701.06(6)(b)
(b) A beneficiary of a trust may not be considered a settlor solely because of a lapse, waiver, or release of any of the following:
701.06(6)(b)2.
2. The beneficiary's right to withdraw part of the trust property, to the extent that the value of the property affected by the lapse, waiver, or release in any year does not exceed the greater of the amount in:
701.06(6)(b)2.a.
a. Section 2041 (b) (2) or 2514 (e), Internal Revenue Code of 1986.
701.06(6)(c)
(c) A beneficiary of a trust is not a settlor, has not made a voluntary or involuntary transfer of the beneficiary's interest in the trust, or does not have the power to make a voluntary or involuntary transfer of the beneficiary's interest in the trust solely because the beneficiary holds or exercises, in any capacity, any of the following:
701.06(6)(c)1.
1. A presently exercisable power to consume, invade, appropriate, or distribute property to or for the benefit of the beneficiary if the power is any of the following:
701.06(6)(c)1.a.
a. Exercisable only on consent of another person holding an interest adverse to the beneficiary's interest.
701.06(6)(c)1.b.
b. Limited by an ascertainable standard, such as health, education, support, or maintenance of the beneficiary.
701.06(6)(c)2.
2. A presently exercisable power to appoint any property of the trust to or for the benefit of a person other than the beneficiary, a creditor of the beneficiary, the beneficiary's estate, or a creditor of the beneficiary's estate.
701.06(6)(d)
(d) A beneficiary of a trust is not a settlor solely because the beneficiary is entitled to nondiscretionary distributions from the trust.
701.06(7)
(7) Subsequent modification of court's order. Any order entered by a court under
sub. (4),
(5) or
(6) (a) is subject to modification upon application of an interested person.
701.06(8)
(8) Exempt assets. Assets of a trust, to the extent they are exempt from claims of creditors under other statutes, shall not be subject to
sub. (4),
(5), or
(6) (a).
701.06 Cross-reference
Cross-reference: See s.
701.07 (3) which deals with creditors' rights where a settlor retains powers over a living trust.
701.06 Annotation
Trust income that is income to the beneficiary under federal tax law is subject to a child support order regardless of whether a distribution is made to the beneficiary. Grohmann v. Grohmann,
189 Wis. 2d 532,
525 N.W.2d 261 (1995).
701.06 Annotation
In not revealing that he was a trust beneficiary, a father failed to make proper financial disclosure at the time of a divorce as was required by s. 767.127. The rationale of Grohmann is applicable to both grantor and nongrantor trusts if there is an obligation to report that trust's income as one's own because it is the obligation to report the income that makes the income reachable for calculations of a child support obligation. Stevenson v. Stevenson,
2009 WI App 29,
316 Wis. 2d 442,
765 N.W.2d 811,
07-2143.
701.065
701.065
Debts of decedents. 701.065(1)(a)1.1. A trustee who has a duty or power to pay the debts of a decedent may publish in the county in which the decedent resided, as a class 3 notice, under
ch. 985, a deadline for filing claims with the trustee. The deadline shall be the date that is 4 months after the date of the first insertion of the notice.
701.065(1)(a)2.
2. Except as provided in
pars. (b) and
(c), if the trustee satisfies the requirements for the publication of the notice under
subd. 1., all claims, including claims of the state and any subdivision thereof, whether due or to become due, absolute or contingent, liquidated or unliquidated, are barred against the trustee, the trust property and any recipient of trust property unless filed with the trustee on or before the date specified in the notice under
subd. 1.
701.065(1)(b)
(b) Notwithstanding
par. (a) 2., a claim that is not filed on or before the date specified in the notice under
par. (a) 1. is not barred if any of the following apply:
701.065(1)(b)1.
1. The claim is a claim based on tort, on a marital property agreement that is subject to the time limitations under
s. 766.58 (13) (b) or
(c), on Wisconsin income, franchise, sales, withholding, gift or death taxes, or on unemployment compensation contributions due or benefits overpaid; a claim for funeral or administrative expenses; a claim of this state under
s. 46.27 (7g),
49.496 or
49.682 or rules promulgated under
s. 46.286 (7); or a claim of the United States.
701.065(1)(b)2.a.
a. On or before the date specified in the notice under
par. (a) 1., the trustee knew, or in the exercise of reasonable diligence should have known, of the existence of the potential claim and of the identity and mailing address of the potential claimant.
701.065(1)(b)2.b.
b. At least 30 days before the date specified in the notice under
par. (a) 1., the trustee had not given notice to the potential claimant of the final day for filing his or her claim.
