Amendment SSA1-SB109

SB109-SSA1,30,23 6. Estate, inheritance, and other transfer taxes, including penalties, apportioned to the trust; and

SB109-SSA1,31,6 7. Disbursements related to environmental matters, including reclamation, assessing environmental conditions, remedying and removing environmental contamination, monitoring remedial activities and the release of substances, preventing future releases of substances, collecting amounts from persons liable or potentially liable for the costs of those activities, penalties imposed under environmental laws or regulations and other payments made to comply with those laws or regulations, statutory or common law claims by third parties, and defending claims based on environmental matters.

SB109-SSA1,31,10 (b) If a principal asset is encumbered with an obligation that requires income from that asset to be paid directly to the creditor, the trustee shall transfer from principal to income an amount equal to the income paid to the creditor in reduction of the principal balance of the obligation.

SB109-SSA1,31,14 (27) Transfers from income to principal for depreciation. (a) In this subsection, "depreciation" means a reduction in value due to wear, tear, decay, corrosion, or gradual obsolescence of a fixed asset having a useful life of more than one year.

SB109-SSA1,31,17 (b) A trustee may transfer to principal a reasonable amount of the net cash receipts from a principal asset that is subject to depreciation, but may not transfer any amount for depreciation:

SB109-SSA1,31,20 1. Of that portion of real property used or available for use by a beneficiary as a residence or of tangible personal property held or made available for the personal use or enjoyment of a beneficiary;

SB109-SSA1,31,21 2. During the administration of a decedent's estate; or

SB109-SSA1,31,23 3. Under this subsection if the trustee is accounting under sub. (12) for the business or activity in which the asset is used.

SB109-SSA1,31,24 (c) An amount transferred to principal need not be held as a separate fund.

SB109-SSA1,32,5 (28) Transfers from income to reimburse principal. (a) If a trustee makes or expects to make a principal disbursement described in this subsection, the trustee may transfer an appropriate amount from income to principal in one or more accounting periods to reimburse principal or to provide a reserve for future principal disbursements.

SB109-SSA1,32,8 (b) Principal disbursements to which par. (a) applies include the following, but only to the extent that the trustee has not been and does not expect to be reimbursed by a third party:

SB109-SSA1,32,10 1. An amount chargeable to income but paid from principal because it is unusually large, including extraordinary repairs;

SB109-SSA1,32,12 2. A capital improvement to a principal asset, whether in the form of changes to an existing asset or the construction of a new asset, including special assessments;

SB109-SSA1,32,14 3. Disbursements made to prepare property for rental, including tenant allowances, leasehold improvements, and brokers' commissions;

SB109-SSA1,32,17 4. Periodic payments on an obligation secured by a principal asset to the extent that the amount transferred from income to principal for depreciation is less than the periodic payments; and

SB109-SSA1,32,18 5. Disbursements described in sub. (26) (a) 7.

SB109-SSA1,32,21 (c) If the asset whose ownership gives rise to the disbursements becomes subject to a successive income interest after an income interest ends, a trustee may continue to transfer amounts from income to principal as provided in par. (a).

SB109-SSA1,32,23 (29) Income taxes. (a) A tax required to be paid by a trustee based on receipts allocated to income must be paid from income.

SB109-SSA1,33,3 (b) A tax required to be paid by a trustee based on receipts allocated to principal must be paid from principal, even if the tax is called an income tax by the taxing authority.

SB109-SSA1,33,5 (c) A tax required to be paid by a trustee on the trust's share of an entity's taxable income must be paid proportionately:

SB109-SSA1,33,7 1. From income to the extent that receipts from the entity are allocated to income; and

SB109-SSA1,33,8 2. From principal to the extent that:

SB109-SSA1,33,9 a. Receipts from the entity are allocated to principal; and

SB109-SSA1,33,11 b. The trust's share of the entity's taxable income exceeds the total receipts described in subds. 1. and 2. a.

SB109-SSA1,33,14 (d) For purposes of this subsection, receipts allocated to principal or income must be reduced by the amount distributed to a beneficiary from principal or income for which the trust receives a deduction in calculating the tax.

SB109-SSA1,33,18 (30) Adjustments between principal and income because of taxes. (a) A fiduciary may make adjustments between principal and income to offset the shifting of economic interests or tax benefits between income beneficiaries and remainder beneficiaries which arise from:

SB109-SSA1,33,20 1. Elections and decisions, other than those described in par. (b), that the fiduciary makes from time to time regarding tax matters;

SB109-SSA1,33,23 2. An income tax or any other tax that is imposed upon the fiduciary or a beneficiary as a result of a transaction involving or a distribution from the estate or trust; or

SB109-SSA1,34,3 3. The ownership by an estate or trust of an interest in an entity whose taxable income, whether or not distributed, is includable in the taxable income of the estate or trust or of a beneficiary.

SB109-SSA1,34,16 (b) If the amount of an estate tax marital deduction or charitable contribution deduction is reduced because a fiduciary deducts an amount paid from principal for income tax purposes instead of deducting it for estate tax purposes, and as a result estate taxes paid from principal are increased and income taxes paid by an estate, trust, or beneficiary are decreased, each estate, trust, or beneficiary that benefits from the decrease in income tax shall reimburse the principal from which the increase in estate tax is paid. The total reimbursement must equal the increase in the estate tax to the extent that the principal used to pay the increase would have qualified for a marital deduction or charitable contribution deduction but for the payment. The proportionate share of the reimbursement for each estate, trust, or beneficiary whose income taxes are reduced must be the same as its proportionate share of the total decrease in income tax. An estate or trust shall reimburse principal from income.

SB109-SSA1, s. 7 Section 7. 701.24 of the statutes is renumbered 701.24 (1) and amended to read:

SB109-SSA1,34,24 701.24 (1) Except as otherwise provided in s. 701.19 (9) (a) and (10), ss. 701.01 to 701.19, 701.21, 701.22,and 701.23 are applicable to a trust existing on July 1, 1971, as well as a trust created after such date and shall govern trustees acting under such trusts. If application of any provision of ss. 701.01 to 701.19, 701.21, 701.22 ,and 701.23 to a trust in existence on August 1, 1971, is unconstitutional, it shall not affect application of the provision to a trust created after that date.

SB109-SSA1, s. 8 Section 8. 701.24 (2) of the statutes is created to read:

SB109-SSA1,35,8 701.24 (2) Section 701.20 applies to every trust or decedent's estate existing on the effective date of this subsection .... [revisor inserts date], and to every trust or decedent's estate created or coming into existence after that date, except as otherwise expressly provided in s. 701.20 or by the decedent's will or the terms of the trust. With respect to a trust or decedent's estate existing on the effective date of this subsection .... [revisor inserts date], s. 701.20 does not apply before the trust's or estate's first accounting period, as defined in s. 701.20 (2) (a), that begins after the effective date of this subsection .... [revisor inserts date].

SB109-SSA1, s. 9 Section 9. 861.015 (2) of the statutes is amended to read:

SB109-SSA1,35,17 861.015 (2) For purposes of this section, property subject to a directive is valued by its clear market value on the date of the decedent's death. Satisfaction of the nonholding spouse's marital property interest in the property subject to the directive shall be based on that value, plus any income from the property subject to the directive after the death of the decedent and before satisfaction. For purposes of determining the income from the property subject to a directive, such property shall be treated as a legacy or devise of property other than money under s. 701.20 (5) (b) 1.

SB109-SSA1, s. 10 Section 10. 881.01 of the statutes is repealed and recreated to read:

SB109-SSA1,35,19 881.01 Uniform prudent investor act. (1) Definition. In this section:

SB109-SSA1,35,22 (a) "Beneficiary", with respect to a guardianship of the estate, means a ward for whom a guardian of the estate has been appointed and, with respect to a conservator, means a person for whose estate a conservator has been appointed.

