LRB-4358/1
KMS:skw
2023 - 2024 LEGISLATURE
November 9, 2023 - Introduced by Senators Knodl and Felzkowski, cosponsored
by Representatives O'Connor, Dittrich, Murphy, Mursau, Nedweski and
Rettinger. Referred to Committee on Shared Revenue, Elections and
Consumer Protection.
SB667,1,2 1An Act to create chapter 699 of the statutes; relating to: domestic asset
2protection trusts.
Analysis by the Legislative Reference Bureau
This bill creates a new type of trust, called a legacy trust. A legacy trust is an
irrevocable trust that contains a spendthrift provision and that appoints at least one
qualified trustee. Under the bill, a person, called a transferor, may create a legacy
trust into which he or she may place assets that will be managed by the trustee. The
transferor may also be a co-trustee or a beneficiary of the legacy trust. The terms
of the trust may grant a transferor the power to remove and replace a trustee or
advisor and to direct trust investments.
A person who places assets in a trust is a settlor. Under current law, generally,
the assets of a settlor are subject to creditor claims. If the assets are placed in a
revocable trust, the assets are subject to the claims of the settlor's creditors. If the
assets are placed in an irrevocable trust and the trust is not for an individual with
a disability, 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 a judgment out of payments from the trust.
Current law also provides a spendthrift provision, which is a term of a trust that
restricts voluntary or involuntary transfers of a beneficiary's interest in the trust.
Under current law, a spendthrift provision is valid only if the beneficiary is someone
other than the settlor, or if the beneficiary is disabled. Under current law there are
exceptions that provide that a spendthrift provision does not protect assets from
claims for child support under any circumstance or claims for public support unless
the beneficiary is disabled.

Under the bill, a legacy trust must have a spendthrift provision, and none of the
current law restrictions to spendthrift trusts apply. Assets in a legacy trust are not
subject to claims for public support, but they are subject to claims for child support.
Additionally, under the bill, a creditor generally may not bring an action of any kind
against a transferor, against a trustee of a legacy trust, or against any assets that are
held by a legacy trust. There are three exceptions to this prohibition. First, an action
may be brought if the transfer of the asset was made to hinder, delay, or defraud the
creditor. Second, an action may be brought by a creditor who was a creditor of the
transferor when the disposition was made if the creditor commences the action
within the later of 18 months after the transfer or six months after the creditor
discovers or reasonably should have discovered the transfer. Third, an action may
be brought by a creditor who becomes a creditor after the transfer occurs if the
creditor commences the action no later than 18 months after the transfer occurred.
Under the bill, a creditor includes a person seeking to enforce a judgment entered by
a court or other authorized adjudicative body. No other actions are permitted for any
reason.
The people of the state of Wisconsin, represented in senate and assembly, do
enact as follows:
SB667,1 1Section 1. Chapter 699 of the statutes is created to read:
SB667,2,22 Chapter 699
SB667,2,3 3Legacy Trusts
SB667,2,4 4699.01 Definitions. In this chapter:
SB667,2,6 5(1) “Advisor" means a person who, under the terms of a legacy trust, is granted
6the power to do any of the following:
SB667,2,77 (a) Remove or appoint a trustee of the legacy trust.
SB667,2,98 (b) Direct, consent to, or disapprove a trustee's actual or proposed investment,
9distribution, or any other action related to assets of the legacy trust.
SB667,2,11 10(2) “Asset" means property of a transferor but does not include any of the
11following:
SB667,2,1212 (a) Property to the extent it is encumbered by a valid lien.
SB667,3,2
1(b) Property to the extent it is generally exempt under nonbankruptcy law at
2the time of a qualified disposition.
SB667,3,63 (c) Property held as marital property with rights of survivorship to the extent
4that under the law governing the marital property at the time of a qualified
5disposition the property is not subject to process by a creditor holding a claim against
6only one spouse.
SB667,3,97 (d) Property transferred from a nonlegacy trust to a legacy trust to the extent
8that the property would not be subject to attachment under applicable
9nonbankruptcy law that governs the nonlegacy trust.
SB667,3,10 10(3) “Beneficiary" has the meaning given in s. 701.0103 (3).
SB667,3,13 11(4) “Claim" means a right to payment, whether or not the right is reduced to
12judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured,
13disputed, undisputed, legal, equitable, secured, or unsecured.
SB667,3,15 14(5) “Creditor" means a person who has a claim against a transferor and
15includes any transferee of, assignee of, or successor to the claim.
SB667,3,16 16(6) “Debt" means liability on a claim.
SB667,3,20 17(7) “Disposition" means a transfer, conveyance, or assignment of a property
18interest, including a partial, contingent, undivided, or co-ownership property
19interest. “Disposition" includes an exercise of a general power of appointment that
20results in a transfer of property to a trustee but does not include any of the following:
SB667,3,2221 (a) The release or relinquishment of a property interest that is subject to a
22qualified disposition until the release or relinquishment.
SB667,3,2423 (b) The exercise of a special power of appointment that results in a transfer of
24property to a trustee.
SB667,3,2525 (c) A disclaimer under s. 700.27 or 854.13.
SB667,4,3
1(8) “Investment decision" means a decision regarding the retention, purchase,
2sale, exchange, tender, or other action affecting the ownership of or rights in an
3investment.
SB667,4,5 4(9) “Legacy trust" means a trust created by a written instrument, the terms of
5which do all of the following:
SB667,4,86 (a) Appoint at least one qualified trustee to accept property that is the subject
7of a disposition, regardless of whether the terms of the trust also appoint a
8nonqualified trustee.
SB667,4,109 (b) Expressly designate the laws of this state to govern the meaning and effect
10of the terms of the trust, in whole or in part.
SB667,4,1111 (c) Expressly provide that the trust is irrevocable.
SB667,4,1312 (d) Include a spendthrift provision that applies to an interest of a beneficiary
13in trust property, including an interest of a transferor who is a beneficiary.
SB667,4,14 14(10) “Lien" has the meaning given in s. 242.01 (8).
SB667,4,15 15(11) “Nonlegacy trust" means a trust that is not a legacy trust.
SB667,4,16 16(12) “Nonqualified trustee" means a trustee who is not a qualified trustee.
SB667,4,17 17(13) “Person" has the meaning given in s. 701.0103 (17).
SB667,4,18 18(14) “Property" has the meaning given in s. 701.0103 (20).
SB667,4,20 19(15) “Qualified disposition" means a disposition by a transferor to any trustee
20of a legacy trust.
SB667,4,22 21(16) “Qualified trustee" means a trustee who is not a transferor and to whom
22one of the following applies:
SB667,4,2423 (a) If the trustee is an individual, the individual resides and is domiciled in this
24state.
SB667,5,3
1(b) If the trustee is a trust company or a bank, the trust company or bank is
2organized under federal law, state law, or the laws of another state, and the trust
3company or bank maintains an office in this state.
SB667,5,4 4(18) “Spendthrift provision" has the meaning given in s. 701.0103 (25).
SB667,5,6 5(19) “Transferor" means a person who directly or indirectly makes a disposition
6to a legacy trust, including a settlor, as defined in s. 701.0103 (23).
SB667,5,7 7(20) “Valid lien" has the meaning given in s. 242.01 (13).
SB667,5,11 8699.015 Applicability. Unless the terms of a legacy trust provide otherwise,
9this chapter governs the construction, operation, and enforcement in this state of a
10legacy trust, whether created in this state or any other state, if any of the following
11applies:
SB667,5,13 12(1) Any of the land, rents, issues, or profits that are the subject of a qualified
13disposition are located in this state.
SB667,5,15 14(2) Any portion of personal property, interest of money, or dividends of stock
15that is the subject of a qualified disposition is located in this state.
SB667,5,16 16(3) The transferor's legal residence is in this state.
SB667,5,19 17(4) A qualified trustee of the legacy trust has the power to maintain records and
18prepare income tax returns for the trust, and all or part of the administration of the
19trust is performed in this state.
SB667,5,23 20699.02 Spendthrift provision; legacy trust. (1) Notwithstanding s.
21701.0502 (1), a spendthrift provision of a legacy trust is not invalid because a
22transferor or a person who is treated as a settlor under s. 701.0505 (2) is also a
23beneficiary of the legacy trust.
SB667,6,6 24(2) Except as otherwise provided in this section, a spendthrift provision in a
25legacy trust restrains both voluntary and involuntary transfers of a transferor's

1interest in the legacy trust. A spendthrift provision in a legacy trust is enforceable
2under any applicable nonbankruptcy law within the meaning of 11 USC 541 (c) (2)
3regardless of whether the legacy trust instrument makes any reference to that
4enforceability. The terms of a legacy trust, including in a spendthrift provision, may
5provide for any other restraint of alienation that are permitted under the laws of this
6state.
SB667,6,8 7(3) Section 701.0503 (2) does not apply to a spendthrift provision in a legacy
8trust.
SB667,6,9 9(4) Section 701.0505 (1) (a) 2. does not apply to a legacy trust.
SB667,6,12 10(5) Nothing in this section may deprive a beneficiary of any exemption right
11that the beneficiary has under any applicable law after the trust property is received
12by the beneficiary.
SB667,6,16 13699.03 Implied power to revoke or to transfer an interest in a legacy
14trust.
None of the following is considered to be, including in combination, a power
15to revoke a legacy trust or to voluntarily or involuntarily transfer an interest in the
16legacy trust:
SB667,6,18 17(1) A transferor's power to veto a distribution of income or principal from the
18legacy trust.
SB667,6,21 19(2) A special power of appointment, as defined in s. 702.02 (7), exercisable by
20a transferor by will or another written document that is effective during the lifetime
21of the transferor or upon the death of the transferor.
SB667,6,23 22(3) The right of a transferor to receive income from the legacy trust in
23accordance with the terms of the legacy trust.
SB667,7,4 24(4) That a transferor is a beneficiary of the legacy trust regardless of whether
25the trust qualifies as a charitable remainder annuity trust under 26 USC 664 (d) (1)

1or as a charitable remainder unitrust under 26 USC 664 (d) (2), even if the transferor
2has the right to release the transferor's retained interest, in whole or in part, in the
3charitable remainder annuity trust or charitable remainder unitrust at any time in
4favor of one or more of the remainder beneficiaries of the legacy trust.
SB667,7,10 5(5) A transferor's annual receipt of a percentage of the value of the legacy trust
6assets, as determined in accordance with the terms of the trust, as long as the amount
7the transferor receives in a year is not more than the amount defined as the income
8of the legacy trust under 26 USC 643 (b) or, for any qualified retirement plan or
9eligible deferred compensation plan that is an asset of the legacy trust, the minimum
10required distribution, as defined in 26 USC 4974 (b).
SB667,7,12 11(6) A transferor's potential or actual receipt or use of principal or income of the
12legacy trust if the potential or actual receipt or use is the result of any of the following:
SB667,7,1613 (a) A qualified trustee's discretion. For purposes of this paragraph, a qualified
14trustee has discretion with respect to the distribution and use of the principal and
15income of a legacy trust unless the terms of the legacy trust expressly provide
16otherwise.
SB667,7,1817 (b) A qualified trustee applying a standard that governs the distribution or use
18of principal or income of the legacy trust.
SB667,7,2319 (c) A qualified trustee acting at the direction of an advisor if the advisor's
20direction is discretionary or pursuant to a standard that governs the distribution or
21use of principal or income under the terms of the legacy trust. For purposes of this
22paragraph, an advisor's direction is discretionary unless the terms of the legacy trust
23expressly provide otherwise.
SB667,7,25 24(7) A transferor's potential or actual right to use real or tangible personal
25property owned by the legacy trust.
SB667,8,3
1(8) A transferor's right to possess and enjoy a qualified interest, as defined in
226 USC 2702 (b), or property held under a qualified personal residence trust, as
3described in 26 USC 2702 (c).
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