SB384: Bill Text

SB384,146,11 701.1109 (1) Nothing in this section subchapter creates a duty to make an adjustment under sub. (4) s. 701.1104 or to convert a trust to a unitrust under sub. (4g) s. 701.1106. Unless it determines that the decision to make an adjustment or to convert to a unitrust was an abuse of the fiduciary's discretion, a court may not grant relief from any decision a fiduciary makes regarding the exercise of a discretionary power conferred by sub. (4) s. 701.1104 or (4g) 701.1106.

SB384,247 Section 247. 701.20 (4m) (am) of the statutes is renumbered 701.1109 (2) and amended to read:

SB384,146,18 701.1109 (2) An action taken under sub. (4) s. 701.1104 or (4g) 701.1106 is not an abuse of a fiduciary's discretion if the fiduciary gave written notice of the proposed action under sub. (4c) s. 701.1105 and did not receive a timely written objection to the notice. It is not an abuse of discretion not to exercise the power to adjust under sub. (4) s. 701.1104 or to convert under sub. (4g) s. 701.1106.

SB384,248 Section 248. 701.20 (4m) (b) of the statutes is renumbered 701.1109 (3).

SB384,249 Section 249. 701.20 (4m) (c) of the statutes is renumbered 701.1109 (4), and 701.1109 (4) (c), as renumbered, is amended to read:

SB384,147,2 701.1109 (4) (c) To the extent that the court is unable, after applying subds. 1. pars. (a) and 2. (b), to place the beneficiaries, the trust, or both in the positions that they would have occupied had the discretion not been abused, the court may order the fiduciary to pay an appropriate amount from its own funds to one or more of the beneficiaries, the trust, or both.

SB384,250 Section 250. 701.20 (4m) (d) of the statutes is renumbered 701.1109 (5).

SB384,251 Section 251. 701.20 (5) of the statutes is renumbered 701.1110, and 701.1110 (1), (2) (intro.), (3), (4) and (5), as renumbered, are amended to read:

SB384,147,11 701.1110 (1) A fiduciary of an estate or of a terminating income interest shall determine the amount of net income and net principal receipts received from property specifically given to a beneficiary under the rules in subs. (7) ss. 701.1112 to (30) 701.1135 that apply to trustees and the rules in par. (e) sub. (5). The fiduciary shall distribute the net income and net principal receipts to the beneficiary who is to receive the specific property.

SB384,147,14 (2) (intro.) A fiduciary shall determine the remaining net income of a decedent's estate or a terminating income interest under the rules in subs. (7) ss. 701.1112 to (30) 701.1135 that apply to trustees and by:

SB384,147,24 (3) A fiduciary shall distribute to a beneficiary, including a trustee, who receives a pecuniary amount not determined by a pecuniary formula related to a transfer tax interest at the legal rate set forth in s. 138.04 on any unpaid portion of the pecuniary amount for the period commencing one year after the decedent's death or after the income interest in the trust ends. The interest under this paragraph subsection shall be distributed from net income determined under par. (b) sub. (2) or from principal to the extent that net income is insufficient. For purposes of this paragraph subsection, the deferred marital property elective share amount elected by a surviving spouse under s. 861.02 (1) is a bequest of a specific pecuniary amount of money not determined by a pecuniary formula related to a transfer tax.

SB384,148,4 (4) A fiduciary shall distribute the net income remaining after distributions required by par. (c) under subs. (1) to (3) in the manner described in sub. (6) s. 701.1111 to all other beneficiaries, including a beneficiary who receives a pecuniary amount determined by a pecuniary formula related to a transfer tax.

SB384,148,16 (5) A fiduciary may not reduce principal or income receipts from property described in par. (a) sub. (1) because of a payment described in sub. (25) s. 701.1130 or (26) 701.1131 to the extent that the will, the terms of the trust, or applicable law requires the fiduciary to make the payment from assets other than the property or to the extent that the fiduciary recovers or expects to recover the payment from a 3rd party. The net income and principal receipts from the property are determined by including all of the amounts the fiduciary receives or pays with respect to the property, whether those amounts accrued or became due before, on, or after the date of a decedent's death or an income interest's terminating event, and by making a reasonable provision for amounts that the fiduciary believes the estate or terminating income interest may become obligated to pay after the property is distributed.

SB384,252 Section 252. 701.20 (6) of the statutes is renumbered 701.1111, and 701.1111 (1), (2) (d) and (4), as renumbered, are amended to read:

SB384,149,2 701.1111 (1) Each beneficiary described in sub. (5) (d) s. 701.1110 (4) is entitled to receive a portion of the net income equal to the beneficiary's fractional interest in undistributed principal assets, using values as of the distribution date. If a fiduciary makes more than one distribution of assets to beneficiaries to whom this subsection section applies, each beneficiary, including one who does not receive part of the distribution, is entitled, as of each distribution date, to the net income the fiduciary has received after the date of death or terminating event or earlier distribution date but has not distributed as of the current distribution date.

SB384,149,5 (2) (d) The distribution date for purposes of this subsection section may be the date as of which the fiduciary calculates the value of the assets if that date is reasonably near the date on which assets are actually distributed.

SB384,149,9 (4) A trustee may apply the rules in this subsection section, to the extent that the trustee considers it appropriate, to net gain or loss realized after the date of death or terminating event or earlier distribution date from the disposition of a principal asset if this subsection section applies to the income from the asset.

SB384,253 Section 253. 701.20 (7) of the statutes is renumbered 701.1112, and 701.1112 (3), as renumbered, is amended to read:

SB384,149,15 701.1112 (3) An asset becomes subject to a successive income interest on the day after the preceding income interest ends, as determined under par. (d) sub. (4), even if there is an intervening period of administration to wind up the preceding income interest.

SB384,254 Section 254. 701.20 (8) of the statutes is renumbered 701.1113, and 701.1113 (1) and (3), as renumbered, are amended to read:

SB384,149,21 701.1113 (1) A trustee shall allocate to principal an income receipt or disbursement other than one to which sub. (5) (a) s. 701.1110 (1) applies if its due date occurs before a decedent dies in the case of an estate or before an income interest begins in the case of a trust or successive income interest.

SB384,150,4 (3) An item of income or an obligation is due on the date the payer is required to make a payment. If a payment date is not stated, there is no due date for the purposes of this section. Distributions to shareholders or other owners from an entity, as defined in sub. (10) s. 701.1115, are due on the date fixed by the entity for determining who is entitled to receive the distribution or, if no date is fixed, on the declaration date for the distribution. A due date is periodic for receipts or disbursements that must be paid at regular intervals under a lease or an obligation to pay interest or if an entity customarily makes distributions at regular intervals.

SB384,255 Section 255. 701.20 (9) (a) of the statutes is renumbered 701.1114, and 701.1114 (1), as renumbered, is amended to read:

SB384,150,11 701.1114 (1) In this subsection section, "undistributed income" means net income received before the date on which an income interest ends. "Undistributed income" does not include an item of income or expense that is due or accrued or net income that has been added or is required to be added to principal under the terms of the trust.

SB384,256 Section 256. 701.20 (10) of the statutes is renumbered 701.1115, and 701.1115 (1), (2) and (5), as renumbered, is amended to read:

SB384,150,19 701.1115 (1) In this subsection section, "entity" means a corporation, partnership, limited liability company, regulated investment company, real estate investment trust, common trust fund, or any other organization in which a trustee has an interest other than a trust or estate to which sub. (11) s. 701.1116 applies, a business or activity to which sub. (12) s. 701.1117 applies, or an asset-backed security to which sub. (24) s. 701.1129 applies.

SB384,150,21 (2) Except as otherwise provided in this subsection section, a trustee shall allocate to income money received from an entity.

SB384,150,25 (5) Money is not received in partial liquidation, nor may it be taken into account under par. (d) 2. sub. (4) (b), to the extent that it does not exceed the amount of income tax that a trustee or beneficiary must pay on taxable income of the entity that distributes the money.

SB384,257 Section 257. 701.20 (11) of the statutes is renumbered 701.1116 and amended to read:

SB384,151,9 701.1116 Distribution from trust or estate. A trustee shall allocate to income an amount received as a distribution of income from a trust or an estate in which the trust has an interest other than a purchased interest, and shall allocate to principal an amount received as a distribution of principal from such a trust or estate. If a trustee purchases an interest in a trust that is an investment entity, or a decedent or donor transfers an interest in such a trust to a trustee, sub. (10) s. 701.1115 or (24) 701.1129 applies to a receipt from the trust.

SB384,258 Section 258. 701.20 (12) of the statutes is renumbered 701.1117 and 701.1117 (3) (g), as renumbered, is amended to read:

SB384,151,12 701.1117 (3) (g) Activities to which sub. (23) s. 701.1128 applies.

SB384,259 Section 259. 701.20 (13) of the statutes is renumbered 701.1118, and 701.1118 (1), (2), (3) and (6), as renumbered, are amended to read:

SB384,151,18 701.1118 (1) To the extent not allocated to income under this section subchapter, assets received from a transferor during the transferor's lifetime, a decedent's estate, a trust with a terminating income interest, or a payer under a contract naming the trust or its trustee as beneficiary.

SB384,151,21 (2) Money or other property received from the sale, exchange, liquidation, or change in form of a principal asset, including realized profit, subject to subs. (10) ss. 701.1115 to (24) 701.1129.

SB384,151,24 (3) Amounts recovered from 3rd parties to reimburse the trust because of disbursements described in sub. (26) (a) 7. s. 701.1131 (1) (g) or for other reasons to the extent not based on the loss of income.

SB384,151,25 (6) Other receipts as provided in subs. (17) ss. 701.1122 to (24) 701.1129.

SB384,260 Section 260. 701.20 (14) of the statutes is renumbered 701.1119 and amended to read:

SB384,152,10 701.1119 Rental property. To the extent that a trustee accounts for receipts from rental property in accordance with this subsection section, the trustee shall allocate to income an amount received as rent of real or personal property, including an amount received for cancellation or renewal of a lease. An amount received as a refundable deposit, including a security deposit or a deposit that is to be applied as rent for future periods, must be added to principal and held subject to the terms of the lease and is not available for distribution to a beneficiary until the trustee's contractual obligations have been satisfied with respect to that amount.

SB384,261 Section 261. 701.20 (15) of the statutes is renumbered 701.1120, and 701.1120 (3), as renumbered, is amended to read:

SB384,152,15 701.1120 (3) This subsection section does not apply to an obligation to which sub. (18), (19), (20), (21), (23) s. 701.1123, 701.1124, 701.1125, 701.1126, 701.1128, or (24) 701.1129 applies.

SB384,262 Section 262. 701.20 (16) of the statutes is renumbered 701.1121 and amended to read:

SB384,152,24 701.1121 Insurance policies and similar contracts. (1) Except as provided in par. (b) sub. (2), a trustee shall allocate to principal the proceeds of a life insurance policy or other contract in which the trust or its trustee is named as beneficiary, including a contract that insures the trust or its trustee against loss for damage to, destruction of, or loss of title to, a trust asset. The trustee shall allocate dividends on an insurance policy to income if the premiums on the policy are paid from income, and to principal if the premiums are paid from principal.

SB384,153,3 (2) A trustee shall allocate to income proceeds of a contract that insures the trustee against loss of occupancy or other use by an income beneficiary, loss of income, or, subject to sub. (12) s. 701.1117, loss of profits from a business.

SB384,153,5 (3) This subsection section does not apply to a contract to which sub. (18) s. 701.1123 applies.

SB384,263 Section 263. 701.20 (17) of the statutes is renumbered 701.1122, and 701.1122 (intro.), as renumbered, is amended to read:

SB384,153,16 701.1122 Insubstantial allocations not required. (intro.) If a trustee determines that an allocation between principal and income required by sub. (15) (b), (18), (19), (20), (21) s. 701.1120 (2), 701.1123, 701.1124, 701.1125, 701.1126, or (24) 701.1129 is insubstantial, the trustee may allocate the entire amount to principal unless one of the circumstances described in sub. (4) (c) s. 701.1104 (3) applies to the allocation. This power may be exercised by a cotrustee in the circumstances described in sub. (4) (d) s. 701.1104 (4) and may be released for the reasons and in the manner described in sub. (4) (e) s. 701.1104 (5). An allocation is presumed to be insubstantial if:

SB384,264 Section 264. 701.20 (18) (title) of the statutes is renumbered 701.1123 (title).

SB384,265 Section 265. 701.20 (18) (a) of the statutes is repealed.

SB384,266 Section 266. 701.20 (18) (b) of the statutes is renumbered 701.1123 (2) and amended to read:

SB384,154,2 701.1123 (2) To the extent that a payment is characterized as interest or, a dividend, or a payment made in lieu of interest or a dividend, a trustee shall allocate it the payment to income. The trustee shall allocate to principal the balance of the payment and any other payment received in the same accounting period that is not characterized as interest, a dividend, or an equivalent a payment in lieu of interest or a dividend.

SB384,267 Section 267. 701.20 (18) (c) 1. of the statutes is renumbered 701.1123 (1) (d) and amended to read:

SB384,154,6 701.1123 (1) (d) In this paragraph "plan "Plan income" means any of the following:

SB384,154,17 1. With respect to payments received from a plan that maintains separate accounts or funds for its participants or account holders, such as defined contribution retirement plans, individual retirement accounts, Roth individual retirement accounts, and some types of deferred compensation plans, either the amount of the plan separate account or fund held for the benefit of the trust that, if the plan separate account or fund were a trust, would be allocated to income under pars. (b) and (d) for that accounting period, or 4 percent of the value of the plan account or fund on the first day of the accounting period. The trustee shall, in his or her discretion, choose the method of determining "plan income" under this subd. 1. a. subdivision, and may change the method of determining "plan income" under this subd. 1. a. subdivision for any subsequent accounting period.

SB384,154,23 2. With respect to payments received from a plan that does not maintain separate accounts or funds for its participants or account holders, such as defined benefit retirement plans and some types of deferred compensation plans, 4 percent of the total present value of the trust's interest in the plan as of the first day of the accounting period, based on reasonable actuarial assumptions as determined by the trustee.

SB384,268 Section 268. 701.20 (18) (c) 2. of the statutes is renumbered 701.1123 (3) and amended to read:

SB384,155,7 701.1123 (3) For each accounting period of a trust in which the trust receives a payment but no part of any payment is allocated to income under par. (b) sub. (2), the trustee shall allocate to income that portion of the aggregate value of all payments received by the trustee in that accounting period that is equal to the amount of plan income that is attributable to the trust's interest in the plan from which payment is received for that accounting period. The trustee shall allocate the balance of any payments to principal.

SB384,269 Section 269. 701.20 (18) (d) of the statutes is renumbered 701.1123 (5) and amended to read:

SB384,155,13 701.1123 (5) If, to obtain an estate or gift tax marital deduction for an interest in a trust, a trustee must allocate more of a payment to income than provided for by this subsection section, the trustee shall allocate to income the additional amount necessary to obtain the marital deduction.

SB384,270 Section 270. 701.20 (18) (e) of the statutes is renumbered 701.1123 (6) and amended to read:

SB384,155,17 701.1123 (6) This subsection section does not apply to payments a payment to which sub. (19) s. 701.1124 applies.

SB384,271 Section 271. 701.20 (19) of the statutes is renumbered 701.1124, and 701.1124 (1), as renumbered, is amended to read:

SB384,156,4 701.1124 (1) In this subsection section, "liquidating asset" means an asset whose value will diminish or terminate because the asset is expected to produce receipts for a period of limited duration. The term includes a leasehold, patent, copyright, royalty right, and right to receive payments during a period of more than one year under an arrangement that does not provide for the payment of interest on the unpaid balance. The term does not include a payment subject to sub. (18) s. 701.1123, resources subject to sub. (20) s. 701.1125, timber subject to sub. (21) s. 701.1126, an activity subject to sub. (23) s. 701.1128, an asset subject to sub. (24) s. 701.1129, or any asset for which the trustee establishes a reserve for depreciation under sub. (27) s. 701.1132.

SB384,272 Section 272. 701.20 (20) of the statutes is renumbered 701.1125, and 701.1125 (1) (intro.) and (d), (3) and (4), as renumbered, are amended to read:

SB384,156,9 701.1125 (1) (intro.) To the extent that a trustee accounts for receipts from an interest in minerals or other natural resources in accordance with this subsection section, the trustee shall allocate them as follows:

SB384,156,12 (d) If an amount is received from a working interest or any other interest not provided for in subd. 1., 2. par. (a), (b), or 3. (c), 90 percent of the net amount received must be allocated to principal and the balance to income.

SB384,156,15 (3) This subsection section applies whether or not a decedent or donor was extracting minerals, water, or other natural resources before the interest became subject to the trust.

SB384,156,21 (4) If a trust owns an interest in minerals, water, or other natural resources on May 17, 2005, the trustee may allocate receipts from the interest as provided in this subsection section or in the manner used by the trustee before May 17, 2005. If the trust acquires an interest in minerals, water, or other natural resources after May 17, 2005, the trustee shall allocate receipts from the interest as provided in this subsection section.

SB384,273 Section 273. 701.20 (21) (title) of the statutes is repealed.

SB384,274 Section 274. 701.20 (21) of the statutes is renumbered 701.1126, and 701.1126 (1) (intro.), (c) and (d), (2), (3) and (4), as renumbered, are amended to read:

SB384,157,3 701.1126 (1) (intro.) To the extent that a trustee accounts for receipts from the sale of timber and related products in accordance with this subsection section, the trustee shall allocate the net receipts:

SB384,157,7 (c) To income or principal or between income and principal if the net receipts are from the lease of timberland or from a contract to cut timber from land owned by a trust, by determining the amount of timber removed from the land under the lease or contract and applying the rules in subds. 1. pars. (a) and 2. (b).

SB384,157,9 (d) To principal to the extent that advance payments, bonuses, and other payments are not allocated under subd. 1., 2. par. (a), (b), or 3. (c).

SB384,157,11 (2) In determining net receipts to be allocated under par. (a) sub. (1), a trustee shall deduct and transfer to principal a reasonable amount for depletion.

SB384,157,13 (3) This subsection section applies whether or not a decedent or transferor was harvesting timber from the property before it became subject to the trust.

SB384,157,19 (4) If a trust owns an interest in timberland on May 17, 2005, the trustee may allocate net receipts from the sale of timber and related products as provided in this subsection section or in the manner used by the trustee before May 17, 2005. If the trust acquires an interest in timberland after May 17, 2005, the trustee shall allocate net receipts from the sale of timber and related products as provided in this subsection section.

SB384,275 Section 275. 701.20 (22) of the statutes is renumbered 701.1127 and amended to read:

SB384,158,6 701.1127 Property not productive of income. (1) If a marital deduction is allowed for all or part of a trust whose assets consist substantially of property that does not provide the surviving spouse with sufficient income from or use of the trust assets, and if the amounts that the trustee transfers from principal to income under sub. (4) s. 701.1104 and distributes to the spouse from principal in accordance with the terms of the trust are insufficient to provide the spouse with the beneficial enjoyment required to obtain the marital deduction, the spouse may require the trustee to make property productive of income, convert property within a reasonable time, or exercise the power conferred by sub. (4) (a) s. 701.1104 (1). The trustee may decide which action or combination of actions to take.

SB384,158,9 (2) In cases not governed by par. (a) sub. (1), proceeds from the sale or other disposition of an asset are principal without regard to the amount of income the asset produces during any accounting period.

SB384,276 Section 276. 701.20 (23) of the statutes is renumbered 701.1128, and 701.1128 (1) and (2), as renumbered, are amended to read:

SB384,158,16 701.1128 (1) In this subsection section, "derivative" means a contract or financial instrument or a combination of contracts and financial instruments that gives a trust the right or obligation to participate in some or all changes in the price of a tangible or intangible asset or group of assets, or changes in a rate, an index of prices or rates, or another market indicator for an asset or a group of assets.

SB384,158,19 (2) To the extent that a trustee does not account under sub. (12) s. 701.1117 for transactions in derivatives, the trustee shall allocate to principal receipts from and disbursements made in connection with those transactions.

SB384,277 Section 277. 701.20 (24) of the statutes is renumbered 701.1129, and 701.1129 (1), as renumbered, is amended to read:

SB384,159,3 701.1129 (1) In this subsection section, "asset-backed security" means an asset whose value is based upon the right it gives the owner to receive distributions from the proceeds of financial assets that provide collateral for the security. The term includes an asset that gives the owner the right to receive from the collateral financial assets only the interest or other current return or only the proceeds other than interest or current return. The term does not include an asset to which sub. (10) s. 701.1115 or (18) 701.1123 applies.

SB384,278 Section 278. 701.20 (25) of the statutes is renumbered 701.1130, and 701.1130 (intro.), as renumbered, are amended to read:

SB384,159,8 701.1130 Disbursements from income. (intro.) A trustee shall make the following disbursements from income to the extent that they are not disbursements specified in sub. (5) (b) 2. s. 701.1110 (2) (b) or 3. (c):

SB384,279 Section 279. 701.20 (26) of the statutes is renumbered 701.1131, and 701.1131 (1) (a), (e) and (g), as renumbered, are amended to read:

SB384,159,12 701.1131 (1) (a) The remaining one-half of the disbursements described in sub. (25) (a) s. 701.1130 (1) and (b) (2).

SB384,159,14 (e) Premiums paid on a policy of insurance not described in sub. (25) (d) s. 701.1130 (4) of which the trust is the owner and beneficiary.