701.16 Annotation
Cross-references: See s. 223.12 which contains requirements which must be met before a foreign corporate trustee is qualified to act in this state.
701.16 Annotation
See s. 701.23 (1), which provides for the discharge of a trustee when a testamentary trust is removed to another state.
701.16 Annotation
Even during a hearing on discharge, a trustee's duty to affirmatively represent the beneficiaries' interests by disclosing relevant information remains, and a breach of this duty leaves the discharge open to attack. Hammes v. First National Bank & Trust Co.
79 Wis. 2d 355,
255 N.W.2d 555 (1977).
701.16 Annotation
A trustee has a duty to the trust beneficiaries to ensure that the personal representative transfers all property to which the trust is entitled. Even when the same person acts as trustee and personal representative, the trustee has a duty to enforce claims the trust has against the personal representative. Old Republic Surety Co. v. Erlien,
190 Wis. 2d 400,
527 N.W.2d 389 (Ct. App. 1994).
701.17
701.17
Successor and added trustees. 701.17(1)
(1)
Appointment of successor or added trustee. If there is a vacancy in the office of trustee because of the death, resignation or removal of a trustee, the court may appoint a successor trustee unless the creating instrument names or provides an effective method for appointing a successor. Upon the death of a sole trustee, title to the trust property does not pass to the trustee's personal representative but to the successor named in or appointed pursuant to the terms of the creating instrument or, in the case of a successor or special trustee appointed by the court, as provided in
sub. (5). The court may in the exercise of a sound discretion appoint an additional trustee if necessary for the better administration of the trust, unless the creating instrument expressly prohibits such addition or provides an effective method for appointing an additional trustee. Subject to
s. 701.16 (2), a successor or added testamentary trustee shall be issued letters of trust, at that trustee's request.
701.17(2)
(2) Appointment of special trustee. If it appears necessary, the court may appoint a special trustee until a successor trustee can be appointed or, where a trust has terminated, to distribute the assets. A special trustee may be appointed without notice and may be removed whenever the court so orders. Such special trustee shall give such bond as the court requires and shall have the powers conferred by the order of appointment and set forth in any letters of trust issued the special trustee.
701.17(3)
(3) Powers of successor or added trustee. Unless expressly prohibited in the creating instrument, all powers conferred upon the trustee by such instrument attach to the office and are exercisable by the trustee holding the office.
701.17(4)
(4) Powers of cotrustees. If one of several trustees dies, resigns or is removed, the remaining trustees shall have all rights, title and powers of all the original trustees. If the creating instrument manifests an intent that a successor trustee be appointed to fill a vacancy, the remaining trustees may exercise the powers of all the original trustees until such time as a successor is appointed.
701.17(5)
(5) Vesting of title. A special or successor trustee is vested with the title of the original trustee and an added trustee becomes a joint tenant with the existing trustee in all trust property. The court may order a trustee who resigns, is removed or is joined by an added trustee to execute such documents transferring title to trust property as may be appropriate to facilitate administration of the trust or may itself transfer title.
701.17 History
History: 1971 c. 66;
1991 a. 316.
701.18
701.18
Resignation and removal of trustees. 701.18(1)
(1)
Resignation. A trustee may resign in accordance with the terms of the creating instrument or petition the court to accept the trustee's resignation and the court may, upon notice and hearing, discharge the trustee from further responsibility for the trust upon such terms and conditions as are necessary to protect the rights of the beneficiaries and any cotrustee. In no event shall a testamentary trustee be discharged from further responsibility except as provided in
s. 701.16 (6).
701.18(2)
(2) Removal. A trustee may be removed in accordance with the terms of the creating instrument or the court may, upon its own motion or upon a petition by a beneficiary or cotrustee, and upon notice and hearing, remove a trustee who fails to comply with the requirements of this chapter or a court order, or who is otherwise unsuitable to continue in office. In no event shall a testamentary trustee be discharged from further responsibility except as provided in
s. 701.16 (6).
701.18 History
History: 1971 c. 66;
1991 a. 316.
701.18 Annotation
Trustees of an employees' profit-sharing plan who are also beneficiaries may not be removed simply because other beneficiaries have lost confidence in them or because they personally benefit in a minor way from a denial of benefits to a participant. Zimmermann v. Brennan,
56 Wis. 2d 623,
202 N.W.2d 923 (1973).
701.18 Annotation
Although the will creating the trust provided that the 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 Wis. 2d 196,
482 N.W.2d 118 (Ct. App. 1992).
701.18 Annotation
That this section allows removing a trustee for cause does not prevent removal of a trustee under s. 701.12 with the approval of the settlor and all beneficiaries, without showing cause. Weinberger v. Bowen, 2000 WI App 264,
240 Wis. 2d 55,
622 N.W.2d 471.
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. 701.19(4)(am)(am) 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)(am)1.
1. 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)(am)2.
2. 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)(am)3.
3. 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)(am)4.
4. For the period of time for which the business may be conducted and any 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 liquidating the business 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 Cross-reference
Cross-reference: See s.
112.01, the Uniform Fiduciaries Act on protection of third parties.
701.19 Cross-reference
Cross-reference: See s.
112.02, which provides for suspending powers of a testamentary trustee in military service.
701.19 Cross-reference
Cross-reference: Chapter
881 and s.
223.055 contain limitations on investments by trustees.
701.19 Annotation
The loss of future profit to an estate through the disposal of a parcel is damage chargeable to the trustee or personal representative only if the parcel was not needed for liquidity. In re Estate of Meister,
71 Wis. 2d 581,
239 N.W.2d 52 (1976).
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:
