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17(4) Property of a trust authorized by this section may be applied only to its
18intended use, except to the extent the court determines that the value of the trust
19property exceeds the amount required for the intended use. Property not required
20for the intended use must be distributed to the settlor, if then living, otherwise to the
21settlor's successors in interest.
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22Section
84. 701.0410 of the statutes is created to read:
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23701.0410 Modification or termination of trust; proceedings for
24approval or disapproval. (1) In addition to the methods of termination prescribed
25by ss. 701.0411 to 701.0414, a trust terminates to the extent the trust is revoked or
1expires pursuant to its terms, no purpose of the trust remains to be achieved, or the
2purposes of the trust have become unlawful or impossible to achieve.
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3(2) A proceeding to approve or disapprove a proposed modification or
4termination under ss. 701.0411 to 701.0416, or a proposed trust combination or
5division under s. 701.0417, may be commenced by a trustee or beneficiary, and a
6proceeding to approve or disapprove a proposed modification or termination under
7s. 701.0411 may be commenced by the settlor. The settlor of a charitable trust may
8maintain a proceeding to modify the trust under s. 701.0413. A trustee does not have
9standing to oppose a proposed modification or termination commenced under s.
10701.0411 (1).
SB384,54,19
11(3) A trustee may not be compelled by a modification or termination under this
12section or under ss. 701.0411 to 701.0416 to make distributions to or for any
13beneficiary of a trust for an individual with a disability or to terminate the trust,
14during the lifetime of the individual with a disability. A court may modify the terms
15of a trust for an individual with a disability with retroactive effect or reform the
16terms of such trust to achieve the settlor's objective or, if because of circumstances
17not anticipated by the settlor, to otherwise further the purposes of the trust so that
18it does not result in trust property being countable as resources or income of the
19individual with a disability for purposes of public assistance.
SB384,85
20Section
85. 701.0411 of the statutes is created to read:
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21701.0411 Modification or termination of noncharitable irrevocable
22trust by consent. (1) A noncharitable irrevocable trust may be modified or
23terminated, with or without court approval, upon consent of the settlor and all
24beneficiaries, even if the modification or termination is inconsistent with a material
25purpose of the trust. A settlor's power to consent to a trust's modification or
1termination may be exercised by a representative under s. 701.0303 only if the
2representative is specifically authorized to consent to a trust's modification or
3termination under a power of attorney, the terms of the trust, or by a court under a
4guardianship or conservatorship.
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5(2) (a) A noncharitable irrevocable trust may be terminated upon consent of all
6of the beneficiaries if the court concludes that continuance of the trust is not
7necessary to achieve any material purpose of the trust.
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(b) A noncharitable irrevocable trust may be modified upon consent of all of the
9beneficiaries if the court concludes that modification is not inconsistent with a
10material purpose of the trust.
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11(3) A spendthrift provision in the terms of the trust is not presumed to
12constitute a material purpose of the trust.
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13(4) A court may not compel a beneficiary to consent to a modification or
14termination to satisfy a creditor of the beneficiary.
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15(5) Upon termination of a trust under sub. (1) or (2), the trustee shall distribute
16the trust property as agreed by the beneficiaries.
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17(6) If not all of the beneficiaries consent to a proposed modification or
18termination of the trust under sub. (1) or (2), the modification or termination may
19be approved by the court if the court is satisfied that all of the following apply:
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(a) If all of the beneficiaries had consented, the trust could have been modified
21or terminated under this section.
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(b) The interests of a beneficiary who does not consent will be adequately
23protected.
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24(7) A party proposing to modify or terminate a trust under sub. (1) or (2) shall
25give notice of the proposed modification or termination to the settlor, if living, the
1trustee, each trust protector, each directing party, and each beneficiary at least 30
2days before the proposed effective date of the modification or termination.
SB384,86
3Section
86. 701.0412 of the statutes is created to read:
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4701.0412 Modification or termination because of unanticipated
5circumstances or inability to administer trust effectively. (1) The court may
6modify the administrative or dispositive terms of a trust or terminate the trust if,
7because of circumstances not anticipated by the settlor, modification or termination
8will further the purposes of the trust. To the extent practicable, the court shall make
9the modification in accordance with the settlor's probable intention.
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10(2) The court may modify the administrative terms of a trust if continuation
11of the trust on its existing terms would be impracticable or wasteful or impair the
12trust's administration.
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13(3) Upon termination of a trust under this section, the trustee shall distribute
14the trust property in a manner consistent with the purposes of the trust.
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15(4) A party petitioning the court for action under this section shall give notice
16of the proceeding to the settlor, if living, the trustee, each trust protector, each
17directing party, and the qualified beneficiaries.
SB384,87
18Section
87. 701.0413 of the statutes is created to read:
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19701.0413 Cy pres. (1) The purpose of this section is to broaden the power of
20the courts to make charitable gifts more effective. The court shall liberally apply the
21cy pres doctrine.
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22(2) Except as provided in sub. (3), if a particular charitable purpose becomes
23unlawful, impracticable, impossible to achieve, or wasteful, all of the following apply:
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(a) The trust does not fail, in whole or in part.
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1(b) The trust property does not revert to the settlor or the settlor's successors
2in interest.
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(c) The court may apply the cy pres doctrine to modify or terminate the trust
4by directing that the trust property be applied or distributed, in whole or in part, in
5a manner consistent with the settlor's charitable purposes. In determining the
6alternative plan for disposition of the property under this paragraph, the court shall
7take into account current and future community needs in the general field of charity
8within which the original charitable purpose falls, other charitable interests of the
9settlor, the amount of principal and income available under the trust, and other
10relevant factors. A person with standing to enforce the terms of a charitable trust
11under s. 701.0405 (3) has standing to commence a proceeding under this paragraph.
12The attorney general is a necessary party in all proceedings under this paragraph.
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13(3) A provision in the terms of a charitable trust that would result in
14distribution of the trust property to a noncharitable beneficiary prevails over the
15power of the court under sub. (2) to apply the cy pres doctrine to modify or terminate
16the trust only if, when the provision takes effect, the trust property is to revert to the
17settlor and the settlor is still living.
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18(4) A party petitioning the court for action under this section shall give notice
19to the settlor, if living, the trustee, each trust protector, each directing party, the
20qualified beneficiaries, and any person with standing to enforce the terms of a
21charitable trust under s. 701.0405 (3).
SB384,88
22Section
88. 701.0414 of the statutes is created to read:
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23701.0414 Modification or termination of uneconomic trust. (1) In this
24section:
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1(a) "Adjustment reference number" means the consumer price index for all
2urban consumers, as published by the United States bureau of labor statistics, in
3effect on January 1 of the year in which an adjustment is to be made in accordance
4with sub. (3).
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(b) "Base reference number" means the consumer price index for all urban
6consumers, as published by the United States bureau of labor statistics, in effect on
7January 1 of the base year.
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(c) "Base year" means the year in which this paragraph takes effect .... [LRB
9inserts date].
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10(2) After notice to the settlor, if living, each trust protector, each directing party,
11and the qualified beneficiaries, the trustee of a trust consisting of trust property
12having a total value less than $100,000 or a revised applicable figure, as determined
13under sub. (3), may terminate the trust if the trustee concludes that the value of the
14trust property is insufficient to justify the cost of administration.
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15(3) The dollar amount specified in sub. (2) shall be adjusted to a revised
16applicable figure on the 5th anniversary of the effective date of this subsection ....
17[LRB inserts date], and every 5 years thereafter. The revised applicable figure shall
18be determined as follows:
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(a) Calculate the percentage change between the base reference number and
20the adjustment reference number for the year in which the adjustment is being
21made.
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(b) 1. If the percentage change determined in par. (a) is a positive number,
23determine the revised applicable figure as follows:
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a. Multiply $100,000 by the percentage change determined in par. (a),
25expressed as a decimal.
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1b. Round the product under subd. 1. a. to the nearest $1,000.
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c. Add the value determined under subd. 1. b. to $100,000.
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2. If the percentage change determined in par. (a) is a negative number,
4determine the revised applicable figure as follows:
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a. Multiply $100,000 by the absolute value of the percentage change
6determined in par. (a), expressed as a decimal.
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b. Round the product under subd. 2. a. to the nearest $1,000.
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c. Subtract the value determined under subd. 2. b. from $100,000.
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9(4) The court may modify or terminate a trust or remove the trustee and
10appoint a different trustee if it determines that the value of the trust property is
11insufficient to justify the cost of administration even if the trust property has a total
12value in excess of the amount described in sub. (2).
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13(5) Upon termination of a trust under this section, the trustee shall distribute
14the trust property in a manner consistent with the purposes of the trust.
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15(6) This section does not apply to an easement for conservation or preservation.
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16(7) A party petitioning the court for action under this section shall give notice
17of the proceeding to the settlor, if living, the trustee, each trust protector, each
18directing party, and the qualified beneficiaries.
SB384,89
19Section
89. 701.0415 of the statutes is created to read:
SB384,60,2
20701.0415 Reformation to correct mistakes. The court may reform the
21terms of a trust, even if unambiguous, to conform the terms to the settlor's intent if
22it is proved by clear and convincing evidence that both the settlor's intent and the
23terms of the trust were affected by a mistake of fact or law, whether in expression or
24inducement. A party petitioning the court for action under this section shall give
1notice of the proceeding to the settlor, if living, the trustee, each trust protector, each
2directing party, and the qualified beneficiaries.
SB384,90
3Section
90. 701.0416 of the statutes is created to read:
SB384,60,9
4701.0416 Modification to achieve settlor's tax objectives. To achieve the
5settlor's tax objectives, the court may modify the terms of a trust in a manner that
6is not contrary to the settlor's probable intent. The court may provide that the
7modification has retroactive effect. A party petitioning the court for action under this
8section shall give notice of the proceeding to the settlor, if living, the trustee, each
9trust protector, each directing party, and the qualified beneficiaries.
SB384,91
10Section
91. 701.0417 of the statutes is created to read:
SB384,60,14
11701.0417 Combination and division of trusts. (1) After notice to each trust
12protector, each directing party, and the qualified beneficiaries, a trustee may do any
13of the following if the result does not impair rights of any beneficiary or adversely
14affect achievement of any trust purposes:
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(a) Combine 2 or more trusts into a single trust.
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(b) Divide a trust into 2 or more separate trusts.
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17(2) Subject to the terms of the trust, the trustee may take into consideration
18differences in federal tax attributes and other pertinent factors in administering the
19trust property of any separate account or trust, in making applicable tax elections,
20and in making distributions. A separate trust created by severance under sub. (1)
21(b) is treated as a separate trust for all purposes from the date on which the severance
22is effective. The effective date of the severance may be retroactive to a date before
23the date on which the trustee exercises the power.
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24(3) If a trustee combines 2 or more trusts into a single trust, the trustee shall
25identify which trust is the surviving trust.
SB384,92
1Section
92. 701.0418 of the statutes is created to read:
SB384,61,3
2701.0418 Trustee's power to appoint assets to new trust. (1) Definitions. 3In this section:
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(a) "Absolute power" means a power to invade trust assets for the benefit of a
5beneficiary that is not limited by a specific or ascertainable standard, whether or not
6the term "absolute" is used in the trust instrument. "Absolute power" includes a
7power to invade trust assets for the best interests, welfare, comfort, or happiness of
8a beneficiary.
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(b) "First trust" means the trust from which assets are or may be appointed
10under sub. (2).
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(c) "Second trust" means the trust or trusts to which assets are or may be
12appointed under sub. (2).
