Amendment SSA1-SB667

SB667-SSA1,12,7 (7) Subject to sub. (8), a trustee of a legacy trust may not be found liable to a person who is not a beneficiary or a transferor of the legacy trust unless the person demonstrates by clear and convincing evidence that the trustee's actions violated the laws of this state, that the trustee acted knowingly and in bad faith, and that the trustee's actions directly caused the damages suffered by the person.

SB667-SSA1,12,11 (8) (a) Subject to s. 701.1311 (4), no person may bring an action of any kind related to a qualified disposition if the period under sub. (3) in which a creditor may bring an action against the qualified disposition that is the basis of the action has expired.

SB667-SSA1,12,21 (b) An action barred under par. (a) includes an action to enforce a judgment entered by a court or other authorized adjudicative body, in law or equity, against a trustee or advisor of a legacy trust or against any person involved in the counseling in connection with, or the drafting, preparation, execution, administration, or funding of a legacy trust. For purposes of this paragraph, “counseling in connection with, or the drafting, preparation, execution, administration, or funding of a legacy trust" includes any of those actions related to any limited partnership, limited liability company, corporation, or similar entity if the limited partnership interests, limited liability company interests, stock, or other similar ownership interests in the relevant entity are subsequently the subject of a qualified disposition.

SB667-SSA1,12,23 (9) If more than one qualified disposition is made to a legacy trust, all of the following apply:

SB667-SSA1,13,3 (a) For purposes of determining whether a creditor's claim against a qualified disposition is barred under sub. (3), each qualified disposition shall be evaluated individually without regard to any subsequent qualified disposition.

SB667-SSA1,13,5 (b) For purposes of determining the order in which property is paid, applied, or distributed from a legacy trust, all of the following apply:

SB667-SSA1,13,8 1. A payment, application, or distribution of money is considered to be made from or with the money most recently received or acquired by any trustee of a legacy trust except to the extent that it is proven otherwise beyond a reasonable doubt.

SB667-SSA1,13,12 2. A payment, application, or distribution of a fungible asset is considered to be made from or with the fungible asset most recently received or acquired by any trustee of a legacy trust except to the extent that it is proven otherwise by clear and convincing evidence.

SB667-SSA1,13,14 (c) A distribution to a beneficiary is considered to have been made from the most recent transfer to the legacy trust.

SB667-SSA1,13,17 701.1307 Creditor claims against qualified dispositions. (1) If a creditor's claim against a qualified disposition under s. 701.1306 is successful, in whole or in part, all of the following apply:

SB667-SSA1,13,20 (a) The creditor may recover damages from trust assets only to the extent necessary to satisfy a transferor's debt to the creditor and any part of the qualified disposition that is not used to satisfy the debt remains subject to the legacy trust.

SB667-SSA1,13,24 (b) Any other qualified disposition to a trustee of the legacy trust and the legacy trust remain valid, including a qualified disposition of a partial, co-ownership, or undivided interest in property by a transferor whose transfer was the subject of a creditor claim under s. 701.1306.

SB667-SSA1,14,3 (c) If a court is satisfied that the trustee did not act in bad faith in accepting or administering the property that was the subject of the claim under s. 701.1306, all of the following apply:

SB667-SSA1,14,7 1. The trustee has a first lien against the property that was the subject of the claim under s. 701.1306 in an amount equal to the entire cost, including attorney fees, properly incurred by the trustee in defense of the action or proceedings against the qualified disposition.

SB667-SSA1,14,10 2. Any recovery for damages under par. (a) is subject to the fees, costs, and preexisting rights, claims, and interests of the trustee and of any predecessor trustee that has not acted in bad faith.

SB667-SSA1,14,16 (d) If a court is satisfied that a beneficiary of the legacy trust did not act in bad faith in receiving a distribution from the legacy trust, the creditor's recovery of the qualified disposition is subject to the right of the beneficiary to retain that distribution if the distribution was the result of an exercise of a trust power or of discretion vested in a trustee or advisor and that power or discretion was exercised before the creditor commenced the action against the qualified disposition.

