SB384,145,1512
(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.
SB384,145,1816
(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.
SB384,244
19Section
244. 701.20 (4k) of the statutes is renumbered 701.1108 and amended
20to read:
SB384,146,2
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.
SB384,245
3Section
245. 701.20 (4m) (title) of the statutes is renumbered 701.1109 (title).
SB384,246
4Section
246. 701.20 (4m) (a) of the statutes is renumbered 701.1109 (1) and
5amended to read:
SB384,146,116
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.
SB384,247
12Section
247. 701.20 (4m) (am) of the statutes is renumbered 701.1109 (2) and
13amended to read:
SB384,146,1814
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.
SB384,248
19Section
248. 701.20 (4m) (b) of the statutes is renumbered 701.1109 (3).
SB384,249
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:
SB384,147,222
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.
SB384,250
3Section
250. 701.20 (4m) (d) of the statutes is renumbered 701.1109 (5).
SB384,251
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:
SB384,147,116
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.
SB384,147,14
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:
SB384,147,24
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.
SB384,148,4
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.
SB384,148,16
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.
SB384,252
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:
SB384,149,219
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.
SB384,149,5
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.
SB384,149,9
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.
SB384,253
10Section
253. 701.20 (7) of the statutes is renumbered 701.1112, and 701.1112
11(3), as renumbered, is amended to read:
SB384,149,1512
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.
SB384,254
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:
SB384,149,2118
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.
SB384,150,4
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.
SB384,255
5Section
255. 701.20 (9) (a) of the statutes is renumbered 701.1114, and
6701.1114 (1), as renumbered, is amended to read:
SB384,150,11
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.
SB384,256
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:
SB384,150,1914
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.
SB384,150,21
20(2) Except as otherwise provided in this
subsection section, a trustee shall
21allocate to income money received from an entity.
SB384,150,25
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.
SB384,257
1Section
257. 701.20 (11) of the statutes is renumbered 701.1116 and amended
2to read:
SB384,151,9
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.
SB384,258
10Section
258. 701.20 (12) of the statutes is renumbered 701.1117 and 701.1117
11(3) (g), as renumbered, is amended to read:
SB384,151,1212
701.1117
(3) (g) Activities to which
sub. (23) s. 701.1128 applies.
SB384,259
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:
SB384,151,1815
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.
SB384,151,21
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.
SB384,151,24
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.
SB384,151,25
25(6) Other receipts as provided in
subs. (17) ss. 701.1122 to
(24) 701.1129.
SB384,260
1Section
260. 701.20 (14) of the statutes is renumbered 701.1119 and amended
2to read:
SB384,152,10
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.
SB384,261
11Section
261. 701.20 (15) of the statutes is renumbered 701.1120, and 701.1120
12(3), as renumbered, is amended to read:
SB384,152,1513
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.
SB384,262
16Section
262. 701.20 (16) of the statutes is renumbered 701.1121 and amended
17to read:
SB384,152,24
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.
SB384,153,3
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.
SB384,153,5
4(3) This
subsection section does not apply to a contract to which
sub. (18)
s.
5701.1123 applies.
SB384,263
6Section
263. 701.20 (17) of the statutes is renumbered 701.1122, and 701.1122
7(intro.), as renumbered, is amended to read:
SB384,153,16
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:
SB384,264
17Section
264. 701.20 (18) (title) of the statutes is renumbered 701.1123 (title).
SB384,265
18Section
265. 701.20 (18) (a) of the statutes is repealed.
SB384,266
19Section
266. 701.20 (18) (b) of the statutes is renumbered 701.1123 (2) and
20amended to read:
SB384,154,221
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.
SB384,267
3Section
267. 701.20 (18) (c) 1. of the statutes is renumbered 701.1123 (1) (d)
4and amended to read:
SB384,154,65
701.1123
(1) (d)
In this paragraph "plan "Plan income" means any of the
6following:
SB384,154,177
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.
SB384,154,2318
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.
SB384,268
24Section
268. 701.20 (18) (c) 2. of the statutes is renumbered 701.1123 (3) and
25amended to read:
SB384,155,7
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.
SB384,269
8Section
269. 701.20 (18) (d) of the statutes is renumbered 701.1123 (5) and
9amended to read:
SB384,155,1310
701.1123
(5) If, to obtain an estate or gift tax marital deduction for an interest
11in a trust, a trustee must allocate more of a payment to income than provided for by
12this
subsection section, the trustee shall allocate to income the additional amount
13necessary to obtain the marital deduction.
SB384,270
14Section
270. 701.20 (18) (e) of the statutes is renumbered 701.1123 (6) and
15amended to read:
SB384,155,1716
701.1123
(6) This
subsection section does not apply to
payments a payment to
17which
sub. (19) s. 701.1124 applies.
SB384,271
18Section
271. 701.20 (19) of the statutes is renumbered 701.1124, and 701.1124
19(1), as renumbered, is amended to read:
SB384,156,420
701.1124
(1) In this
subsection section, "liquidating asset" means an asset
21whose value will diminish or terminate because the asset is expected to produce
22receipts for a period of limited duration. The term includes a leasehold, patent,
23copyright, royalty right, and right to receive payments during a period of more than
24one year under an arrangement that does not provide for the payment of interest on
25the unpaid balance. The term does not include a payment subject to
sub. (18) s.
1701.1123, resources subject to
sub. (20)
s. 701.1125, timber subject to
sub. (21) s.
2701.1126, an activity subject to
sub. (23) s. 701.1128, an asset subject to
sub. (24) s.
3701.1129, or any asset for which the trustee establishes a reserve for depreciation
4under
sub. (27) s. 701.1132.
SB384,272
5Section
272. 701.20 (20) of the statutes is renumbered 701.1125, and 701.1125
6(1) (intro.) and (d), (3) and (4), as renumbered, are amended to read:
SB384,156,97
701.1125
(1) (intro.) To the extent that a trustee accounts for receipts from an
8interest in minerals or other natural resources in accordance with this
subsection 9section, the trustee shall allocate them as follows:
SB384,156,1210
(d) If an amount is received from a working interest or any other interest not
11provided for in
subd. 1., 2. par. (a), (b), or
3. (c), 90 percent of the net amount received
12must be allocated to principal and the balance to income.
SB384,156,15
13(3) This
subsection section applies whether or not a decedent or donor was
14extracting minerals, water, or other natural resources before the interest became
15subject to the trust.
SB384,156,21
16(4) If a trust owns an interest in minerals, water, or other natural resources
17on May 17, 2005, the trustee may allocate receipts from the interest as provided in
18this
subsection section or in the manner used by the trustee before May 17, 2005.
19If the trust acquires an interest in minerals, water, or other natural resources after
20May 17, 2005, the trustee shall allocate receipts from the interest as provided in this
21subsection section.
SB384,273
22Section
273. 701.20 (21) (title) of the statutes is repealed.
SB384,274
23Section
274. 701.20 (21) of the statutes is renumbered 701.1126, and 701.1126
24(1) (intro.), (c) and (d), (2), (3) and (4), as renumbered, are amended to read:
SB384,157,3
1701.1126
(1) (intro.) To the extent that a trustee accounts for receipts from the
2sale of timber and related products in accordance with this
subsection section, the
3trustee shall allocate the net receipts:
SB384,157,74
(c) To income or principal or between income and principal if the net receipts
5are from the lease of timberland or from a contract to cut timber from land owned by
6a trust, by determining the amount of timber removed from the land under the lease
7or contract and applying the rules in
subds. 1. pars. (a) and
2. (b).
SB384,157,98
(d) To principal to the extent that advance payments, bonuses, and other
9payments are not allocated under
subd. 1., 2. par. (a), (b), or
3. (c).
SB384,157,11
10(2) In determining net receipts to be allocated under
par. (a) sub. (1), a trustee
11shall deduct and transfer to principal a reasonable amount for depletion.
SB384,157,13
12(3) This
subsection section applies whether or not a decedent or transferor was
13harvesting timber from the property before it became subject to the trust.
SB384,157,19
14(4) If a trust owns an interest in timberland on May 17, 2005, the trustee may
15allocate net receipts from the sale of timber and related products as provided in this
16subsection section or in the manner used by the trustee before May 17, 2005. If the
17trust acquires an interest in timberland after May 17, 2005, the trustee shall allocate
18net receipts from the sale of timber and related products as provided in this
19subsection section.
SB384,275
20Section
275. 701.20 (22) of the statutes is renumbered 701.1127 and amended
21to read:
SB384,158,6
22701.1127 Property not productive of income. (1) If a marital deduction
23is allowed for all or part of a trust whose assets consist substantially of property that
24does not provide the surviving spouse with sufficient income from or use of the trust
25assets, and if the amounts that the trustee transfers from principal to income under
1sub. (4) s. 701.1104 and distributes to the spouse from principal in accordance with
2the terms of the trust are insufficient to provide the spouse with the beneficial
3enjoyment required to obtain the marital deduction, the spouse may require the
4trustee to make property productive of income, convert property within a reasonable
5time, or exercise the power conferred by
sub. (4) (a)
s. 701.1104 (1). The trustee may
6decide which action or combination of actions to take.
SB384,158,9
7(2) In cases not governed by
par. (a)
sub. (1), proceeds from the sale or other
8disposition of an asset are principal without regard to the amount of income the asset
9produces during any accounting period.
SB384,276
10Section
276. 701.20 (23) of the statutes is renumbered 701.1128, and 701.1128
11(1) and (2), as renumbered, are amended to read:
SB384,158,1612
701.1128
(1) In this
subsection section, "derivative" means a contract or
13financial instrument or a combination of contracts and financial instruments that
14gives a trust the right or obligation to participate in some or all changes in the price
15of a tangible or intangible asset or group of assets, or changes in a rate, an index of
16prices or rates, or another market indicator for an asset or a group of assets.
SB384,158,19
17(2) To the extent that a trustee does not account under
sub. (12) s. 701.1117 for
18transactions in derivatives, the trustee shall allocate to principal receipts from and
19disbursements made in connection with those transactions.
SB384,277
20Section
277. 701.20 (24) of the statutes is renumbered 701.1129, and 701.1129
21(1), as renumbered, is amended to read: