SB384: Bill Text

SB384,209 Section 209. 701.20 (2) (e) of the statutes is renumbered 701.1102 (4).

SB384,210 Section 210. 701.20 (2) (f) of the statutes is renumbered 701.1102 (5).

SB384,211 Section 211. 701.20 (2) (g) of the statutes is renumbered 701.1102 (6).

SB384,212 Section 212. 701.20 (2) (h) of the statutes is renumbered 701.1102 (7) and amended to read:

SB384,135,23 701.1102 (7) "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 subchapter to or from income during the period.

SB384,213 Section 213. 701.20 (2) (i) of the statutes is repealed.

SB384,214 Section 214. 701.20 (2) (j) of the statutes is renumbered 701.1102 (8).

SB384,215 Section 215. 701.20 (2) (k) of the statutes is renumbered 701.1102 (9) and amended to read:

SB384,136,5 701.1102 (9) "Remainder beneficiary" means a person entitled to receive principal when an income interest ends who is a beneficiary under s. 701.0103 (21) (b).

SB384,216 Section 216. 701.20 (2) (L), (m) and (n) of the statutes are repealed.

SB384,217 Section 217. 701.20 (3) of the statutes is renumbered 701.1103, and 701.1103 (1) and (2), as renumbered, are amended to read:

SB384,136,11 701.1103 (1) 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) ss. 701.1110 to (9) 701.1114, a fiduciary:

SB384,136,13 (a) Shall first 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 subchapter.

SB384,136,17 (b) 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 subchapter.

SB384,136,20 (c) Shall administer a trust or estate in accordance with this section subchapter 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.

SB384,136,23 (d) Shall add a receipt or charge a disbursement to principal to the extent that the terms of the trust and this section subchapter do not provide a rule for allocating the receipt or disbursement to principal or income or between principal and income.

SB384,137,6 (2) In exercising the power to adjust under sub. (4) (a) s. 701.1104 (1) or a discretionary power of administration regarding a matter within the scope of this section subchapter, whether granted by the terms of a trust, a will, or this section subchapter, 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 subchapter is presumed to be fair and reasonable to all of the beneficiaries.

SB384,218 Section 218. 701.20 (4) of the statutes is renumbered 701.1104, and 701.1104 (1), (2) (intro.), (3) (h) and (i), (4), (5) and (6) as renumbered, are amended to read:

SB384,137,14 701.1104 (1) 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) s. 701.1103 (1), that the trustee is unable to comply with sub. (3) (b) s. 701.1103 (2).

SB384,137,17 (2) (intro.) In deciding whether and to what extent to exercise the power conferred by par. (a) sub. (1), a trustee shall consider all factors relevant to the trust and its beneficiaries, including the following factors to the extent they are relevant:

SB384,137,18 (3) (h) If the trust has been converted under sub. (4g) s. 701.1106 to a unitrust.

SB384,137,19 (i) If the trust is an express unitrust, as defined in sub. (4j) (a) s. 701.1107 (1).

SB384,137,23 (4) If par. (c) 5., 6. sub. (3) (e), (f), or 7. (g) applies to a trustee and there is more than one trustee, a cotrustee to whom the provision does not apply may make the adjustment unless the terms of the trust do not permit the exercise of the power by that cotrustee.

SB384,138,6 (5) A trustee may release the entire power conferred by par. (a) sub. (1) or may release only the power to adjust from income to principal or the power to adjust from principal to income if the trustee is uncertain about whether possessing or exercising the power will cause a result described in par. (c) 1. sub. (3) (a) to 6. (f) or if the trustee determines that possessing or exercising the power will or may deprive the trust of a tax benefit or impose a tax burden not described in par. (c) sub. (3). The release may be permanent or for a specified period, including a period measured by the life of an individual.

SB384,138,10 (6) Terms of a trust that limit the power of a trustee to make an adjustment between principal and income do not affect the application of this subsection unless it is clear from the terms of the trust that the terms are intended to deny the trustee the power of adjustment conferred by par. (a) sub. (1).

SB384,219 Section 219. 701.20 (4c) (title) of the statutes is renumbered 701.1105 (title).

SB384,220 Section 220. 701.20 (4c) (b) (intro.) of the statutes is renumbered 701.1105 (1) (intro.) and amended to read:

SB384,138,16 701.1105 (1) (intro.) A trustee may, but is not required to, obtain approval of a proposed action under sub. (4) (a) s. 701.1104 (1) by providing a written notice that complies with all of the following:

SB384,221 Section 221. 701.20 (4c) (b) 1. of the statutes is renumbered 701.1105 (1) (a).

SB384,222 Section 222. 701.20 (4c) (b) 2. of the statutes is renumbered 701.1105 (1) (b).

SB384,223 Section 223. 701.20 (4c) (b) 3. (intro.) of the statutes is renumbered 701.1105 (1) (c) and amended to read:

SB384,138,22 701.1105 (1) (c) Is given to all sui juris qualified beneficiaries who are any of the following:.

SB384,224 Section 224. 701.20 (4c) (b) 3. a., b. and c. of the statutes are repealed.

SB384,225 Section 225. 701.20 (4c) (b) 4. of the statutes is renumbered 701.1105 (1) (d), and 701.1105 (1) (d) (intro.) and 4., as renumbered, are amended to read:

SB384,139,2 701.1105 (1) (d) (intro.) States that it is given in accordance with this subsection section and discloses the following information:

SB384,139,4 4. The effective date of the proposed action if no objection is received from any beneficiary within the time specified in subd. 4. c. 3.

SB384,226 Section 226. 701.20 (4c) (c) of the statutes is renumbered 701.1105 (2) and amended to read:

SB384,139,10 701.1105 (2) If a trustee gives notice of a proposed action under this subsection section, the trustee is not required to give notice to a sui juris qualified beneficiary who consents to the proposed action in writing at any time before or after the proposed action is taken.

SB384,227 Section 227. 701.20 (4c) (d) of the statutes is renumbered 701.1105 (3) and amended to read:

SB384,139,15 701.1105 (3) A sui juris qualified beneficiary may object to the proposed action by giving a written objection to the trustee within the time specified in the notice under par. (b) 4. c. sub. (1) (d) 3.

SB384,228 Section 228. 701.20 (4c) (e) of the statutes is renumbered 701.1105 (4) and amended to read:

SB384,139,21 701.1105 (4) A trustee may decide not to take a proposed action after the trustee receives a written objection to the proposed action or at any other time for any other reason. In that case, the trustee shall give written notice to the sui juris qualified beneficiaries of the decision not to take the proposed action.

SB384,229 Section 229. 701.20 (4c) (f) of the statutes is renumbered 701.1105 (5) and amended to read:

SB384,140,6 701.1105 (5) If a trustee receives a written objection to a proposed action within the time specified in the notice under par. (b) 4. c. sub. (1) (d) 3., either the trustee or the qualified beneficiary making the written objection may petition the court to have the proposed action approved, modified, or prohibited. In the court proceeding, the qualified beneficiary objecting to the proposed action has the burden of proving that the proposed action should be modified or prohibited. A qualified beneficiary who did not make the written objection may oppose the proposed action in the court proceeding.

SB384,230 Section 230. 701.20 (4c) (g) of the statutes is renumbered 701.1105 (6) and amended to read:

SB384,140,11 701.1105 (6) For purposes of this subsection section, a proposed action under sub. (4) s. 701.1104 includes a course of action or a decision not to take action under sub. (4) s. 701.1104.

SB384,231 Section 231. 701.20 (4g) (title) of the statutes is renumbered 701.1106 (title).

SB384,232 Section 232. 701.20 (4g) (a) (intro.) of the statutes is renumbered 701.1106 (1) (intro.) and amended to read:

SB384,140,16 701.1106 (1) (intro.) Subject to par. (d) sub. (4), a trust may be converted to a unitrust in any of the following ways:

SB384,233 Section 233. 701.20 (4g) (a) 1. (intro.) of the statutes is renumbered 701.1106 (1) (a) (intro.) and amended to read:

SB384,140,20 701.1106 (1) (a) (intro.) By the trustee, at his or her own discretion or at the request of a qualified beneficiary, if all of the following apply:

SB384,234 Section 234. 701.20 (4g) (a) 1. a. of the statutes is renumbered 701.1106 (1) (a) 1.

SB384,235 Section 235. 701.20 (4g) (a) 1. b. of the statutes is renumbered 701.1106 (1) (a) 2. and amended to read:

SB384,141,5 701.1106 (1) (a) 2. The trustee provides notice in the same manner as provided in sub. (4c) (b) s. 701.1105 (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. sub. (3) (a) and any other initial determinations under par. (c) 4. sub. (3) (d) that the trustee intends to follow.

SB384,236 Section 236. 701.20 (4g) (a) 1. c. of the statutes is repealed.

SB384,237 Section 237. 701.20 (4g) (a) 1. d. of the statutes is renumbered 701.1106 (1) (a) 3. and amended to read:

SB384,141,10 701.1106 (1) (a) 3. Every sui juris qualified beneficiary consents to the conversion to a unitrust in a writing delivered to the trustee.

SB384,238 Section 238. 701.20 (4g) (a) 1. e. of the statutes is renumbered 701.1106 (1) (a) 4.

SB384,239 Section 239. 701.20 (4g) (a) 2. (intro.) of the statutes is renumbered 701.1106 (1) (b) (intro.) and amended to read:

SB384,141,16 701.1106 (1) (b) (intro.) By a court on the petition of the trustee or a qualified beneficiary, if all of the following apply:

SB384,240 Section 240. 701.20 (4g) (a) 2. a. of the statutes is renumbered 701.1106 (1) (b) 1. and amended to read:

SB384,141,23 701.1106 (1) (b) 1. The trustee or qualified beneficiary has provided notice under sub. (4c) s. 701.1105 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. sub. (3) (a) and any other initial determinations under par. (c) 4. sub. (3) (d) that will be requested.

SB384,241 Section 241. 701.20 (4g) (a) 2. b. of the statutes is renumbered 701.1106 (1) (b) 2.

SB384,242 Section 242. 701.20 (4g) (b), (c), (d) and (e) of the statutes are renumbered 701.1106 (2), (3), (4) and (5), and 701.1106 (2), (3) (a), (b), (c), (d) 7., (f) (intro.) and 2., (g) (intro.), 1. and 3. and (h), (4) (a) (intro.) and 1. and (b) and (5), as renumbered, are amended to read:

SB384,142,8 701.1106 (2) In deciding whether to convert the trust to a unitrust under par. (a) 1. sub. (1) (a) and in determining the fixed percentage under sub. (3) (b) 1., the trustee shall consider all relevant factors under sub. (4) (b) 1. to 9. s. 701.1104 (2) (a) to (i).

SB384,142,17 (3) (a) If a trust is converted to a unitrust under this subsection section by the trustee or a court, notwithstanding sub. (3) (a) 1. s. 701.1103 (1) (a) and 4. (d) and s. 701.21 701.1136 (4) the trustee shall make distributions in accordance with the creating trust instrument, except that any reference in the creating trust instrument to "income" means 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 subchapter, averaged over a preceding period determined by the trustee, which is at least 3 years but not more than 5 years, or the period since the original trust was created, whichever is less.

SB384,142,22 (b) 1. Subject to subd. 2. b., if the trust is converted to a unitrust under par. (a) 1. sub. (1) (a), the trustee shall determine the fixed percentage to be applied under subd. 1. par. (a), and the notice under par. (a) 1. b. sub. (1) (a) 2. must state the fixed percentage. If the trust is converted to a unitrust under par. (a) 2. sub. (1) (b), the court shall determine the fixed percentage to be applied under subd. 1. par. (a).

SB384,142,24 2. Any fixed percentage under subd. 1. par. (a) that is determined by a trustee may not be less than 3 percent nor more than 5 percent.

SB384,143,3 (c) After a trust is converted to a unitrust, the trustee may, subject to the notice requirement under sub. (4c) s. 701.1105 and with the consent of every sui juris qualified beneficiary, do any of the following:

SB384,143,5 1. Convert the unitrust back to the original trust under the creating trust instrument.

SB384,143,7 2. Change the fixed percentage under subd. 1. par. (a), subject to subd. 2. b. par. (b) 2.

SB384,143,9 (d) 7. The averaging under subd. 1. par. (a) to a different preceding period, which is at least 3 years but not more than 5 years.

SB384,143,12 (f) (intro.) Unless otherwise provided by the creating trust instrument, the unitrust distribution is considered to have been paid from the following sources in the order of priority:

SB384,143,14 2. Ordinary income for federal income tax purposes that is not net income under subd. 6. a. 1.

SB384,143,16 (g) (intro.) A court may, on the petition of the trustee or a qualified beneficiary, do any of the following:

SB384,143,18 1. Change the fixed percentage that was determined under subd. 2. par. (b) by the trustee or by a prior court order.

SB384,143,20 3. Average the valuation of the unitrust's assets over a period other than that specified in subd. 1. par. (a).

SB384,143,24 (h) Conversion to a unitrust under this subsection section does not affect a provision in the creating trust instrument that directs or authorizes the trustee to distribute principal or that authorizes a beneficiary to withdraw a portion or all of the principal.

SB384,144,2 (4) (a) (intro.) A trust may not be converted under this subsection section to a unitrust if any of the following applies:

SB384,144,3 1. The creating trust instrument specifically prohibits the conversion.

SB384,144,9 (b) Notwithstanding subd. 1. par. (a), if a trust may not be converted to a unitrust solely because subd. 1. g. par. (a) 7. applies to a trustee, a cotrustee, if any, to whom subd. 1. g. par. (a) 7. does not apply may convert the trust to a unitrust under par. (a) 1. sub. (1) (a), unless prohibited by the creating instrument, or a court may convert the trust to a unitrust under par. (a) 2. sub. (1) (b) on the petition of a trustee or qualified beneficiary.

SB384,144,16 (5) A trustee may release the power conferred by par. (a) 1. sub. (1) (a) if the trustee is uncertain about whether possessing or exercising the power will cause a result described in par. (d) 1. b. sub. (4) (a) 2. to f. 6. or if the trustee determines that possessing or exercising the power will or may deprive the trust of a tax benefit or impose a tax burden not described in par. (d) 1. sub. (4) (a). The release may be permanent or for a specified period, including a period measured by the life of an individual.

SB384,243 Section 243. 701.20 (4j) of the statutes is renumbered 701.1107, and 701.1107 (1) and (2) (a), (e), (f) 2., (g) and (h), as renumbered, are amended to read:

SB384,144,24 701.1107 (1) In this subsection section, "express unitrust" means any trust that by its governing trust instrument requires the distribution at least annually of a unitrust amount equal to a fixed percentage of the net fair market value of the trust's assets, valued at least annually, other than a trust solely for charitable purposes or a charitable split-interest trust under section 664 (d) or 170 (f) (2) (B) of the Internal Revenue Code.

SB384,145,5 (2) (a) To the extent not otherwise provided for in the governing trust instrument, the unitrust amount of not less than 3 percent nor more than 5 percent may be determined by reference to the net fair market value of the trust's assets averaged over a preceding period determined by the trustee, which is at least 3 years but not more than 5 years.

SB384,145,9 (e) The governing trust instrument may grant discretion to the trustee to adopt a consistent practice of treating capital gains as part of the unitrust distribution, to the extent that the unitrust distribution exceeds the income determined as if the trust were not a unitrust, or it may specify the ordering of such classes of income.

SB384,145,11 (f) 2. Ordinary income for federal income tax purposes that is not net income under subd. 6. a. 1.

SB384,145,15 (g) The trust document instrument may provide that assets used by the trust beneficiary, such as a residence or tangible personal property, may be excluded from the net fair market value for computing the unitrust amount. Such use may be considered equivalent to the income or unitrust amount.

SB384,145,18 (h) In the absence of contrary provisions in the governing document trust instrument of an express unitrust, the provisions of sub. (4g) (c) 1., 4. s. 701.1106 (3) (a), (d), and 5. (e) apply.