Amendment SSA1-SB109

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2001 - 2002 LEGISLATURE

SENATE SUBSTITUTE AMENDMENT 1, TO 2001 SENATE BILL 109

March 11, 2002 - Offered by Committee on Judiciary, Consumer Affairs, and Campaign Finance Reform.

SB109-SSA1,1,6 An Act to renumber and amend 701.24; to amend 20.907 (1), 23.0918 (2), 25.70, 36.29 (1), 40.82 (2), 861.015 (2), 881.02 and 881.06; to repeal and recreate 701.20 and 881.01; and to create 701.24 (2) of the statutes; relating to: regulating the investments of personal representatives, trustees, conservators, and guardians of the estate; and providing rules for allocations between principal and income for trusts and estates.

The people of the state of Wisconsin, represented in senate and assembly, do enact as follows:

SB109-SSA1, s. 1 Section 1. 20.907 (1) of the statutes is amended to read:

SB109-SSA1,2,9 20.907 (1) Acceptance and investment. Unless otherwise provided by law, all gifts, grants, bequests, and devises to the state or to any state agency for the benefit or advantage of the state, whether made to trustees or otherwise, shall be legal and valid when approved by the joint committee on finance and shall be executed and enforced according to the provisions of the instrument making the same, including all provisions and directions in any such instrument for accumulation of the income of any fund or rents and profits of any real estate without being subject to the limitations and restrictions provided by law in other cases; but no such accumulation shall be allowed to produce a fund more than 20 times as great as that originally given. When such gifts, grants, bequests or devises include common stocks or other investments which are not authorized by s. 881.01, such common stocks or other investments may be held and may be exchanged, invested or reinvested in similar types of investments without being subject to the limitations provided by law in other cases.

SB109-SSA1, s. 2 Section 2. 23.0918 (2) of the statutes is amended to read:

SB109-SSA1,2,17 23.0918 (2) Unless the natural resources board determines otherwise in a specific case, only the income from the gifts, grants, or bequests in the fund is available for expenditure. The natural resources board may authorize expenditures only for preserving, developing, managing, or maintaining land under the jurisdiction of the department that is used for any of the purposes specified in s. 23.09 (2) (d). In this subsection, unless otherwise provided in a gift, grant, or bequest, principal and income are determined as provided under s. 701.20 (3).

SB109-SSA1, s. 3 Section 3. 25.70 of the statutes is amended to read:

SB109-SSA1,2,25 25.70 Historical society trust fund. There is established a separate nonlapsible trust fund designated as the historical society trust fund, consisting of all endowment principal and income and all cash balances of the historical society. Unless the board of curators of the historical society determines otherwise in each case, only the income from the assets in the historical society trust fund is available for expenditure. In this section, unless otherwise provided in the gift, grant, or bequest, principal and income are determined as provided under s. 701.20 (3).

SB109-SSA1, s. 4 Section 4. 36.29 (1) of the statutes is amended to read:

SB109-SSA1,3,24 36.29 (1) All gifts, grants, and bequests for the benefit or advantage of the system or any of its institutions, departments, or facilities or to provide any means of instruction, illustration, or knowledge in connection therewith, whether made to trustees or otherwise, shall be valid notwithstanding any other provision of this chapter except as otherwise provided in this subsection and shall be executed and enforced according to the provisions of the instrument making the same, including all provisions and directions in any such instrument for accumulation of the income of any fund or rents and profits of any real estate without being subject to the limitations and restrictions provided by law in other cases; but no such income accumulation shall be allowed to produce a fund more than 20 times as great as that originally given. When such gifts, grants or bequests include common stocks or other investments which are not authorized by ch. 881, the board may continue to hold such common stocks or other investments and exchange, invest or reinvest the funds of such gift, grant or bequest in similar types of investments without being subject to the limitations and restrictions provided by law in other cases. No such investment of the funds of such gifts, grants, or bequests shall knowingly be made in any company, corporation, subsidiary, or affiliate which that practices or condones through its actions discrimination on the basis of race, religion, color, creed, or sex. Except as otherwise provided in this section, the board may invest not to exceed 85% of trust funds held and administered by the board in common stocks , the limitation of 50% in s. 881.01 (2) to the contrary notwithstanding. This subsection does not apply to a gift, grant, or bequest that the board declines to accept or that the board is not authorized to accept under this section.

SB109-SSA1, s. 5 Section 5. 40.82 (2) of the statutes is amended to read:

SB109-SSA1,4,7 40.82 (2) Compensation which that is withheld under a deferred compensation plan contract between an employer and an employee may be invested by the employer or a person other than the employer who is authorized by contract to administer the funds. The employer may determine the types of investments in which the deferred compensation funds may be invested. The deferred compensation funds may be invested and reinvested in the same manner provided for investments under s. 881.01 (1).

SB109-SSA1, s. 6 Section 6. 701.20 of the statutes is repealed and recreated to read:

SB109-SSA1,4,9 701.20 Principal and income. (2) Definitions. In this section:

SB109-SSA1,4,13 (a) "Accounting period" means a calendar year, unless another 12-month period is selected by a fiduciary, and includes a portion of a calendar year or other 12-month period that begins when an income interest begins or that ends when an income interest ends.

SB109-SSA1,4,16 (b) "Beneficiary" means a person who has a beneficial interest in a trust or an estate and includes, in the case of a decedent's estate, an heir, a legatee, and a devisee and, in the case of a trust, an income beneficiary and a remainder beneficiary.

