701.18 Annotation
Although will creating trust provided trustee could resign without court approval, filing a petition for the appointment of a successor and approval of accounts invoked court jurisdiction and required the exercise of discretion regarding the trustee's resignation. Matter of Sherman B. Smith Family Trust, 167 W (2d) 196, 482 NW (2d) 118 (Ct. App. 1992).
701.19
701.19
Powers of trustees. 701.19(1)(1)
Power to sell, mortgage or lease. In the absence of contrary or limiting provisions in the creating instrument, in the court order appointing a trustee or in a subsequent order, a trustee has complete power to sell, mortgage or lease trust property without notice, hearing or order. A trustee has no power to give warranties in a sale, mortgage or lease which are binding on the trustee personally. In this section "sale" includes an option or agreement to transfer for cash or on credit, exchange, partition or settlement of a title dispute; this definition is intended to broaden rather than limit the meaning of "sale". "Mortgage" means any agreement or arrangement in which trust property is used as security.
701.19(2)
(2) Court authorization of administrative action. 701.19(2)(a)(a) In the absence of contrary or limiting provisions in the creating instrument, in any case where it is for the best interests of the trust, on application of the trustee or other interested person, the court may upon notice and hearing authorize or require a trustee to sell, mortgage, lease or otherwise dispose of trust property upon such terms and conditions as the court deems just and proper.
701.19(2)(b)
(b) Despite contrary or limiting provisions in the creating instrument, upon application of a trustee or other interested person, a court may upon notice and hearing order the retention, investment, reinvestment, sale, mortgage, lease or other disposition of trust property if the court is satisfied that the original purpose of the settlor cannot be carried out, substantially performed or practically achieved for any reason existing at the inception of the trust or arising from any subsequent change in circumstances and the retention, investment, reinvestment, sale, mortgage, lease or other disposition of the property more nearly approximates the settlor's intention.
701.19(2)(c)
(c) Unless authorized in the creating instrument, a trustee may not be interested as a purchaser, mortgagee or lessee of trust property unless such purchase, mortgage or lease is made with the written consent of all beneficiaries or with the approval of the court upon notice and hearing. A representative of a beneficiary, under
s. 701.15, may give written consent for such beneficiary.
701.19(2)(d)
(d) A trustee may not sell individually owned assets to the trust unless the sale is authorized in the creating instrument, made with the written consent of all beneficiaries or made with the approval of the court upon notice and hearing.
701.19(3)
(3) When mandatory power deemed discretionary. If a creating instrument expressly or by implication directs a trustee to sell trust property and such property has not been sold for a period of 25 years after the creation of the trust, such direction to the trustee shall be deemed a discretionary power of sale.
701.19(4)
(4) Continuation of business by court order. In the absence of contrary or limiting provisions in the creating instrument, the circuit court may, where it is in the best interests of the trust, order the trustee to continue any business of a deceased settlor. The order may be issued without notice and hearing, in the court's discretion and, in any case, may provide:
701.19(4)(a)
(a) For conduct of the business solely by the trustee, jointly with one or more of the settlor's surviving partners or as a corporation or limited liability company to be formed by the trustee;
701.19(4)(b)
(b) As between the trust and the trustee, the extent of liability of the trust and the extent of the personal liability of the trustee for obligations incurred in the continuation of the business;
701.19(4)(c)
(c) As between beneficiaries, the extent to which liabilities incurred in the continuation of the business are to be chargeable solely to a part of the trust property set aside for use in the business or to the trust as a whole; and
701.19(4)(d)
(d) As to the period of time for which the business may be conducted and such other conditions, restrictions, regulations, requirements and authorizations as the court orders.
701.19(4)(e)
(e) Nothing in this subsection shall be construed as requiring a trustee to liquidate a business, including a business operated as a closely held corporation, when such action is not required by the creating instrument or other applicable law.
701.19(4m)
(4m) Continuation of business by direction of settlor. If the settlor directs retention of a business that is among the trust's assets in the trust document or by other written means, a trustee may retain that business during the settlor's lifetime without liability.
701.19(5)
(5) Formation of business entity. In the absence of contrary or limiting provisions in the creating instrument:
701.19(5)(a)
(a) The court may by order authorize a trustee to become a partner under
ch. 178 or
179 and transfer trust property to the partnership in return for a partnership interest.
701.19(5)(aL)
(aL) The court may by order authorize a trustee to become a member of a limited liability company under
ch. 183 and transfer trust property to the limited liability company in return for an ownership interest.
701.19(5)(b)
(b) The court may by order authorize a trustee to organize a corporation for any purpose permitted by
ch. 180, subscribe for shares of such corporation and transfer trust property to such corporation in payment for the shares subscribed.
701.19(5)(c)
(c) The court may by order authorize a trustee to form a corporation for any purpose permitted by
ch. 181.
701.19(5)(d)
(d) An order under this subsection may in the court's discretion be issued without notice and hearing.
701.19(6)
(6) Registration of securities in nominee. Unless prohibited in the creating instrument, a trustee may register securities in the name of a nominee.
701.19(7)
(7) Proxy voting of stock. Unless the creating instrument contains an express prohibition or specifies the manner in which the trustee is to vote stock in a corporation or certificates of beneficial interest in an investment trust, the trustee may vote such stock or certificates by general or limited proxy, with or without power of substitution.
701.19(8)
(8) Platting land. In the absence of contrary or limiting provisions in the creating instrument, the court may by order authorize a trustee to plat land which is part of the trust, either alone or together with other owners of such real estate. In such platting the trustee must comply with the same statutes, ordinances, rules and regulations which apply to a person who is platting the person's own land. The order under this subsection may in the court's discretion be issued without notice and hearing.
701.19(9)(a)(a) In the absence of contrary or limiting provisions in the creating instrument, any power vested in 3 or more trustees may be exercised by a majority. This paragraph shall not apply to living trusts created prior to July 1, 1971, or to testamentary trusts contained in wills executed or last republished prior to that date.
701.19(9)(b)
(b) A trustee who has not joined in exercising a power is not liable to an affected person for the consequences of the exercise unless the trustee has failed to discharge the trustee's duty to participate in the administration of the trust. A dissenting trustee is not liable for the consequences of an act in which the dissenting trustee joins at the direction of the majority of the trustees if the dissenting trustee's dissent is expressed in writing to the other trustees at or before the time of the joinder.
701.19(10)
(10) Restriction on exercise of powers. Unless the creating instrument negates application of this subsection, a power conferred upon a person in the person's capacity as trustee to make discretionary distributions of principal or income to himself or herself or to make discretionary allocations in the trustee's favor of receipts or expenses as between principal and income, cannot be exercised by the trustee. If the power is conferred on 2 or more trustees, it may be exercised by the trustees who are not so disqualified. If there is no trustee qualified to exercise the power, it may be exercised by a special trustee appointed by the court. This subsection shall not apply to living trusts created prior to July 1, 1971, or to testamentary trusts contained in wills executed or last republished prior to that date.
701.19(11)
(11) Protection of third parties. With respect to a third person dealing with a trustee or assisting a trustee in the conduct of a transaction, the existence of trust power and its proper exercise by the trustee may be assumed without inquiry. The third person is not bound to inquire whether the trustee has power to act or is properly exercising the power; and a third person, without actual knowledge that the trustee is exceeding the trustee's powers or improperly exercising them, is fully protected in dealing with the trustee as if the trustee possessed and properly exercised the powers the trustee purports to exercise. A third person is not bound to assure the proper application of trust property paid or delivered to the trustee.
701.19 Annotation
Cross-references: See s. 112.01, the Uniform Fiduciaries Act, and s. 112.06, the Uniform Act for Simplification of Fiduciary Security Transfers, on protection of third parties.
701.19 Annotation
See 112.02 which provides for suspending powers of a testamentary trustee in military service.
701.19 Annotation
Chapter 881 and 223.055 contain limitations on investments by trustees.
701.19 Annotation
Loss of future profit to estate through disposal of parcel is damage chargeable to trustee or executor only if parcel was not needed for liquidity. In re Estate of Meister, 71 W (2d) 581, 239 NW (2d) 52.
