SB759: Bill Text

SB759,,314 701.1005 (2) A report or other record adequately discloses the existence of a potential claim for breach of trust if it provides sufficient information so that the beneficiary or representative knows of the potential claim or should have inquired into its existence.

SB759,114 Section 114. 701.1009 (2) of the statutes is amended to read:

SB759,,316 701.1009 (2) At the time of the consent, release, or ratification, the beneficiary did not have knowledge or a reasonable opportunity to obtain knowledge of the beneficiary’s rights or of the material facts relating to the breach.

SB759,115 Section 115. 701.1105 (1) (b) of the statutes is amended to read:

SB759,,318 701.1105 (1) (b) Is given in the manner provided in ch. 879, except that notice by publication is not required s. 701.0109.

SB759,116 Section 116. 701.1136 (1) of the statutes is amended to read:

SB759,,320 701.1136 (1) Distribution of income. Except as otherwise determined by the trustee or a court under s. 701.1106 with respect to unitrust distributions, if a beneficiary is entitled to receive income from a trust, but the trust instrument fails to specify how frequently it is to be paid a current beneficiary is to receive income from the trust, the trustee shall distribute at least annually the income to which such the current beneficiary is entitled at least annually.

SB759,117 Section 117. Subchapter XIII of chapter 701 [precedes 701.1301] of the statutes is created to read:

SB759,,322 CHAPTER 701

SB759,,324 SUBCHAPTER XIII UNIFORM TRUST DECANTING ACT

SB759,,325 701.1301 Short title. This subchapter may be cited as the Uniform Trust Decanting Act.

SB759,,326 701.1302 Definitions. In this subchapter:

SB759,,327 (1) “Authorized fiduciary” means any of the following:

SB759,,328 (a) A trustee, a directing party, or another fiduciary, other than a settlor, that has discretion to distribute or direct a trustee to distribute part or all of the principal of the first trust to one or more current beneficiaries.

SB759,,329 (b) A special fiduciary appointed under s. 701.1309.

SB759,,330 (c) A special-needs fiduciary under s. 701.1313.

SB759,,331 (d) A trust protector who has been granted a decanting power, which may be exercised in a fiduciary or nonfiduciary capacity, under s. 701.0818 (2) (b) 2. h.

SB759,,332 (2) “Decanting power” means the power of an authorized fiduciary under this subchapter to distribute property of a first trust to one or more 2nd trusts or to modify the terms of the first trust.

SB759,,333 (3) “Expanded distributive discretion” means a discretionary power of distribution that is not limited to an ascertainable standard or a reasonably definite standard.

SB759,,334 (4) “First trust” means a trust over which an authorized fiduciary may exercise the decanting power.

SB759,,335 (5) “First-trust instrument” means the trust instrument for a first trust.

SB759,,336 (6) “Reasonably definite standard” means a clearly measurable standard under which a holder of a power of distribution is legally accountable within the meaning of section 674 (b) (5) (A) of the Internal Revenue Code and any applicable regulations.

SB759,,337 (7) “Second trust” means any of the following:

SB759,,338 (a) A first trust after modification under this subchapter.

SB759,,339 (b) A trust to which a distribution of property from a first trust is or may be made under this subchapter.

SB759,,340 (8) “Second-trust instrument” means the trust instrument for a 2nd trust.

SB759,,341 701.1303 Scope. (1) Except as otherwise provided in subs. (2) and (3), this subchapter applies to an express trust that is irrevocable or revocable by the settlor only with the consent of the trustee or a person holding an adverse interest.

SB759,,342 (2) This subchapter does not apply to a trust held solely for charitable purposes.

SB759,,343 (3) Subject to s. 701.1315, a trust instrument may restrict or prohibit exercise of the decanting power.

SB759,,344 (4) This subchapter does not limit the power of an authorized fiduciary or other person to distribute or appoint property in further trust or to modify a trust under the trust instrument, law of this state other than this subchapter, common law, a court order, or a nonjudicial settlement agreement.

SB759,,345 (5) This subchapter does not affect the ability of a settlor to provide in a trust instrument for the distribution of the trust property or appointment in further trust of the trust property or for modification of the trust instrument.

