0503 (title)
Exceptions to spendthrift provision.