701.065(1)(b)2.c.
c. At least 30 days before the date specified in the notice under
par. (a) 1., the claimant did not have actual knowledge of the date on which the claim would be barred.
701.065(1)(c)
(c) If an action is pending against a decedent at the time of his or her death and the action survives, the plaintiff in that action may serve a notice of substitution of party defendant on the trustee and file proof of service of notice in the court. Filing of proof of service on or before the deadline for filing a claim under
par. (a) 1. gives the plaintiff the same rights against the trust as the filing of a claim. A judgment in any such action constitutes an adjudication for or against the trust.
701.065(2)
(2) Effect of statute of limitations. A trustee shall not pay a claim that was barred by a statute of limitations at the time of the decedent's death. A claim not barred by a statute of limitations at the time of the decedent's death shall not be barred thereafter by a statute of limitations if the claim is filed with the trustee on or before the deadline for filing a claim under
sub. (1) (a) 1.
701.065(3)
(3) Claims of creditors without notice. 701.065(3)(a)(a) A claim not barred by
sub. (1) (a) 2. because of the operation of
sub. (1) (b) 2. may be enforced against trust property only as provided in this subsection.
701.065(3)(b)
(b) The claimant shall file the claim with the trustee within one year after the decedent's death and within 30 days after the earlier of the following:
701.065(3)(b)1.
1. The date that the trustee gives notice to the potential claimant of the deadline for filing a claim under
sub. (1) (a) 1.
701.065(3)(b)2.
2. The date that the claimant first acquires actual knowledge of the deadline for filing a claim under
sub. (1) (a) 1.
701.065(3)(c)
(c) The claimant shall have the burden of establishing by the greater weight of the credible evidence that all of the circumstances under
sub. (1) (b) 2. existed.
701.065(3)(d)
(d) This subsection does not extend the time for commencement of a claim beyond the time provided by any statute of limitations applicable to that claim.
701.065(4)
(4) Satisfaction of claim from other property. Failure of a claimant timely to file a claim as provided in this section does not bar the claimant from satisfying the claim, if not otherwise barred, from property other than trust property.
701.065 History
History: 1997 a. 188;
1999 a. 9.
701.07(1)(1)
Validity. A living trust, otherwise valid, shall not be held invalid as an attempted testamentary disposition, a passive trust under
s. 701.03, or a trust lacking a sufficient principal because:
701.07(1)(a)
(a) It contains any or all of the following powers, whether exercisable by the settlor, another person or both:
701.07(1)(a)1.
1. To revoke, modify or terminate the trust in whole or in part;
701.07(1)(a)2.
2. To exercise a power or option over property in the trust or over interests made payable to the trust under an employee benefit plan, life insurance policy, or otherwise;
701.07(1)(a)3.
3. To direct, during the lifetime of the settlor or another, the person to whom or on whose behalf the income or principal shall be paid or applied;
701.07(1)(a)4.
4. To control the administration of the trust in whole or in part;
701.07(1)(a)5.
5. To add property or cause additional employee benefits, life insurance, or other interests to be made payable to the trust at any time.
701.07(1)(b)
(b) The principal consists of a designation of the trustee as a primary or direct, secondary or contingent beneficiary under a will, employee benefit plan, life insurance policy or otherwise; or
701.07(1)(c)
(c) The principal consists of assets of nominal value.
701.07(2)
(2) Eligibility to receive assets. A living trust shall be eligible to receive property from any source.
701.07(3)
(3) Creditors' rights. If a settlor retains a power to revoke, modify or terminate which is exercisable in the settlor's favor, except when such power is exercisable only in conjunction with a person having a substantial adverse interest, the trust property to the extent it is subject to such power is also subject to the claim of a creditor of the settlor. This subsection shall not apply to trust property to the extent it is exempt from claims of creditors under other statutes.
701.07 Cross-reference
Cross-reference: See s.
701.06 (6) which deals with creditors' rights where the settlor is a beneficiary of the trust.
701.07 Annotation
Section 701.03, which prohibits passive trusts, does not apply to living trusts. This statute, which provides that a living trust cannot be deemed passive, controls. McMahon v. Standard Bank & Trust Co.
202 Wis. 2d 564,
550 N.W.2d 727 (Ct. App. 1996),
95-1303.
701.07 Annotation
Understanding Living Trusts. Moschella. Wis. Law. March 1992.
701.07 Annotation
Informing the Public About Living Trusts. Twohig. Wis. Law. March 1992.