SB667-SSA1,14,19 (e) 1. For purposes of par. (c), a trustee is not considered to have acted in bad faith solely because the trustee accepted the property that is the subject of the recoverable qualified disposition.

SB667-SSA1,14,22 2. For purposes of par. (d), a beneficiary, including a beneficiary who is a transferor, is not considered to have acted in bad faith solely because the beneficiary accepted a distribution made in accordance with the terms of the legacy trust.

SB667-SSA1,14,24 3. For purposes of pars. (c) and (d), a creditor has the burden of proving by clear and convincing evidence that a trustee or a beneficiary acted in bad faith.

SB667-SSA1,15,3 (2) A court shall award costs and reasonable attorney fees to a prevailing party in a final judgment in an action that is wholly or partially brought under this section or s. 701.1306.

SB667-SSA1,15,5 701.1308 Trust advisors; eligibility; default fiduciary status. (1) Except as provided in sub. (2), any person is eligible to serve as an advisor of a legacy trust.

SB667-SSA1,15,7 (2) A transferor of a legacy trust may serve as an advisor only in connection with investment decisions related to trust assets.

SB667-SSA1,15,9 (3) Notwithstanding s. 701.0818 (2), an advisor is a fiduciary unless the terms of a legacy trust expressly provide otherwise.

SB667-SSA1,15,13 701.1309 Rules regarding discretion. Except as otherwise provided under the terms of a legacy trust, each trustee and each advisor of the legacy trust has the greatest discretion permitted by law in connection with all matters of trust administration, trust distributions, and any other trustee or advisor decision.

SB667-SSA1,15,18 701.1310 Discretionary interest not property of a beneficiary. No person, including a beneficiary, has a property interest in property of a legacy trust to the extent that the distribution of that property is subject to the discretion of a qualified trustee or advisor, whether acting alone or in conjunction with another person, including a person authorized to veto a distribution from the legacy trust.

SB667-SSA1,15,21 701.1311 Miscellaneous provisions. (1) If there is a conflict between a provision of this subchapter and s. 242.07, the provision of this subchapter shall control.

SB667-SSA1,15,25 (2) A statement in a trust instrument that the trust is governed by “the laws of this state" or a statement to similar effect is considered to expressly designate the laws of this state to govern the validity, construction, and administration of the trust and satisfies s. 701.1301 (8) (b).

SB667-SSA1,16,3 (3) A disposition by a nonqualified trustee to a qualified trustee of a legacy trust is not disqualified from being a qualified disposition on the sole basis that the nonqualified trustee is a trustee of a trust that is a nonlegacy trust.

SB667-SSA1,16,9 (4) A valid lien that is attached to property before the property is the subject of a qualified disposition survives the disposition, and the trustee of the legacy trust takes the property subject to the lien and subject to any agreements that created or perfected the lien. Nothing in this subchapter may be construed to authorize any disposition that is prohibited by the terms of an agreement, note, guaranty, mortgage, indenture, instrument, undertaking, or other document.

SB667-SSA1,16,11 (5) A trust administered under the laws of another state or a foreign jurisdiction is considered to be a legacy trust if all of the following apply:

SB667-SSA1,16,14 (a) The trustee of the trust complies with the requirements in the trust instrument and any applicable requirements under the laws of the state or foreign jurisdiction in which the trust is being administered.

SB667-SSA1,16,17 (b) 1. The trustee or other person having the power to transfer the domicile of the trust declares in writing that the trustee or other person intends to transfer the domicile of the trust to this state.

SB667-SSA1,16,19 2. If the person making the declaration under subd. 1. is a person other than the trustee, the declaration is delivered to the trustee.

SB667-SSA1,16,21 (c) At the time of or immediately following the transfer of the trustee to this state, the trust satisfies the definition of a legacy trust under this subchapter.

SB667-SSA1,2 Section 2 . Initial applicability.

SB667-SSA1,16,24 (1) This act first applies to qualified dispositions made on the effective date of this subsection.

SB667-SSA1,16,25 (End)