SB384,61,18
13(2) Power to appoint. (a) Except as otherwise provided in this subsection and
14in subs. (3) and (5), a trustee who has the power to invade the principal of a first trust
15for the benefit of a beneficiary who is eligible to receive or entitled to the income of
16the first trust or entitled to an annuity or unitrust payment from the first trust may
17exercise the power by appointing part or all of the assets of the first trust in favor of
18a trustee of a 2nd trust if all of the following apply:
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1. The appointment of assets does not reduce any fixed income, annuity, or
20unitrust interest of a beneficiary.
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2. If the trustee's power to invade income or principal of the first trust is limited
22by a specific or ascertainable standard, the appointment of assets does not result in
23the trustee of the 2nd trust or any other person having a power to invade the income
24or principal of the 2nd trust that is broader than the trustee's power to invade income
1or principal of the first trust. This subdivision does not apply if the 2nd trust is a trust
2for an individual with a disability.
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3. One of the following applies:
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a. The beneficiaries of the first trust are the same as the beneficiaries of the 2nd
5trust.
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b. If the first trust grants the trustee the absolute power to invade principal,
7the 2nd trust includes only all or some of the beneficiaries of the first trust.
SB384,62,108
(b) Paragraph (a) applies to a trustee whether or not the trustee has an absolute
9power to invade principal and whether or not there is a current need to invade
10principal under the terms of the first trust.
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11(3) Limitations on exercise of power. A trustee may not appoint assets to a
122nd trust under sub. (2) if any of the following applies:
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(a) The trust instrument creating the first trust expressly prohibits the trustee
14from appointing assets of the first trust to a 2nd trust by reference to this section or
15by using the term "decanting."
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(b) A contribution to the first trust qualified for a marital or charitable
17deduction for federal income, gift, or estate tax purposes under the Internal Revenue
18Code and one of the following applies:
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1. The 2nd trust contains a provision that, if included in the first trust, would
20have prevented the first trust from qualifying for the deduction or would have
21reduced the amount of the deduction.
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2. The 2nd trust does not contain a provision that was contained in the first
23trust that, if omitted from the first trust, would have prevented the first trust from
24qualifying for the deduction or would have reduced the amount of the deduction.
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1(c)
The trustee has a beneficial interest in the first trust unless the 2nd trust
2is a trust for an individual with a disability, the trustee's only beneficial interest in
3the first trust is as a remainder beneficiary, and the trustee's beneficial interest in
4the 2nd trust is not greater than the trustee's beneficial interest in the first trust.
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(d)
The appointment of assets to a 2nd trust would impair currently exercisable
6withdrawal rights of a beneficiary of the first trust and one of the following applies:
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1. The withdrawal rights were granted to the beneficiary in a manner designed
8to allow contributions subject to the withdrawal rights to qualify for the federal gift
9tax annual exclusion.
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2. The terms of the 2nd trust would impair gifts previously made to the first
11trust from qualifying for the federal gift tax annual exclusion under section
2503 of
12the Internal Revenue Code.
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(e)
The appointment of assets to the 2nd trust would violate a rule against
14perpetuities applicable to the first trust or suspend a trustee's power of alienation
15over assets of the first trust in a manner that would cause all or a portion of the 2nd
16trust to be void.
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(f) The appointment of assets to the 2nd trust under sub. (2) would impair the
18essential purpose of a trust for an individual with a disability.
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19(4) Permissible terms of 2nd trust. (a) Subject to pars. (b) to (d) and subs. (2),
20(3), and (5), the trustee of the first trust may create a 2nd trust instrument that
21includes terms that are intended to achieve any purpose, including terms that are
22intended to do any of the following:
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1. Correct a drafting error in the first trust.
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2. Clarify potentially ambiguous terms contained in the first trust.
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3. Change the age of distribution to a beneficiary of the first trust.
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14. Extend the duration of the first trust.
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5. Protect a beneficiary of the first trust, including protecting the beneficiary
3from self-destructive behavior.
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6. Allow the trustee of the 2nd trust to transfer trust assets to a community
5trust. In this subdivision, "community trust" means a master trust that is
6established and managed by a nonprofit organization that maintains sub-accounts
7for individual beneficiaries that each satisfy the definition of a trust for an individual
8with a disability.