701.19 Annotation
Fiduciary and estate liability in contract and in tort. Dubis, 55 MLR 297.
701.20
701.20
Principal and income. 701.20(1)
(1)
Scope of section. Unless otherwise stated, this section governs the ascertainment of income and principal and the apportionment of receipts and expenses in trusts and decedents' estates, to the extent not inconsistent with the provisions of a creating instrument. A person making an outright gift or establishing a trust may make provision in the creating instrument for the manner of ascertainment of income and principal and the apportionment of receipts and expenses or grant discretion to the personal representative or trustee to do so and the provision where not otherwise contrary to law controls notwithstanding this section.
701.20(2)
(2) Duty of trustee as to receipts and expenditure. 701.20(2)(a)(a) A trust shall be administered with due regard to the respective interests of beneficiaries of income and principal. A trust is so administered with respect to the allocation of receipts and expenditures if a receipt is credited or an expenditure is charged to income or principal or partly to each:
701.20(2)(a)1.
1. In accordance with the terms of the creating instrument, notwithstanding contrary provisions of this section;
701.20(2)(a)2.
2. In the absence of any contrary terms of the creating instrument, in accordance with the provisions of this section; or
701.20(2)(a)3.
3. If neither of the rules of administration under
subd. 1. or
2. is applicable, in accordance with what is reasonable and equitable in view of the respective interests of the beneficiaries.
701.20(2)(b)
(b) If the creating instrument gives the trustee discretion in crediting a receipt or charging an expenditure to income or principal or partly to each, no inference that the trustee has or has not improperly exercised such discretion arises from the fact that the trustee has made an allocation contrary to this section.
701.20(2)(c)
(c) After determining income and principal, the trustee shall charge to income or principal expenses and other charges as provided in
sub. (12).
701.20(3)
(3) Income; principal; charges. As used in this section:
701.20(3)(a)
(a) "Income" is the return in money or other property derived from the use of principal, including, but not limited to, return received as:
701.20(3)(a)1.
1. Rent of real or personal property, including sums received for cancellation or renewal of a lease.
701.20(3)(a)2.
2. Interest, including sums received as consideration for the privilege of prepayment of principal, except as provided in
sub. (7).
701.20(3)(a)3.
3. Income earned during administration of a decedent's estate as provided in
sub. (5).
701.20(3)(a)5.
5. Accrued increment on bonds or other obligations issued at discount as provided in
sub. (7).
701.20(3)(a)6.
6. Receipts from business and farming operations as provided in
sub. (8).
701.20(3)(a)8.
8. Receipts from other principal subject to depletion as provided in
sub. (11).
701.20(3)(b)
(b) "Principal" is property other than income, including, but not limited to:
701.20(3)(b)1.
1. Consideration received by the trustee on the sale or other transfer of principal or on repayment of a loan or as a refund or replacement or change in the form of principal.
701.20(3)(b)2.
2. Proceeds of property taken on eminent domain proceedings.
701.20(3)(b)3.
3. Proceeds of insurance upon property forming part of the principal.
701.20(3)(b)4.
4. Stock dividends, receipts on liquidation of a corporation, and other corporate distributions as provided in
sub. (6).
701.20(3)(b)5.
5. Receipts from the disposition of bonds or other obligations as provided in
sub. (7).
701.20(3)(b)7.
7. Receipts from other principal subject to depletion as provided in
sub. (11).
701.20(4)
(4) When right to income arises; apportionment of income. 701.20(4)(a)(a) Except as provided in
par. (b), income earned or accrued in whole or in part before the date when an asset becomes subject to the trust shall be income when received.
701.20(4)(b)
(b) In the administration of a decedent's estate or of an asset becoming subject to a trust by reason of a will or by reason of the death of a decedent, income which is earned or accrued to the date of death of the decedent but not yet payable, including, but not limited to, income in respect of a decedent, or which is due but not yet paid, shall be added to principal when received.
701.20(4)(c)
(c) On termination of an income interest, the following amounts shall be classified as income and treated as if received prior to the termination.