701.08
701.08
Transfers to living trusts. 701.08(1)
(1)
Validity and effect. The order of execution of a living trust instrument and a will or other instrument purporting to transfer or appoint property to the trust evidenced by the trust instrument shall be disregarded in determining the validity of the transfer or appointment. No reference in any will to a living trust shall cause assets in such trust to be included in property administered as part of the testator's estate; nor shall it cause the trust or any portion thereof to be treated as a testamentary trust.
701.08(2)
(2) Governing terms. Property transferred or appointed by a will or by a beneficiary designation under an employee benefit plan, life insurance policy or other instrument permitting designation of a beneficiary to a living trust, the terms of which the testator or designator was the sole holder of a power to modify, shall be administered in accordance with the terms of the trust as they may have been modified prior to the testator's or designator's death, even though the will or beneficiary designation was not reexecuted or republished after exercise of the power to modify, unless the will or beneficiary designation expressly provides otherwise. Such property transferred or appointed to a living trust, which is subject to a power of modification requiring action or consent of a person other than the testator or designator, shall be administered in accordance with the terms of the trust instrument as they exist at the execution of the will or beneficiary designation, unless expressly otherwise provided. If the will or beneficiary designation expressly provides that the property shall be administered in accordance with the terms of the trust instrument as they may be modified thereafter, the will or beneficiary designation need not be reexecuted or republished after exercise of the power to modify.
701.08(3)
(3) Disposition when no existing living trust. If at the death of a testator a living trust has been completely revoked, or otherwise terminated, a provision in the testator's will purporting to transfer or appoint property to such trust shall have the following effect, unless the will provides otherwise:
701.08(3)(a)
(a) If the testator was a necessary party to the revocation or other termination of such trust, the provision in the testator's will shall be invalid;
701.08(3)(b)
(b) If the testator was not a necessary party to the revocation or other termination of such trust, the provision in the testator's will shall be deemed to create a testamentary trust upon the terms of the living trust instrument at the time the will was executed or as otherwise provided where
sub. (2) is applicable.
701.08 History
History: 1971 c. 66;
1991 a. 316.
701.09
701.09
Transfers to testamentary trusts. 701.09(1)
(1)
Testamentary transfer to trust of another. A transfer or appointment by will shall not be held invalid because it is made to a trust created, or to be created, under the will of another person if the will of such other person was executed, or was last modified with respect to the terms of such trust, prior to the death of the person making the transfer or appointment and such other person's will is admitted to probate prior to, or within 2 years after, the death of the person making the transfer or appointment. Property included in such a transfer or appointment shall not be considered property subject to administration as part of the other person's estate but shall pass directly to that other person's testamentary trustee, be added to the designated trust and administered as a part thereof.
701.09(2)
(2) Invalid testamentary transfer. If such a transfer or appointment by will is not accepted by the testamentary trustee of such other person or if no will of such other person which meets the conditions specified in
sub. (1) is admitted to probate within the period therein limited, and if the will containing such transfer or appointment by will makes no alternative disposition of the assets, the will shall be construed as creating a trust upon the terms contained in the documents constituting the will of such other person as of the date of death of the person making the transfer or appointment by will.
701.09(3)
(3) Life insurance proceeds transferred to trust of insured. A trustee named or to be named in the will of an insured person may be designated beneficiary of an insurance policy on the life of the insured if the designation is made in accordance with the terms of the policy. After admission of the insured's will to probate and issuance of letters to such trustee, the insurance proceeds shall be paid to the trustee to be administered in accordance with the terms of the trust as they exist at the death of the insured, and the proceeds may be commingled with other assets passing to the trust. Insurance proceeds paid to a testamentary trustee because of his or her designation as life insurance beneficiary shall not be subject to death tax to any greater extent than if the proceeds were payable to a beneficiary other than the insured's estate. The proceeds shall be inventoried for tax purposes only and shall not be subject to taxes, debts or charges enforceable against the estate or otherwise considered assets of the insured's estate to any greater extent than if the proceeds were payable to a beneficiary other than the insured's estate.
701.09(4)
(4) Employee benefits transferred to trust of employee. A trustee named or to be named in the will of an employee covered by any employee benefit plan or contract described in
s. 815.18 (3) (j) or any annuity or insurance contract purchased by an employer that is a religious, scientific, educational, benevolent or other corporation or association not organized or conducted for pecuniary profit may be designated payee of any benefits payable after the death of the employee if the designation is made in accordance with the terms of the plan or contract. After admission of the employee's will to probate and issuance of letters to the trustee, the death benefits shall be paid to the trustee to be administered in accordance with the terms of the trust as they exist at the death of the employee, and the benefits may be commingled with other assets passing to the trust. Death benefits paid to a testamentary trustee because of his or her designation as payee are not subject to the death tax to any greater extent than if the benefits were payable to a beneficiary other than the employee's estate. The benefits shall be inventoried for tax purposes only and are not subject to taxes, debts or charges enforceable against the estate or otherwise considered assets of the employee's estate to any greater extent than if the benefits were payable to a beneficiary other than the employee's estate.
701.09(5)
(5) Transfer of other property. Property other than that described in
subs. (3) and
(4) may be made payable to or transferred to a trustee named or to be named in the will of the transferor.
701.09 History
History: 1971 c. 66; Sup. Ct. Order, 67 Wis. 2d 585, 777 (1975);
1975 c. 218;
1987 a. 27;
1989 a. 278;
1991 a. 316.
701.10
701.10
Charitable trusts. 701.10(1)(1)
Validity. A charitable trust may be created for any of the following charitable purposes: relief of poverty, advancement of education, advancement of religion, promotion of health, governmental or municipal purposes or any other purpose the accomplishment of which is beneficial to the community. No gift to charity, in trust or otherwise, is invalid because of indefiniteness. If a particular charitable purpose is not indicated and the trustee is not expressly authorized by the creating instrument to select such a purpose, the trustee has an implied power to select one or more charitable purposes. If a particular charitable purpose is not indicated and no trustee is named in the creating instrument, the court may appoint a trustee with such an implied power to select or may direct that the property be transferred outright to one or more established charitable entities.
701.10(2)(a)(a) If a purpose of a charitable trust is or becomes impractical, unlawful or impossible, the court may order the trust continued for one or more other charitable purposes designated by the settlor or, in the absence of such designation, order the property devoted to one or more other charitable purposes either by continuing the trust or by distributing the property to one or more established charitable entities. In determining the alternative plan for disposition of the property, the court shall take into account current and future community needs in the general field of charity within which the original charitable purpose falls, other charitable interest of the settlor, the amount of principal and income available under the trust and other relevant factors. The provisions of this subsection do not apply insofar as the settlor expressly provides in the creating instrument for an alternative disposition if the original trust fails; nor do they apply to gifts by several persons to a charitable entity on a subscription basis if the court finds that the donors intended their gifts to be limited to the original purpose and such purpose fails initially.
701.10(2)(b)
(b) If any administrative provision of a charitable trust or part of a plan set forth by the settlor to achieve the settlor's charitable purpose is or becomes impractical, unlawful, inconvenient or undesirable, and a modification of such provision or plan will enable the trustee to achieve more effectively the basic charitable purpose, the court may by appropriate order modify the provision or plan.
701.10(2)(c)
(c) If a charitable trust is or becomes uneconomic when principal and probable income, cost of administration and other relevant factors are considered, or in any event if the trust property is valued at less than $50,000, the court may terminate the trust and order outright distribution to an established charitable entity in the general field of charity within which the charitable purpose falls.
701.10(2)(d)
(d) It is the purpose of this subsection to broaden the power of the courts to make charitable gifts more effective. In any situation not expressly covered the court shall liberally apply the cy pres doctrine.
701.10(2)(e)
(e) The settlor if living, the trustee, the attorney general and an established charitable entity to which income or principal must be paid under the terms of the trust shall be persons interested in any proceeding under this subsection.
701.10(3)
(3) Enforcement; notice to attorney general. 701.10(3)(a)(a) A proceeding to enforce a charitable trust may be brought by:
701.10(3)(a)1.
1. An established charitable entity named in the governing instrument to which income or principal must or may be paid under the terms of the trust;
701.10(3)(a)2.
2. The attorney general in the name of the state upon the attorney general's own information or, in the attorney general's discretion, upon complaint of any person;
701.10(3)(a)3.
3. Any settlor or group of settlors who contributed half or more of the principal; or
701.10(3)(b)
(b) In a proceeding affecting a charitable trust, notice must be given to the attorney general, but, except as provided in
sub. (2), notice need not be given where the income or principal must be paid exclusively to one or more established charitable entities named in the governing instrument.
701.10(4)
(4) Established charitable entity. As used in this section, "established charitable entity" means a corporation, unincorporated association or trust operated exclusively for a charitable purpose defined in
sub. (1).