SB109-SSA1,4,19 (c) "Fiduciary" means a personal representative or a trustee and includes an executor, administrator, successor personal representative, special administrator, and a person performing substantially the same function as any of those.

SB109-SSA1,4,23 (d) "Income" means money or property that a fiduciary receives as current return from a principal asset. "Income" includes a portion of receipts from a sale, exchange, or liquidation of a principal asset, to the extent provided in subs. (10) to (24).

SB109-SSA1,4,25 (e) "Income beneficiary" means a person to whom net income of a trust is or may be payable.

SB109-SSA1,5,3 (f) "Income interest" means the right of an income beneficiary to receive all or part of net income, whether the terms of the trust require it to be distributed or authorize it to be distributed in the trustee's discretion.

SB109-SSA1,5,5 (g) "Mandatory income interest" means the right of an income beneficiary to receive net income that the terms of the trust require the fiduciary to distribute.

SB109-SSA1,5,8 (h) "Net income" means the total receipts allocated to income during an accounting period, minus the disbursements made from income during the period, plus or minus transfers under this section to or from income during the period.

SB109-SSA1,5,12 (i) "Person" means an individual; corporation; business trust; estate; trust; partnership; limited liability company; association; joint venture; government; governmental subdivision, agency, or instrumentality; public corporation; or any other legal or commercial entity.

SB109-SSA1,5,14 (j) "Principal" means property held in trust for distribution to a remainder beneficiary when the trust terminates.

SB109-SSA1,5,16 (k) "Remainder beneficiary" means a person entitled to receive principal when an income interest ends.

SB109-SSA1,5,18 (km) "Sui juris beneficiary" means a beneficiary not under a legal disability. The term includes all of the following:

SB109-SSA1,5,19 1. A court-appointed guardian of an incapacitated beneficiary.

SB109-SSA1,5,20 2. An agent for an incompetent beneficiary.

SB109-SSA1,5,22 3. A court-appointed guardian of a minor beneficiary's estate or, if there is no court-appointed guardian, the parents of the minor beneficiary.

SB109-SSA1,5,25 (L) "Terms of a trust" means the manifestation of the intent of a settlor or decedent with respect to a trust, expressed in a manner that admits of its proof in a judicial proceeding, whether by written or spoken words or by conduct.

SB109-SSA1,6,2 (m) "Trustee" includes an original, additional, or successor trustee, whether or not appointed or confirmed by a court.

SB109-SSA1,6,5 (3) Fiduciary duties; general principles. (a) In allocating receipts and disbursements to income or principal or between income and principal, and with respect to any matter within the scope of subs. (5) to (9), a fiduciary:

SB109-SSA1,6,7 1. Shall administer a trust or estate in accordance with the terms of the trust or the will, even if there is a different provision in this section;

SB109-SSA1,6,11 2. May administer a trust or estate by the exercise of a discretionary power of administration given to the fiduciary by the terms of the trust or the will, even if the exercise of the power produces a result different from a result required or permitted by this section;

SB109-SSA1,6,14 3. Shall administer a trust or estate in accordance with this section if the terms of the trust or the will do not contain a different provision or do not give the fiduciary a discretionary power of administration; and

SB109-SSA1,6,17 4. Shall add a receipt or charge a disbursement to principal to the extent that the terms of the trust and this section do not provide a rule for allocating the receipt or disbursement to principal or income or between principal and income.

SB109-SSA1,6,25 (b) In exercising the power to adjust under sub. (4) (a) or a discretionary power of administration regarding a matter within the scope of this section, whether granted by the terms of a trust, a will, or this section, a fiduciary shall administer a trust or estate impartially, based on what is fair and reasonable to all of the beneficiaries, except to the extent that the terms of the trust or the will clearly manifest an intention that the fiduciary shall or may favor one or more of the beneficiaries. A determination in accordance with this section is presumed to be fair and reasonable to all of the beneficiaries.

SB109-SSA1,7,6 (4) Trustee's power to adjust. (a) A trustee may adjust between principal and income to the extent the trustee considers necessary if the trustee invests and manages trust assets as a prudent investor, the terms of the trust describe the amount that may or must be distributed to a beneficiary by referring to the trust's income, and the trustee determines, after applying the rules in sub. (3) (a), that the trustee is unable to comply with sub. (3) (b).

SB109-SSA1,7,9 (b) In deciding whether and to what extent to exercise the power conferred by par. (a), a trustee shall consider all factors relevant to the trust and its beneficiaries, including the following factors to the extent they are relevant:

SB109-SSA1,7,10 1. The nature, purpose, and expected duration of the trust;

SB109-SSA1,7,11 2. The intent of the settlor;

SB109-SSA1,7,12 3. The identity and circumstances of the beneficiaries;

SB109-SSA1,7,14 4. The needs for liquidity, regularity of income, and preservation and appreciation of capital;

SB109-SSA1,7,18 5. The assets held in the trust; the extent to which they consist of financial assets, interests in closely held enterprises, tangible and intangible personal property, or real property; the extent to which an asset is used by a beneficiary; and whether an asset was purchased by the trustee or received from the settlor;

SB109-SSA1,7,22 6. The net amount allocated to income under the other subsections of this section and the increase or decrease in the value of the principal assets, which the trustee may estimate in the case of assets for which market values are not readily available;

SB109-SSA1,8,2 7. Whether and to what extent the terms of the trust give the trustee the power to invade principal or accumulate income or prohibit the trustee from invading principal or accumulating income, and the extent to which the trustee has exercised a power from time to time to invade principal or accumulate income;