701.20(4)(c)2.
2. Income due but not paid to the trustee on the date of termination.
701.20(4)(d)
(d) In determining accrued income, the following rules apply:
701.20(4)(d)1.
1. Corporate distributions to stockholders including distributions from a regulated investment company or by a trust qualified and electing to be taxed under federal law as a real estate investment trust shall be treated as accrued on the day fixed by the corporation for determination of stockholders of record entitled to distribution or, if no date is fixed, on the date of declaration of the distribution by the corporation.
701.20(4)(d)2.
2. Income in the form of periodic payments (other than corporate distributions to stockholders), including interest, rent and annuities, shall be treated as accruing from day to day.
701.20(4)(d)3.
3. Obligations for the payment of money which are sold by the issuer at a discount from their maturity value in lieu of interest payments shall be treated as accruing from day to day.
701.20(5)
(5) Income earned during administration of a decedent's estate. 701.20(5)(a)(a) Unless the will otherwise provides and subject to
par. (b), debts, funeral expenses, estate taxes, property taxes prorated to the date of death, family allowances unless charged against income by the court, and administration expenses shall be charged against the principal of the estate.
701.20(5)(b)
(b) Unless the will otherwise provides, income from the assets of a decedent's estate after the death of the decedent and before distribution, including income from property used to discharge liabilities, legacies and devises, shall be determined in accordance with the rules applicable to a trustee under this section and distributed as follows:
701.20(5)(b)1.
1. To legatees and devisees of specific property other than money, the income from the property bequeathed or devised to them less the following recurrent and other ordinary expenses attributable to the specific property: property taxes (excluding taxes prorated to the date of death), interest (excluding interest accrued to the date of death), income taxes (excluding taxes on income in respect of a decedent, capital gains and any other income taxes chargeable against principal) which accrue during the period of administration, ordinary repairs, and other expenses of management and operation of the property. For the purpose of this subdivision, property elected by a surviving spouse under
s. 861.02 (1) is a bequest or devise to the surviving spouse.
701.20(5)(b)2.
2. To all other legatees and devisees, except as provided in
par. (d), the balance of the income, less the balance of the recurrent and other ordinary expenses attributable to all other property from which the estate is entitled to income, the distribution to be in proportion to their respective interests in the property at the time of distribution and based upon the value of the property at the date of death.
701.20(5)(c)
(c) Income received by a trustee under
par. (b) shall be treated as income of the trust.
701.20(5)(d)
(d) A legatee, including a trustee, of a specific amount of money not determined by a pecuniary formula shall not be paid any part of the income of the estate but shall receive interest on any unpaid portion of the legacy for the period commencing one year after decedent's death at the legal rate set forth in
s. 138.04.
701.20(5)(e)
(e) Unless the creating instrument otherwise provides, if a trust may be included in a decedent's gross estate for federal estate tax purposes, and if the trust is divided or distributed in whole or in part as a result of the decedent's death, this subsection shall apply during the period after the death of the decedent and before the division or distribution is complete. For this purpose, the assets of the trust shall be valued as of the decedent's death.
701.20(6)(a)(a) Except as provided in
pars. (b),
(c) and
(d), all corporate distributions are income, including cash dividends, distributions of or rights to subscribe to shares or securities or obligations of corporations other than the distributing corporation, and the proceeds of the rights or property distributions. Except as provided in
pars. (c) and
(d), if the distributing corporation gives a stockholder an option to receive a distribution either in cash or in its own shares, the distribution chosen is income.
701.20(6)(b)
(b) Corporate distributions of shares of the distributing corporation, including distributions in the form of a stock split or stock dividend, are principal. A right to subscribe to shares or other securities issued by the distributing corporation accruing to stockholders on account of their stock ownership and the proceeds of any sale of the right are principal.
701.20(6)(c)
(c) Except to the extent that the corporation indicates that some part of a corporate distribution is a settlement of preferred or guaranteed dividends accrued since the trustee became a stockholder or is in lieu of an ordinary cash dividend, a corporate distribution is principal if the distribution is pursuant to:
