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,
00-0903.
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. 701.19(10)(a)(a) Except as provided in
par. (c), a person may not exercise any of the following powers conferred upon him or her in his or her capacity as trustee:
701.19(10)(a)1.
1. The power to make discretionary distributions of trust principal or income if the distributions are to himself or herself or for the discharge of his or her legal obligations.
701.19(10)(a)2.
2. The power to make discretionary allocations of receipts or expenses as between principal and income if the allocations are in his or her favor.
701.19(10)(b)
(b) If a power under
par. (a) is conferred upon more than one person as trustee, a person who is not disqualified to act under
par. (a) may exercise the power for the benefit of the person who is disqualified to act, unless the creating instrument expressly provides otherwise. A special trustee appointed by a court may exercise a power under
par. (a) for the benefit of the disqualified person if no other trustee is qualified to exercise the power.
701.19(10)(c)1.
1. The person is also the settlor of the trust, and the trust may be revoked or amended by the settlor.
701.19(10)(c)2.
2. The terms of the creating instrument specifically limit the scope of the power to expenditures and distributions of income or principal on the basis of an ascertainable standard relating to the person's health, maintenance, support, or education such that the person would not be subject to tax under section
2041 or
2514 of the Internal Revenue Code as a result of having or exercising the power.
701.19(10)(c)3.
3. The person is the spouse, widow, or widower of the settlor of the trust, and a marital deduction has been allowed for federal gift or estate tax purposes with respect to the trust property that is subject to the power.
701.19(10)(c)4.
4. The creating instrument negates the application of
par. (a) with respect to the power or indicates that provisions that are similar to
par. (a) do not apply.
701.19(11)
(11) Protection of 3rd parties. With respect to a 3rd 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 3rd person is not bound to inquire whether the trustee has power to act or is properly exercising the power; and a 3rd 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 3rd 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(2)(a)
(a) "Accounting period" means a calendar year, unless a fiduciary selects another 12-month period, and includes a portion of a calendar year or other 12-month period that begins when an income interest begins or that ends when an income interest ends.
701.20(2)(b)
(b) "Beneficiary" means a person who has a beneficial interest in a trust or an estate and includes, in the case of a decedent's estate, an heir, a legatee, and a devisee and, in the case of a trust, an income beneficiary and a remainder beneficiary.
701.20(2)(c)
(c) "Fiduciary" means a personal representative or a trustee and includes an executor, administrator, successor personal representative, special administrator, and a person performing substantially the same function as any of those.
701.20(2)(d)
(d) "Income" means money or property that a fiduciary receives as current return from a principal asset. "Income" includes a portion of receipts from a sale, exchange, or liquidation of a principal asset, to the extent provided in
subs. (10) to
(24).
701.20(2)(e)
(e) "Income beneficiary" means a person to whom net income of a trust is or may be payable.
701.20(2)(f)
(f) "Income interest" means the right of an income beneficiary to receive all or part of net income, whether the terms of the trust require it to be distributed or authorize it to be distributed in the trustee's discretion.
701.20(2)(g)
(g) "Mandatory income interest" means the right of an income beneficiary to receive net income that the terms of the trust require the fiduciary to distribute.
701.20(2)(h)
(h) "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 to or from income during the period.
701.20(2)(i)
(i) "Person" means an individual; corporation; business trust; estate; trust; partnership; limited liability company; association; joint venture; government; governmental subdivision, agency, or instrumentality; public corporation; or any other legal or commercial entity.
701.20(2)(j)
(j) "Principal" means property held in trust for distribution to a remainder beneficiary when the trust terminates or property held in trust in perpetuity.
701.20(2)(k)
(k) "Remainder beneficiary" means a person entitled to receive principal when an income interest ends.
701.20(2)(L)
(L) "Sui juris beneficiary" means a beneficiary not under a legal disability. The term includes all of the following:
701.20(2)(L)1.
1. A court-appointed guardian of a beneficiary who is incompetent, as defined in
s. 880.01 (4) [is adjudicated incompetent under
ch. 54].
701.20 Note
NOTE: The bracketed language indicates the current terminology and cross-reference used to refer to incompetency. Corrective legislation is pending.
701.20(2)(L)3.
3. A court-appointed guardian of a minor beneficiary's estate or, if there is no court-appointed guardian, the parents of the minor beneficiary.
701.20(2)(m)
(m) "Terms of a trust" means the manifestation of the intent of a settlor or decedent with respect to a trust, expressed in a manner that admits of its proof in a judicial proceeding, whether by written or spoken words or by conduct.
701.20(2)(n)
(n) "Trustee" includes an original, additional, or successor trustee, whether or not appointed or confirmed by a court.
701.20(3)
(3) Fiduciary duties; general principles. 701.20(3)(a)(a) 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) to
(9), a fiduciary:
701.20(3)(a)1.
1. 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.
701.20(3)(a)2.
2. 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.
701.20(3)(a)3.
3. Shall administer a trust or estate in accordance with this section 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.
701.20(3)(a)4.
4. Shall add a receipt or charge a disbursement to principal to the extent that the terms of the trust and this section do not provide a rule for allocating the receipt or disbursement to principal or income or between principal and income.
701.20(3)(b)
(b) In exercising the power to adjust under
sub. (4) (a) or a discretionary power of administration regarding a matter within the scope of this section, whether granted by the terms of a trust, a will, or this section, 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 is presumed to be fair and reasonable to all of the beneficiaries.
701.20(4)(a)(a) 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), that the trustee is unable to comply with
sub. (3) (b).
701.20(4)(b)
(b) In deciding whether and to what extent to exercise the power conferred by
par. (a), a trustee shall consider all factors relevant to the trust and its beneficiaries, including the following factors to the extent they are relevant:
701.20(4)(b)1.
1. The nature, purpose, and expected duration of the trust.
701.20(4)(b)3.
3. The identity and circumstances of the beneficiaries.
701.20(4)(b)4.
4. The needs for liquidity, regularity of income, and preservation and appreciation of capital.
701.20(4)(b)5.
5. The assets held in the trust; the extent to which they consist of financial assets, interests in closely held enterprises, tangible and intangible personal property, or real property; the extent to which an asset is used by a beneficiary; and whether an asset was purchased by the trustee or received from the settlor.
701.20(4)(b)6.
6. The net amount allocated to income under the other subsections of this section and the increase or decrease in the value of the principal assets, which the trustee may estimate in the case of assets for which market values are not readily available.
701.20(4)(b)7.
7. Whether and to what extent the terms of the trust give the trustee the power to invade principal or accumulate income or prohibit the trustee from invading principal or accumulating income, and the extent to which the trustee has exercised a power from time to time to invade principal or accumulate income.
701.20(4)(b)8.
8. The actual and anticipated effect of economic conditions on principal and income and effects of inflation and deflation.