SB109-SSA1,35,24 (b) "Fiduciary" means personal representative, trustee, conservator, or guardian of the estate.

SB109-SSA1,36,3 (2) Prudent investor rule. (a) Except as otherwise provided in par. (b), a fiduciary who invests and manages assets owes a duty to the beneficiaries to comply with the prudent investor rule set forth in this section.

SB109-SSA1,36,7 (b) The prudent investor rule, a default rule, may be expanded, restricted, eliminated or otherwise altered by the provisions of a will, trust, or court order. A fiduciary is not liable to a beneficiary to the extent that the fiduciary acted in reasonable reliance on the provisions of the will, trust, or court order.

SB109-SSA1,36,12 (3) Standard of care; portfolio strategy; risk and return objectives. (a) A fiduciary shall invest and manage assets as a prudent investor would, by considering the purposes, terms, distribution requirements, and other circumstances of the estate, trust, conservatorship, or guardianship. In satisfying this standard, the fiduciary shall exercise reasonable care, skill, and caution.

SB109-SSA1,36,16 (b) A fiduciary's investment and management decisions about individual assets shall be evaluated not in isolation but in the context of the portfolio as a whole and as a part of an overall investment strategy having risk and return objectives reasonably suited to the estate, trust, conservatorship, or guardianship.

SB109-SSA1,36,19 (c) Among circumstances that a fiduciary shall consider in investing and managing assets are those of the following that are relevant to the estate, trust, conservatorship, or guardianship or its beneficiaries:

SB109-SSA1,36,20 1. General economic conditions.

SB109-SSA1,36,21 2. The possible effect of inflation or deflation.

SB109-SSA1,36,22 3. The expected tax consequences of investment decisions or strategies.

SB109-SSA1,36,25 4. The role that each investment or course of action plays within the overall portfolio, which may include financial assets, interests in closely held enterprises, tangible and intangible personal property, and real property.

SB109-SSA1,37,1 5. The expected total return from income and the appreciation of capital.

SB109-SSA1,37,2 6. Other resources of the beneficiaries.

SB109-SSA1,37,4 7. Needs for liquidity, regularity of income, and preservation or appreciation of capital.

SB109-SSA1,37,6 8. An asset's special relationship or special value to the purposes of the estate, trust, conservatorship, or guardianship or to one or more of the beneficiaries.

SB109-SSA1,37,8 (d) A fiduciary shall make a reasonable effort to verify facts relevant to the investment and management of assets.

SB109-SSA1,37,10 (e) A fiduciary may invest in any kind of property or type of investment consistent with the standards of this section.

SB109-SSA1,37,13 (f) A fiduciary who has special skills or expertise, or is named fiduciary in reliance upon the fiduciary's representation that the fiduciary has special skills or expertise, has a duty to use those special skills or expertise.

SB109-SSA1,37,17 (4) Diversification. A fiduciary shall diversify investments unless the fiduciary reasonably determines that, because of special circumstances, the purposes of the estate, trust, conservatorship, or guardianship are better served without diversifying.

SB109-SSA1,37,23 (5) Duties at inception. Within a reasonable time after accepting a fiduciary appointment or receiving assets, a fiduciary shall review the assets and make and implement decisions concerning the retention and disposition of assets, in order to bring the portfolio into compliance with the purposes, terms, distribution requirements, and other circumstances of the estate, trust, conservatorship, or guardianship and with the requirements of this section.

SB109-SSA1,37,25 (6) Loyalty. A fiduciary shall invest and manage the assets solely in the interest of the beneficiaries.

SB109-SSA1,38,3 (7) Impartiality. If an estate, trust, conservatorship, or guardianship has 2 or more beneficiaries, the fiduciary shall act impartially in investing and managing the assets, taking into account the differences between the interests of the beneficiaries.

SB109-SSA1,38,6 (8) Investment costs. In investing and managing assets, a fiduciary may incur only costs that are appropriate and reasonable in relation to the assets, the purposes of the estate, trust, conservatorship, or guardianship, and the skills of the fiduciary.

SB109-SSA1,38,9 (9) Reviewing compliance. Compliance with the prudent investor rule is determined in light of the facts and circumstances existing at the time of a fiduciary's decision or action and not by hindsight.

SB109-SSA1,38,13 (10) Delegation of investment and management functions. (a) A fiduciary may delegate investment and management functions that a prudent fiduciary of similar skills could properly delegate under the circumstances. The fiduciary shall exercise reasonable care, skill, and caution in all of the following:

SB109-SSA1,38,14 1. Selecting an agent.

SB109-SSA1,38,16 2. Establishing the scope and terms of the delegation, consistent with the purposes and terms of the estate, trust, conservatorship, or guardianship.

SB109-SSA1,38,18 3. Periodically reviewing the agent's actions in order to monitor the agent's performance and compliance with the terms of the delegation.

SB109-SSA1,38,21 (b) In performing a delegated function, an agent owes a duty to the estate, trust, conservatorship, or guardianship to exercise reasonable care to comply with the terms of the delegation.

SB109-SSA1,38,24 (c) A fiduciary who complies with the requirements of par. (a) is not liable to the beneficiaries or to the estate, trust, conservatorship, or guardianship for the decisions or actions of the agent to whom a function was delegated.

SB109-SSA1,39,3 (d) By accepting the delegation of a function from the fiduciary of an estate, trust, conservatorship, or guardianship that is subject to the law of this state, an agent submits to the jurisdiction of the courts of this state.

SB109-SSA1,39,13 (11) Phrases invoking standard of this section. The following phrases or similar phrases in a will, trust, or court order, unless otherwise limited or modified, authorize any investment or strategy permitted under this section: "investments permissible by law for investment of trust funds"; "legal investments"; "authorized investments"; "using the judgment and care under the circumstances then prevailing that persons of prudence, discretion, and intelligence exercise in the management of their own affairs, not in regard to speculation but in regard to the permanent disposition of their funds, considering the probable income as well as the probable safety of their capital"; "prudent man rule"; "prudent trustee rule"; "prudent person rule"; and "prudent investor rule".

SB109-SSA1,39,20 (12) Application to existing estates, trusts, conservatorships, and guardianships. This section applies to estates, trusts, conservatorships, and guardianships of the estate existing on, or created on or after, the effective date of this subsection .... [revisor inserts date]. As applied to estates, trusts, conservatorships, and guardianships of the estate existing on the effective date of this subsection .... [revisor inserts date], this section governs only decisions or actions occurring after that date.

SB109-SSA1,39,24 (13) Uniformity of application and construction. This section shall be applied and construed to effectuate its general purpose to make uniform the law with respect to the subject of this section among the states that have enacted this uniform legislation.

SB109-SSA1, s. 11 Section 11. 881.02 of the statutes is amended to read:

SB109-SSA1,40,7 881.02 Construction; court orders; written instruments. Nothing contained in this chapter shall be construed as authorizing any departure from, or variation of, the express terms or limitations set forth in any will, agreement, court order, or other instrument creating or defining the fiduciary's duties and powers, but the terms "legal investment" or "authorized investment" or words of similar import, as used in any such instrument, shall be taken to mean any investment which is permitted by the terms of this chapter.

SB109-SSA1, s. 12 Section 12. 881.06 of the statutes is amended to read:

SB109-SSA1,40,12 881.06 Law governing existing instruments. This Subject to s. 881.01 (12), this chapter shall govern fiduciaries, including personal representatives, guardians of the estate, conservators, and trustees acting under wills, agreements, court orders, and other instruments now existing or hereafter made.

SB109-SSA1,40,13 (End)