Amendment SA1-SSA1-SB109

LRBa1396/1

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2001 - 2002 LEGISLATURE

SENATE AMENDMENT 1, TO 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-SA1,1,1 At the locations indicated, amend the substitute amendment as follows:

SB109-SSA1-SA1,1,2 1. Page 1, line 5: delete "and providing" and substitute "providing".

SB109-SSA1-SA1,1,4 2. Page 1, line 6: after "estates" insert "; and authorizing the conversion of a trust to a unitrust".

SB109-SSA1-SA1,1,5 3. Page 4, line 7: after that line insert:

SB109-SSA1-SA1,1,7 " Section 5c. 66.0603 (1m) (b) of the statutes, as affected by 2001 Wisconsin Act 30, is amended to read:

SB109-SSA1-SA1,2,6 66.0603 (1m) (b) A town, city, or village may invest surplus funds in any bonds or securities issued under the authority of the municipality, whether the bonds or securities create a general municipality liability or a liability of the property owners of the municipality for special improvements, and may sell or hypothecate the bonds or securities. Funds of an employer, as defined by s. 40.02 (28), in a deferred compensation plan may also be invested and reinvested in the same manner authorized for investments under s. 881.01 (1). Funds of any school district operating under ch. 119, held in trust for pension plans intended to qualify under section 401 (a) of the Internal Revenue Code, other than funds held in the public employee trust fund, may be invested and reinvested in the same manner as is authorized for investments under s. 881.01.

SB109-SSA1-SA1,2,7 " Section 5r. 701.12 (3) of the statutes is amended to read:

SB109-SSA1-SA1,2,10 701.12 (3) Nothing in this section shall prevent revocation, modification, or termination of a trust pursuant to its terms or otherwise in accordance with law or prevent conversion of a trust to a unitrust under s. 701.20 (4g).".

SB109-SSA1-SA1,2,12 4. Page 4, line 9: delete " Principal and income" and substitute "Revised principal and income act".

SB109-SSA1-SA1,2,13 5. Page 9, line 21: after "(4)" insert "(a)".

SB109-SSA1-SA1,2,14 6. Page 11, line 9: after that line insert:

SB109-SSA1-SA1,2,16 "(4g) Conversion to unitrust. (a) Subject to par. (d), a trust may be converted to a unitrust in any of the following ways:

SB109-SSA1-SA1,2,18 1. By the trustee, at his or her own discretion or at the request of a beneficiary, if all of the following apply:

SB109-SSA1-SA1,2,20 a. Subject to sub. (3), the trustee determines that the conversion will enable the trustee to better carry out the purposes of the trust.

SB109-SSA1-SA1,2,24 b. The trustee provides notice in the same manner as provided in sub. (4c) (b) 1. of the trustee's intention to convert the trust to a unitrust, and the notice advises how the unitrust will operate, including the fixed percentage under par. (c) 1. and any other initial determinations under par. (c) 4. that the trustee intends to follow.

SB109-SSA1-SA1,3,5 c. There is at least one sui juris beneficiary who is an income beneficiary who is currently eligible to receive income from the trust and at least one other sui juris beneficiary who is a remainder beneficiary who would receive, if no powers of appointment were exercised, a distribution of principal if the trust were to terminate immediately before the notice under subd. 1. b. is given.

SB109-SSA1-SA1,3,7 d. Every sui juris beneficiary consents to the conversion to a unitrust in a writing delivered to the trustee.

SB109-SSA1-SA1,3,9 e. The terms of the trust describe the amount that may or must be distributed by referring to the trust income.

SB109-SSA1-SA1,3,10 f. The trustee invests and manages the trust assets as provided in s. 881.01.

SB109-SSA1-SA1,3,12 2. By a court on the petition of the trustee or a beneficiary, if all of the following apply:

SB109-SSA1-SA1,3,16 a. The trustee or beneficiary has provided notice under sub. (4c) of the intention to request the court to convert the trust to a unitrust, and the notice advises how the unitrust will operate, including the fixed percentage under par. (c) 1. and any other initial determinations under par. (c) 4. that will be requested.

SB109-SSA1-SA1,3,18 b. The court determines that the conversion to a unitrust will enable the trustee to better carry out the purposes of the trust.

SB109-SSA1-SA1,3,20 (b) In deciding whether to convert the trust to a unitrust under par. (a) 1., the trustee shall consider all relevant factors under sub. (4) (b) 1. to 9.

SB109-SSA1-SA1,4,3 (c) 1. If a trust is converted to a unitrust under this subsection by the trustee or a court, notwithstanding sub. (3) (a) 1. and 4. and s. 701.21 (4) the trustee shall make distributions in accordance with the creating instrument, except that any reference in the creating instrument to "income" shall be construed to mean a fixed percentage of the net fair market value of the unitrust's assets, whether such assets otherwise would be considered income or principal under this section, averaged over the preceding 3 years or the period since the original trust was created, whichever is less.

SB109-SSA1-SA1,4,8 2. a. Subject to subd. 2. b., if the trust is converted to a unitrust under par. (a) 1., the fixed percentage to be applied under subd. 1. shall be determined by the trustee and stated in the notice under par. (a) 1. b. If the trust is converted to a unitrust under par. (a) 2., the fixed percentage to be applied under subd. 1. shall be determined by the court.

SB109-SSA1-SA1,4,10 b. Any fixed percentage under subd. 1. that is determined by a trustee may not be less than 3% nor more than 5%.

SB109-SSA1-SA1,4,13 3. After a trust is converted to a unitrust, the trustee may, subject to the notice requirement under sub. (4c) and with the consent of every sui juris beneficiary, do any of the following:

SB109-SSA1-SA1,4,15 a. Convert the unitrust back to the original trust under the creating instrument.

SB109-SSA1-SA1,4,16 b. Change the fixed percentage under subd. 1., subject to subd. 2. b.

SB109-SSA1-SA1,4,18 4. After a trust is converted to a unitrust, a trustee may determine or change any of the following:

SB109-SSA1-SA1,4,19 a. The frequency of distributions during the year.

SB109-SSA1-SA1,4,21 b. Standards for prorating a distribution for a short year in which a beneficiary's right to payments commences or ceases.

SB109-SSA1-SA1,4,23 c. The effect on the valuation of the unitrust's assets of other payments from, or contributions to, the unitrust.

SB109-SSA1-SA1,4,24 d. How, and how frequently, to value the unitrust's assets.

SB109-SSA1-SA1,4,25 e. The valuation dates to use.

SB109-SSA1-SA1,5,2 f. Whether to omit from the calculation of the value of the unitrust's assets unitrust property occupied by or in the possession of a beneficiary.

SB109-SSA1-SA1,5,3 g. Any other matters necessary for the proper functioning of the unitrust.

SB109-SSA1-SA1,5,5 5. The trustee may not deduct from a unitrust distribution expenses that would be deducted from income if the trust were not a unitrust.

SB109-SSA1-SA1,5,7 6. Unless otherwise provided by the creating instrument, a unitrust distribution shall be paid as follows:

SB109-SSA1-SA1,5,8 a. First, from net income, determined as if the trust were not a unitrust.

SB109-SSA1-SA1,5,10 b. Next, to the extent that net income under subd. 6. a. is insufficient, from net realized short-term capital gains.

SB109-SSA1-SA1,5,12 c. Next, to the extent that net income under subd. 6. a. and short-term capital gains under subd. 6. b. are insufficient, from net realized long-term capital gains.

SB109-SSA1-SA1,5,15 d. Next, to the extent that net income under subd. 6. a., short-term capital gains under subd. 6. b., and net realized long-term capital gains under subd. 6. c. are insufficient, from principal.

SB109-SSA1-SA1,5,17 7. A court may, on the petition of the trustee or a beneficiary, do any of the following:

SB109-SSA1-SA1,5,19 a. Change the fixed percentage under subd. 1. that was determined by the trustee or by a prior court order.

SB109-SSA1-SA1,5,21 b. If necessary to preserve a tax benefit, provide for a distribution of net income, determined as if the trust were not a unitrust, that exceeds the unitrust distribution.