SB759,,346 701.1304 Fiduciary duty. (1) In exercising the decanting power, an authorized fiduciary shall act in accordance with its fiduciary duties, including the duty to act in accordance with the purposes of the first trust. If a trustee or other authorized fiduciary is directed by another authorized fiduciary to exercise the decanting power, the trustee or other directed authorized fiduciary shall act to comply with the exercise of the decanting power and the trustee or other directed authorized fiduciary shall not be liable for the action regardless of any fiduciary duty that the trustee or other directed authorized fiduciary might otherwise have.

SB759,,347 (2) This subchapter does not create or imply a duty to exercise the decanting power or to inform beneficiaries about the applicability of this subchapter.

SB759,,348 (3) Except as otherwise provided in a first-trust instrument, for purposes of this subchapter and ss. 701.0801 and 701.0802 (2), the terms of the first trust are deemed to include the decanting power.

SB759,,349 701.1305 Application; governing law. This subchapter applies to a trust created before, on, or after the effective date of this section .... [LRB inserts date], if any of the following applies:

SB759,,350 (1) The trust has its principal place of administration in this state, including a trust whose principal place of administration has been changed to this state.

SB759,,351 (2) The trust provides by its trust instrument that it is governed by the law of this state or is governed by the law of this state for the purpose of any of the following:

SB759,,352 (a) Administration, including administration of a trust whose governing law for purposes of administration has been changed to the law of this state.

SB759,,353 (b) Construction of terms of the trust.

SB759,,354 (c) Determining the meaning or effect of terms of the trust.

SB759,,355 701.1306 Reasonable reliance. A trustee or other person that reasonably relies on the validity of a distribution of part or all of the property of a trust to another trust, or a modification of a trust, under this subchapter, law of this state other than this subchapter, or the law of another jurisdiction is not liable to any person for any action or failure to act as a result of the reliance.

SB759,,356 701.1307 Notice; exercise of decanting power. (1) In this section, a notice period begins on the day notice is given under sub. (3) and ends 30 days after the day notice is given.

SB759,,357 (2) Except as otherwise provided in this subchapter, an authorized fiduciary may exercise the decanting power without the consent of any person and without court approval.

SB759,,358 (3) Except as otherwise provided in sub. (6), an authorized fiduciary shall give notice of the intended exercise of the decanting power not later than 30 days before the exercise to all of the following:

SB759,,359 (a) Each settlor of the first trust, if living or then in existence.

SB759,,360 (b) Each qualified beneficiary of the first trust.

SB759,,361 (c) Each holder of a presently exercisable power of appointment over any part or all of the first trust.

SB759,,362 (d) Each person that currently has the right to remove or replace the authorized fiduciary.

SB759,,363 (e) Each directing party, trust protector, or other fiduciary of the first trust.

SB759,,364 (f) Each directing party, trust protector, or other fiduciary of the 2nd trust.

SB759,,365 (g) If s. 701.1314 (2) applies, the attorney general.

SB759,,366 (4) An authorized fiduciary is not required to give notice under sub. (3) to a person that is not known to the fiduciary or is known to the fiduciary but cannot be located by the fiduciary after reasonable diligence.

SB759,,367 (5) A notice under sub. (3) must do all of the following:

SB759,,368 (a) Specify the manner in which the authorized fiduciary intends to exercise the decanting power.

SB759,,369 (b) Specify the proposed effective date for exercise of the power.

SB759,,370 (c) Include a copy of the first-trust instrument.

SB759,,371 (d) Include a copy of all 2nd-trust instruments.

SB759,,372 (6) The decanting power may be exercised before expiration of the notice period under sub. (1) if all persons entitled to receive notice waive the period in a signed record.

SB759,,373 (7) The receipt of notice, waiver of the notice period, or expiration of the notice period does not affect the right of a person to file an application under s. 701.1309 asserting any of the following:

SB759,,374 (a) That an attempted exercise of the decanting power is ineffective because it did not comply with this subchapter or was an abuse of discretion or breach of fiduciary duty.

SB759,,375 (b) That s. 701.1322 applies to the exercise of the decanting power.

SB759,,376 (8) An exercise of the decanting power is not ineffective because of the failure to give notice to one or more persons under sub. (3) if the authorized fiduciary acted with reasonable care to comply with sub. (3).

SB759,,377 701.1309 Court involvement. (1) On application of an authorized fiduciary, a person entitled to notice under s. 701.1307 (3), a beneficiary, or with respect to a charitable interest the attorney general or other person that has standing to enforce the charitable interest, the court may do any of the following:

SB759,,378 (a) Provide instructions to the authorized fiduciary regarding whether a proposed exercise of the decanting power is permitted under this subchapter and consistent with the fiduciary duties of the authorized fiduciary.

SB759,,379 (b) Appoint a special fiduciary and authorize the special fiduciary to determine whether the decanting power should be exercised under this subchapter and to exercise the decanting power.

SB759,,380 (c) Approve an exercise of the decanting power.

SB759,,381 (d) Determine that a proposed or attempted exercise of the decanting power is ineffective for any of the following reasons:

SB759,,382 1. After applying s. 701.1322, the proposed or attempted exercise does not or did not comply with this subchapter.

SB759,,383 2. The proposed or attempted exercise would be or was an abuse of the fiduciary’s discretion or a breach of fiduciary duty.

SB759,,384 3. The proposed or attempted exercise is expressly prohibited under the terms of the first trust.

SB759,,385 (e) Determine the extent to which s. 701.1322 applies to a prior exercise of the decanting power.

SB759,,386 (f) Provide instructions to the trustee regarding the application of s. 701.1322 to a prior exercise of the decanting power.

SB759,,387 (g) Order other relief to carry out the purposes of this subchapter.

SB759,,388 (2) On application of an authorized fiduciary, the court may approve any of the following:

SB759,,389 (a) An increase in the fiduciary’s compensation under s. 701.1316.

SB759,,390 (b) A modification under s. 701.1318 of a provision granting a person the right to remove or replace the fiduciary.

SB759,,391 701.1310 Formalities. An exercise of the decanting power must be made in a record signed by an authorized fiduciary. The signed record must, directly or by reference to the notice required by s. 701.1307, identify the first trust and the 2nd trust or trusts and state the property of the first trust being distributed to each 2nd trust and the property, if any, that remains in the first trust.

SB759,,392 701.1311 Decanting power under expanded distributive discretion. (1) In this section:

SB759,,393 (a) “Noncontingent right” means a right that is not subject to the exercise of discretion or the occurrence of a specified event that is not certain to occur. The term does not include a right held by a beneficiary if any person has discretion to distribute property subject to the right to any person other than the beneficiary or the beneficiary’s estate.

SB759,,394 (b) “Successor beneficiary” means a beneficiary that is not a qualified beneficiary on the date the beneficiary’s qualification is determined. The term does not include a person that is a beneficiary only because the person holds a nongeneral power of appointment.

SB759,,395 (c) “Vested interest” means any of the following:

SB759,,396 1. A right to a mandatory distribution that is a noncontingent right as of the date of the exercise of the decanting power.

SB759,,397 2. A current and noncontingent right, annually or more frequently, to a mandatory distribution of income, a specified dollar amount, or a percentage of value of some or all of the trust property.

SB759,,398 3. A current and noncontingent right, annually or more frequently, to withdraw income, a specified dollar amount, or a percentage of value of some or all of the trust property.

SB759,,399 4. A presently exercisable general power of appointment.

SB759,,400 5. A right to receive an ascertainable part of the trust property on the trust’s termination that is not subject to the exercise of discretion or to the occurrence of a specified event that is not certain to occur.

SB759,,401 (2) Subject to sub. (3) and s. 701.1314, an authorized fiduciary that has expanded distributive discretion over the principal of a first trust for the benefit of one or more current beneficiaries may exercise the decanting power over the principal of the first trust.

SB759,,402 (3) Subject to s. 701.1313, in an exercise of the decanting power under this section, a 2nd trust may not do any of the following:

SB759,,403 (a) Include as a current beneficiary a person that is not a current beneficiary of the first trust, except as otherwise provided in sub. (4).