SB384: Bill Text

SB384,117,15 (2) To remedy a breach of trust that has occurred or may occur, a court may do any of the following:

SB384,117,16 (a) Compel the trustee to perform the trustee's duties.

SB384,117,17 (b) Enjoin the trustee from committing a breach of trust.

SB384,117,19 (c) Compel the trustee to redress a breach of trust by paying money, restoring property, or other means.

SB384,117,20 (d) Order a trustee to account.

SB384,117,24 (e) Appoint an additional trustee, a directing party, or a trust protector having the duties and authority ordered by the court, including, in the case of an additional trustee, the authority to take possession of the trust property and administer the trust.

SB384,117,25 (f) Suspend the trustee.

SB384,118,1 (g) Remove the trustee as provided in s. 701.0706.

SB384,118,2 (h) Reduce the compensation of or deny compensation to the trustee.

SB384,118,5 (i) Subject to s. 701.1012, void an act of the trustee, impose a lien or a constructive trust on trust property, or trace trust property wrongfully disposed of and order recovery of the property or its proceeds.

SB384,118,7 (j) Order any other appropriate relief, whether provided elsewhere in this chapter, available at common law, or under equity principles.

SB384,162 Section 162. 701.1002 of the statutes is created to read:

SB384,118,11 701.1002 Damages for breach of trust; liability of successor trustee. (1) A trustee who commits a breach of trust is liable to an affected beneficiary for the greater of the following:

SB384,118,13 (a) The amount required to restore the value of the trust property and trust distributions to what they would have been had the breach not occurred.

SB384,118,14 (b) The profit the trustee made by reason of the breach.

SB384,118,22 (2) Except as otherwise provided in this subsection, if more than one trustee is liable to a beneficiary for a breach of trust, a trustee is entitled to contribution from the other trustee or trustees. A trustee is not entitled to contribution if the trustee was substantially more at fault than another trustee or if the trustee committed the breach of trust in bad faith or with reckless indifference to the purposes of the trust or the interests of the beneficiary. A trustee who received a benefit from the breach of trust is not entitled to contribution from another trustee to the extent of the benefit received.

SB384,118,25 (3) A successor trustee is not liable for the acts and omissions of a former trustee or for the acts or omissions of any directing party or trust protector that are taken before the appointment of the successor trustee.

SB384,163 Section 163. 701.1003 of the statutes is created to read:

SB384,119,4 701.1003 Damages in absence of breach. Absent a breach of trust, a trustee is not liable to a beneficiary for a loss or depreciation in the value of trust property or for not having made a profit.

SB384,164 Section 164. 701.1004 of the statutes is created to read:

SB384,119,9 701.1004 Attorney fees and costs. (1) In a judicial proceeding involving the administration of a trust, the court, as justice and equity may require, may award costs and expenses, including reasonable attorney fees, to any party, to be paid by another party or from the trust that is the subject of the controversy.

SB384,119,15 (2) Subject to sub. (3), if a trustee, directing party, or trust protector defends or prosecutes any proceeding in good faith, whether successful or not, the trustee, directing party, or trust protector is entitled to receive from the trust the necessary expenses and disbursements, including reasonable attorney fees, incurred. This subsection does not preclude a court from ordering another party to reimburse the trust for these expenses and disbursements as provided in sub. (1).

SB384,119,18 (3) (a) A trustee may pay costs or attorney fees incurred in any proceeding from the trust property without the approval of any person and without court authorization, unless the court orders otherwise as provided in par. (c).

SB384,120,5 (b) If a claim or defense based upon a breach of trust is made against a trustee, directing party, or trust protector in a proceeding, the trustee shall provide notice to each qualified beneficiary, directing party, and trust protector of the trustee's intention to pay costs or attorney fees incurred in the proceeding from the trust prior to making payment. The notice shall inform each qualified beneficiary, directing party, and trust protector of the right to apply to the court for an order prohibiting the trustee from paying attorney fees or costs from trust property. If a trustee is served with a motion for an order prohibiting the trustee from paying from the trust attorney fees or costs in the proceeding and the trustee pays attorney fees or costs from the trust before an order is entered on the motion, the trustee, directing party, or trust protector and their respective attorneys who have been paid attorney fees or costs from trust property are subject to the remedies in pars. (c) and (d).

SB384,120,8 (c) 1. If a claim or defense based upon breach of trust is made against a trustee, directing party, or trust protector in a proceeding, a party may move the court for an order to prohibit the trustee from paying costs or attorney fees from trust property.

SB384,120,16 2. Except as provided in subd. 3., if the moving party demonstrates to the court that there is a reasonable basis for the court to find that a breach of trust occurred, the court shall enter an order prohibiting the payment of further attorney fees and costs from trust property and shall order attorney fees or costs previously paid from trust property in such proceeding to be refunded, unless the court finds good cause to allow attorney fees and costs to be paid from the trust. A trustee, directing party, or trust protector may offer evidence to rebut the evidence submitted to the court by the moving party.

SB384,120,18 3. The court may defer ruling on a motion to prohibit a trustee from paying costs or attorney fees from trust property until discovery is taken by the parties.

SB384,121,3 4. An order entered under this paragraph does not limit a trustee's, directing party's, or trust protector's right to seek an order allowing the payment of some or all of the attorneys fees or costs incurred in the proceeding from trust property, including any fees required to be refunded, after the claim or defense is finally determined by the court. If a claim or defense based upon a breach of trust is withdrawn, dismissed, or resolved without a determination by the court that the trustee committed a breach of trust, after the entry of an order prohibiting payment of attorney fees and costs pursuant to this paragraph, the trustee may pay costs or attorney fees incurred in the proceeding from the trust property without further court authorization.

SB384,121,8 (d) If the court orders a refund under par. (c), the court may enter sanctions as are appropriate if a refund is not made as directed by the court, including striking defenses or pleadings filed by the trustee, directing party, or trust protector. Nothing in this paragraph limits other remedies and sanctions the court may employ for the failure to refund the trust in a timely manner.

SB384,121,11 (e) Subject to s. 701.1005, nothing in this subsection limits the power of the court to review fees and costs or the right of any interested persons to challenge fees and costs after payment, after an accounting, or after conclusion of the litigation.

SB384,121,15 (f) Notice under par. (b) is not required if the action or defense is later withdrawn or dismissed by the party that is alleging a breach of trust or resolved without a determination by the court that the trustee has not committed a breach of trust.

SB384,121,23 (4) A provision of a trust instrument drafted or caused to be drafted by a trustee, directing party, or trust protector that modifies the application of this section in a manner favorable to the trustee, directing party, or trust protector and potentially detrimental to a beneficiary is invalid with respect to the trustee, directing party, or trust protector unless the trustee, directing party, or trust protector proves that the provision was fair under the circumstances existing at the time the trust instrument was signed and that the existence and contents of the provision were adequately communicated to the settlor.

SB384,165 Section 165. 701.1005 of the statutes is created to read:

SB384,122,4 701.1005 Limitation of action against trustee. (1) A beneficiary may not commence a proceeding against a trustee for breach of trust more than one year after the date on which the beneficiary or a representative of the beneficiary was sent a report that adequately disclosed the existence of a potential claim for breach of trust.

SB384,122,7 (2) A report adequately discloses the existence of a potential claim for breach of trust if it provides sufficient information so that the beneficiary or representative knows of the potential claim or should have inquired into its existence.

SB384,122,10 (3) If sub. (1) does not apply, a proceeding by a beneficiary against a trustee for breach of trust must be commenced within 5 years after the first to occur of the following:

SB384,122,11 (a) The removal, resignation, or death of the trustee.

SB384,122,12 (b) The termination of the beneficiary's interest in the trust.

SB384,122,13 (c) The termination of the trust.

SB384,122,15 (4) Subsections (1) and (3) do not apply to a claim for fraud. The time for asserting a claim for fraud is governed by applicable law.

SB384,166 Section 166. 701.1006 of the statutes is created to read:

SB384,122,20 701.1006 Reliance on trust instrument. A trustee who acts in reasonable reliance on the terms of the trust as expressed in the trust instrument is not liable to a beneficiary for a breach of trust to the extent the breach resulted from the reliance.

SB384,167 Section 167. 701.1007 of the statutes is created to read:

SB384,123,2 701.1007 Event affecting administration or distribution. If the happening of an event, including marriage, divorce, performance of educational requirements, or death, affects the administration or distribution of a trust, a trustee who has exercised reasonable care to ascertain the happening of the event is not liable for a loss resulting from the trustee's lack of knowledge.

SB384,168 Section 168. 701.1008 of the statutes is created to read:

SB384,123,6 701.1008 Exculpation of trustee. (1) A term of a trust relieving a trustee of liability for breach of trust is unenforceable to the extent that it does any of the following:

SB384,123,9 (a) Relieves the trustee of liability for breach of trust committed in bad faith or with reckless indifference to the purposes of the trust or the interests of a beneficiary.

SB384,123,11 (b) Was inserted as the result of an abuse by the trustee of a fiduciary or confidential relationship with the settlor.

SB384,123,16 (2) An exculpatory term drafted or caused to be drafted by the trustee is invalid as an abuse of a fiduciary or confidential relationship unless the trustee proves that the exculpatory term was fair under the circumstances existing at the time the trust instrument was signed and that the existence and contents of the exculpatory term were adequately communicated to the settlor.

SB384,169 Section 169. 701.1009 of the statutes is created to read:

SB384,123,21 701.1009 Beneficiary's consent, release, or ratification. A trustee is not liable to a beneficiary for breach of trust if the beneficiary consented to the conduct constituting the breach, released the trustee from liability for the breach, or ratified the transaction constituting the breach, unless any of the following applies:

SB384,123,23 (1) The consent, release, or ratification of the beneficiary was induced by improper conduct of the trustee.

SB384,124,3 (2) At the time of the consent, release, or ratification, the beneficiary did not have knowledge of the beneficiary's rights or of the material facts relating to the breach.

SB384,170 Section 170. 701.1010 of the statutes is created to read:

SB384,124,8 701.1010 Limitation on personal liability of trustee. (1) Except as otherwise provided in the contract, a trustee is not personally liable on a contract properly entered into in the trustee's fiduciary capacity in the course of administering the trust if the trustee in the contract disclosed the fiduciary capacity.

SB384,124,12 (2) A trustee is personally liable for torts committed in the course of administering a trust, or for obligations arising from ownership or control of trust property, including liability for violation of environmental law, only if the trustee is personally at fault.

SB384,171 Section 171. 701.1011 of the statutes is created to read:

SB384,124,18 701.1011 Interest as general partner. (1) Unless personal liability is imposed in the contract, a trustee who holds an interest as a general partner in a general or limited partnership is not personally liable on a contract entered into by the partnership after the trust's acquisition of the interest if the fiduciary capacity was disclosed in the contract.

SB384,124,21 (2) A trustee who holds an interest as a general partner is not personally liable for torts committed by the partnership or for obligations arising from ownership or control of the interest unless the trustee is personally at fault.

SB384,124,24 (3) If the trustee of a revocable trust holds an interest as a general partner, the settlor is personally liable for contracts and other obligations of the partnership as if the settlor were a general partner.

SB384,172 Section 172. 701.1012 of the statutes is created to read:

SB384,125,5 701.1012 Protection of person dealing with trustee. (1) A person other than a beneficiary who in good faith assists a trustee, or who in good faith and for value deals with a trustee, without knowledge that the trustee is exceeding or improperly exercising the trustee's powers is protected from liability as if the trustee properly exercised the power.

SB384,125,8 (2) A person other than a beneficiary who in good faith deals with a trustee is not required to inquire into the extent of the trustee's powers or the propriety of their exercise.

SB384,125,10 (3) A person who in good faith delivers assets to a trustee does not need to ensure their proper application.

SB384,125,14 (4) A person other than a beneficiary who in good faith assists a former trustee, or who in good faith and for value deals with a former trustee, without knowledge that the trusteeship has terminated is protected from liability as if the former trustee were still a trustee.

SB384,125,17 (5) Comparable protective provisions of other laws relating to commercial transactions or transfer of securities by fiduciaries prevail over the protection provided by this section.

SB384,173 Section 173. 701.1013 of the statutes is created to read:

SB384,125,21 701.1013 Certification of trust. (1) Instead of furnishing a copy of the trust instrument to a person other than a beneficiary, the trustee may furnish to the person a certification of trust containing the following information:

SB384,125,23 (a) That the trust exists and the date on which the trust instrument was executed.

SB384,125,24 (b) The identity of the settlor.

SB384,125,25 (c) The identity and address of the currently acting trustee.

SB384,126,1 (d) The powers of the trustee.

SB384,126,3 (e) The revocability or irrevocability of the trust and the identity of any person holding a power to revoke the trust.

SB384,126,6 (f) The authority of a cotrustee to sign or otherwise authenticate and whether all cotrustees or less than all cotrustees are required to sign or otherwise authenticate in order to exercise powers of the trustee.

SB384,126,7 (g) The manner in which title to trust property may be taken.

SB384,126,9 (2) A certification of trust may be signed or otherwise authenticated by any trustee.

SB384,126,12 (3) A trustee shall include in a certification of trust that the trust has not been revoked, modified, or amended in any manner that would cause the representations contained in the certification of trust to be incorrect.

SB384,126,14 (4) A certification of trust does not need to contain the dispositive terms of a trust.

SB384,126,18 (5) A recipient of a certification of trust may require the trustee to furnish copies of those excerpts from the original trust instrument and later amendments that designate the trustee and confer upon the trustee the power to act in the pending transaction.

SB384,126,24 (6) A person who acts in reliance upon a certification of trust without knowledge that the representations contained therein are incorrect is not liable to any person for so acting and may assume without inquiry the existence of the facts contained in the certification. Knowledge of the terms of the trust may not be inferred solely from the fact that a copy of all or part of the trust instrument is held by the person relying upon the certification.

SB384,127,3 (7) A person who in good faith enters into a transaction in reliance upon a certification of trust may enforce the transaction against the trust property as if the representations contained in the certification were correct.

SB384,127,8 (8) A person making a demand for copies of the trust instrument or excerpts from the trust instrument, other than those excerpts described in sub. (5), in addition to a certification of trust is liable for costs, expenses, reasonable attorney fees and damages if the court determines that the person did not act in good faith in demanding the copies.

SB384,127,10 (9) This section does not limit the right of a person to obtain a copy of the trust instrument in a judicial proceeding concerning the trust.

SB384,174 Section 174. 701.105 (title), (1), (2) and (3) of the statutes are renumbered 701.1201 (title), (1), (2) and (3), and 701.1201 (1), (2) and (3), as renumbered, are amended to read:

SB384,127,19 701.1201 (1) (a) In the administration of any trust which that is a private foundation, as defined in section 509 of the internal revenue code Internal Revenue Code, a charitable trust, as defined described in section 4947 (a) (1) of the internal revenue code Internal Revenue Code, or a split-interest trust as defined described in section 4947 (a) (2) of the internal revenue code Internal Revenue Code, all of the following acts shall be prohibited:

SB384,127,23 1. Engaging in any act of self-dealing, as defined in section 4941 (d) of the internal revenue code, which Internal Revenue Code, that would give rise to any liability for the tax imposed by section 4941 (a) of the internal revenue code Internal Revenue Code.

SB384,128,2 2. Retaining any excess business holdings, as defined in section 4943 (c) of the internal revenue code, which Internal Revenue Code, that would give rise to any liability for the tax imposed by section 4943 (a) of the internal revenue code Internal Revenue Code.

SB384,128,6 3. Making any investments which that would jeopardize the carrying out of any of the exempt purposes of the trust, within the meaning of section 4944 of the internal revenue code Internal Revenue Code, so as to give rise to any liability for the tax imposed by section 4944 (a) of the internal revenue code Internal Revenue Code.

SB384,128,10 4. Making any taxable expenditures, as defined in section 4945 (d) of the internal revenue code, which Internal Revenue Code, that would give rise to any liability for the tax imposed by section 4945 (a) of the internal revenue code Internal Revenue Code.