701.0418(5)(b)2.b. b. The proposed effective date of the appointment.
701.0418(5)(b)2.c. c. A copy of the trust instrument of the first trust.
701.0418(5)(b)2.d. d. A copy of the trust instrument of the 2nd trust.
701.0418(5)(b)3. 3. A trustee may not appoint assets to the 2nd trust until 30 days after the trustee provides notice as required under this paragraph unless every person who is entitled to receive notice under subd. 1. waives the 30-day notice period by delivering a signed written instrument to the trustee. A person's waiver of the 30-day notice period does not constitute that person's consent to the trustee's appointment of assets to a 2nd trust.
701.0418(5)(b)4. 4. If a person entitled to receive notice under subd. 1. delivers a written objection to the trustee before the effective date of the appointment of assets to a 2nd trust, the trustee may not appoint the assets to a 2nd trust, as specified in the trustee's notice, without obtaining court approval under par. (c) unless the written objection is withdrawn.
701.0418(5)(b)5. 5. If the trustee does not receive a written objection from any person entitled to receive notice under subd. 1. before the effective date of the appointment of assets to the 2nd trust or all written objections to the proposed appointment of assets to the 2nd trust are withdrawn, the trustee may appoint the assets to a 2nd trust, as specified in the notice.
701.0418(5)(c)1.1. If a trustee chooses to proceed with court approval, including after receiving a written objection to a proposed appointment of assets, the trustee shall petition a court to approve a proposed appointment of assets to a 2nd trust under sub. (2). The trustee shall provide notice of the petition to all qualified beneficiaries of the first trust, each trust protector appointed under the first trust, each directing party appointed under the first trust, and to the settlor of the first trust, if living. The trustee shall include in the notice of the petition the proposed effective date of the appointment of assets to a 2nd trust. The trustee shall also provide to each person who is entitled to receive notice under this paragraph a copy of the proposed instrument under which the trustee will appoint assets to a 2nd trust, the proposed effective date of the appointment, a copy of the trust instrument of the first trust, and a copy of the trust instrument of the 2nd trust.
701.0418(5)(c)2. 2. If a person who is entitled to receive notice under subd. 1. files an objection with the court, in determining whether to grant or deny a petition under subd. 1., the court shall consider all of the following:
701.0418(5)(c)2.a. a. The purpose of the proposed appointment of assets under sub. (2).
701.0418(5)(c)2.b. b. The reasons for any objection made by a person entitled to receive notice under subd. 1.
701.0418(5)(c)2.c. c. Changes in circumstances that have occurred since the creation of the first trust.
701.0418(5)(c)2.d. d. Whether the appointment of assets under sub. (2) complies with the requirements of this section.
701.0418(5)(c)3. 3. If no person who is entitled to receive notice under subd. 1. files an objection with the court or any objection that has been filed with the court is withdrawn, the court shall enter an order approving the appointment of assets under sub. (2) as set forth in the trustee's notice unless the court determines that the appointment of assets does not comply with the requirements of this section.
701.0418(6) (6)Subsequently discovered assets.
701.0418(6)(a) (a) The appointment of all of the assets of the first trust in favor of the trustee of the 2nd trust includes subsequently discovered assets otherwise belonging to the first trust and assets paid to or acquired by the first trust subsequent to the appointment in favor of the 2nd trust.
701.0418(6)(b) (b) Except as otherwise provided by the trustee of the first trust, the appointment of part but not all of the assets of the first trust in favor of the 2nd trust does not include subsequently discovered assets belonging to the first trust or assets paid to or acquired by the first trust subsequent to the appointment in favor of the 2nd trust, which remain the assets of the first trust.
701.0418(7) (7)Liability.
701.0418(7)(a) (a) This section does not create or imply a duty on a trustee to appoint assets to a 2nd trust under sub. (2). A trustee that does not appoint assets to a 2nd trust under sub. (2) is not liable for the failure to do so.
701.0418(7)(b) (b) A trustee who appoints assets to a 2nd trust under sub. (2) is not liable to any beneficiary for any loss related to the appointment unless the trustee did not appoint the assets in good faith.
701.0418(8) (8)Miscellaneous provisions.
701.0418(8)(a) (a) The appointment of assets to a 2nd trust under sub. (2) is not an exercise of a general power of appointment.
701.0418(8)(b) (b) A trustee may appoint assets to a 2nd trust under sub. (2) even if the first trust includes a spendthrift clause or a provision that prohibits amendment or revocation of the trust.
701.0418(8)(c) (c) This section does not limit a trustee who has a power to invade principal to appoint property in further trust to the extent the power arises under the terms of the first trust or under any other section of this chapter or under another provision of law or under common law.
701.0418(8)(d) (d) The restriction relating to a trustee under sub. (3) (c) does not preclude a cotrustee who does not have a beneficial interest in the first trust from appointing assets to a 2nd trust under sub. (2) even if the terms of the first trust, applicable law, or other circumstances would otherwise require the majority or unanimous action of the trustees of the first trust.
701.0418(8)(e) (e) For purposes of this section, if beneficiaries of a first trust are defined as a class of persons, the class shall include any person who falls within the class of persons after the trustee appoints assets to the 2nd trust.
701.0418(8)(f) (f) Notwithstanding s. 701.0103 (23), a trustee of a first trust who appoints assets to a 2nd trust under sub. (2) or creates a 2nd trust instrument under sub. (4) is not the settlor of the 2nd trust.
701.0418(8)(g) (g) To the extent a directing party or trust protector has the power to invade the principal of a first trust, as described in sub. (2), this section applies to the directing party or trust protector as if the directing party or trust protector is a trustee.
701.0418 History History: 2013 a. 92.
701.0419 701.0419 Transfers to trusts.
701.0419(1)(1)Validity and effect. The order of execution of a 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 trust shall cause assets in such trust to be included in property administered as part of the testator's estate.
701.0419(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 online tool, as defined in s. 711.03 (18), or other instrument permitting designation of a beneficiary to a trust, shall be administered in accordance with the terms of the trust as the terms of the trust may have been modified prior to the testator's or designator's death, even though the will, beneficiary designation, online tool, or other instrument was not reexecuted or republished after exercise of the power to modify, unless the will, beneficiary designation, online tool, or other instrument expressly provides otherwise.
701.0419(3) (3)Disposition when no existing trust. If at the death of a testator a trust has been completely revoked, or otherwise terminated, a provision in the testator's will purporting to transfer or appoint property to the trust shall have the following effect, unless the will provides otherwise:
701.0419(3)(a) (a) If the testator was a necessary party to the revocation or other termination of the trust, the provision in the testator's will shall be invalid.
701.0419(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 trust upon the terms of the trust instrument at the time the will was executed or as otherwise provided where sub. (2) is applicable.
701.0419 History History: 1971 c. 66; 1991 a. 316; 2013 a. 92 s. 132; Stats. 2013 s. 701.0419; 2015 a. 300.
subch. V of ch. 701 SUBCHAPTER V
CREDITOR'S CLAIMS; SPENDTHRIFT
AND DISCRETIONARY TRUSTS
701.0501 701.0501 Rights of beneficiary's creditor or assignee.
701.0501(1)(a) (a) To the extent a beneficiary's interest is not protected by a spendthrift provision, the court may authorize a judgment creditor or an assignee of the beneficiary to reach the beneficiary's interest by attachment of present or future distributions to or for the benefit of the beneficiary or other means. The court may limit the award to such relief as is appropriate under the circumstances.
701.0501(1)(b) (b) This subsection does not apply to a trust for an individual with a disability.
701.0501(2) (2)A trustee is not liable to any creditor of a beneficiary for any distributions made to or for the benefit of the beneficiary if any of the following applies:
701.0501(2)(a) (a) The beneficiary's interest is protected by a spendthrift provision.
701.0501(2)(b) (b) The trust is a trust for an individual with a disability.
701.0501 History History: 2013 a. 92.
701.0502 701.0502 Spendthrift provision.
701.0502(1)(1)A spendthrift provision is valid only if any of the following applies:
701.0502(1)(a) (a) The beneficiary is a person other than the settlor and is not treated as the settlor under s. 701.0505 (2).
701.0502(1)(b) (b) The trust is a trust for an individual with a disability.
701.0502(2) (2)Subject to sub. (1), a term of a trust providing that the interest of a beneficiary is held subject to a spendthrift trust, or words of similar import, restrains both a voluntary and involuntary transfer of the beneficiary's interest.
701.0502(3) (3)A beneficiary may not transfer an interest in a trust in violation of a valid spendthrift provision and, except as otherwise provided in this subchapter, a creditor or assignee of the beneficiary may not attach, garnish, execute on, or otherwise reach the interest or a distribution by the trustee before its receipt by the beneficiary.
701.0502(4) (4)Real property or tangible personal property that is owned by the trust but that is made available for a beneficiary's occupancy or use in accordance with the trustee's authority under the trust instrument may not be considered to have been distributed by the trustee or received by the beneficiary for purposes of allowing a creditor or assignee of the beneficiary to reach the property.
701.0502 History History: 2013 a. 92.
701.0503 701.0503 Exceptions to spendthrift provision.
701.0503(1)(1)Claims for child support. Notwithstanding s. 701.0502, upon application of a person having a valid order directing a beneficiary to make payment for support of the beneficiary's child, the court may do any of the following:
701.0503(1)(a) (a) If the beneficiary is entitled to receive income or principal under the trust, order the trustee to satisfy part or all of the claim out of part or all of payments of income or principal as they are due, presently or in the future;
701.0503(1)(b) (b) If a beneficiary may receive income or principal at the trustee's discretion under the trust, order the trustee to satisfy part or all of the claim out of part or all of future payments of income or principal that are made pursuant to the exercise of the trustee's discretion in favor of such beneficiary.
701.0503(2) (2)Claims for public support. Notwithstanding s. 701.0502 and except as provided in sub. (3), if the settlor is legally obligated to pay for the public support of a beneficiary under s. 46.10, 49.345, or 301.12 or the beneficiary is legally obligated to pay for the beneficiary's public support or for support furnished to the beneficiary's spouse or minor child under s. 46.10, 49.345, or 301.12, upon application by the appropriate state department or county official, the court may do any of the following:
701.0503(2)(a) (a) If the beneficiary is entitled to receive income or principal under the trust, order the trustee to satisfy part or all of the liability out of part or all of payments of income or principal as they are due, presently or in the future;
701.0503(2)(b)1.1. Except as provided in subd. 2., if the beneficiary may receive income or principal at the trustee's discretion under the trust, order the trustee to satisfy part or all of the liability out of part or all of future payments of income or principal which are to be made pursuant to the exercise of the trustee's discretion in favor of the beneficiary.
701.0503(2)(b)2. 2. In the case of a beneficiary who may receive income or principal of the trust at the trustee's discretion and who is a settlor or a spouse or minor child of the settlor, order the trustee to satisfy part or all of the liability without regard to whether the trustee has then exercised or may thereafter exercise the trustee's discretion in favor of the beneficiary.
701.0503(3) (3)Trust for an individual with a disability. Subsection (2) does not apply to any trust for an individual with a disability.
701.0503(4) (4)Subsequent modification of court's order. Any order entered by a court under sub. (1) or (2) may be modified upon application of an interested person.
701.0503(5) (5)Exempt assets. Assets of a trust that are exempt from claims of creditors under other statutes are not subject to sub. (1) or (2).
701.0503 History History: 2013 a. 92 ss. 97, 103 to 107, 111, 112; Stats. 2013 s. 701.0503.
701.0503 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).
701.0503 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.
701.0504 701.0504 Discretionary trusts; effect of standard.
701.0504(1)(1)For purposes of this subchapter, and except as provided in sub. (3), a beneficiary's interest in a trust that is subject to the trustee's discretion does not constitute an interest in property or an enforceable right even if the discretion is expressed in the form of a standard of distribution or the beneficiary is then serving as sole trustee or cotrustee.
701.0504(2) (2)Except as provided in this subchapter, a creditor or other claimant may not attach present or future distributions from a beneficiary's interest in property or an enforceable right, obtain an order from a court forcing the judicial sale of the interest or compelling the trustee to make distributions, or reach the interest or right by any other means, even if the trustee has abused the trustee's discretion.
701.0504(3) (3)Subsections (1) and (2) do not apply if a beneficiary is acting as sole trustee of a trust for his or her benefit and his or her discretion to make distributions to himself or herself is not limited by an ascertainable standard or the consent of a party holding an adverse interest to the beneficiary.
701.0504(4)(a)(a) Except as provided in par. (b), this section does not limit the right of a beneficiary to maintain a judicial proceeding against a trustee for an abuse of discretion or failure to comply with a standard for distribution.
701.0504(4)(b) (b) The right of a beneficiary described in par. (a) may not be exercised by a creditor.
701.0504 History History: 2013 a. 92.
701.0505 701.0505 Creditor's claim against settlor.
701.0505(1)(a) (a) Whether or not the terms of a trust include a spendthrift provision and except as provided in par. (b), the following rules apply to claims of a settlor's creditors:
701.0505(1)(a)1. 1. During the lifetime of the settlor, the property of a revocable trust is subject to claims of the settlor's creditors.
701.0505(1)(a)2. 2. With respect to an irrevocable trust that is not a trust for an individual with a disability, upon application of a judgment creditor of the settlor, the court may, if the trust instrument requires or authorizes the trustee to make payments of income or principal to or for the settlor, order the trustee to satisfy part or all of the judgment out of part or all of the payments of income or principal as they are due, presently or in the future, or which are payable in the trustee's discretion. If a trust has more than one settlor, the amount the judgment creditor of a particular settlor may reach may not exceed the settlor's interest in the trust.
701.0505(1)(a)3. 3. After the death of a settlor, and subject to the settlor's right to direct the source from which liabilities will be paid, the property of a trust that was revocable at the settlor's death is subject to claims of the settlor's creditors, costs of administration of the settlor's estate, the expenses of the settlor's funeral and disposal of remains, and statutory allowances to a surviving spouse and children to the extent the settlor's probate estate is inadequate to satisfy those claims, costs, expenses, and allowances.
701.0505(1)(b) (b) Assets of a trust that are exempt from claims of creditors under other statutes are not subject to par. (a).
701.0505(2) (2)For purposes of this subchapter, all of the following apply:
701.0505(2)(a) (a) During the period the power may be exercised, the holder of a power of withdrawal is treated in the same manner as the settlor of a revocable trust to the extent of the property subject to the power.
701.0505(2)(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:
701.0505(2)(b)1. 1. A power described under par. (c).
701.0505(2)(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 following:
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2017-18 Wisconsin Statutes updated through 2019 Wis. Act 50 and through all Supreme Court and Controlled Substances Board Orders filed before and in effect on December 6, 2019. Published and certified under s. 35.18. Changes effective after December 6, 2019, are designated by NOTES. (Published 12-6-19)