SB759: Bill Text

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).

SB759,,404 (b) Include as a presumptive remainder beneficiary or successor beneficiary a person that is not a current beneficiary, presumptive remainder beneficiary, or successor beneficiary of the first trust, except as otherwise provided in sub. (4).

SB759,,405 (c) Reduce or eliminate a vested interest.

SB759,,406 (d) Fail to be a trust described in 42 USC 1396p (d) (4) (A) or (C) if the first trust is a trust described in 42 USC 1396p (d) (4) (A) or (C).

SB759,,407 (4) Subject to sub. (3) (c) and s. 701.1314, in an exercise of the decanting power under this section, a 2nd trust may be a trust created or administered under the law of any jurisdiction and may do any of the following:

SB759,,408 (a) Retain a power of appointment granted in the first trust.

SB759,,409 (b) Omit a power of appointment granted in the first trust, other than a presently exercisable general power of appointment.

SB759,,410 (c) Create or modify a power of appointment if the powerholder is a current beneficiary of the first trust and the authorized fiduciary has expanded distributive discretion to distribute principal to the beneficiary.

SB759,,411 (d) Create or modify a power of appointment if the powerholder is a presumptive remainder beneficiary or successor beneficiary of the first trust, but the exercise of the power may take effect only after the powerholder becomes, or would have become if then living, a current beneficiary.

SB759,,412 (5) A power of appointment described in sub. (4) (a) to (d) may be general or nongeneral. The class of permissible appointees in favor of which the power may be exercised may be broader than or different from the beneficiaries of the first trust.

SB759,,413 (6) If an authorized fiduciary has expanded distributive discretion over part but not all of the principal of a first trust, the fiduciary may exercise the decanting power under this section over that part of the principal over which the authorized fiduciary has expanded distributive discretion.

SB759,,414 701.1312 Decanting power under limited distributive discretion. (1) In this section, “limited distributive discretion” means a discretionary power of distribution that is limited to an ascertainable standard or a reasonably definite standard.

SB759,,415 (2) An authorized fiduciary that has limited distributive discretion over the principal of the first trust for the benefit of one or more current beneficiaries may exercise the decanting power over the principal of the first trust.

SB759,,416 (3) Under this section and subject to s. 701.1314, a 2nd trust may be created or administered under the law of any jurisdiction. Under this section, the 2nd trusts, in the aggregate, must grant each beneficiary of the first trust beneficial interests that are substantially similar to the beneficial interests of the beneficiary in the first trust.

SB759,,417 (3m) Notwithstanding sub. (3), an authorized fiduciary exercising the decanting power under this section may grant to a beneficiary of the 2nd trust a testamentary power of appointment exercisable in favor of the creditors of the beneficiary’s estate, but only if the authorized fiduciary concludes the granting of such power will be unlikely to adversely affect the beneficial interest of the presumptive remainder beneficiaries of the first trust.

SB759,,418 (4) A power to make a distribution under a 2nd trust for the benefit of a beneficiary who is an individual is substantially similar to a power under the first trust to make a distribution directly to the beneficiary. A distribution is for the benefit of a beneficiary if any of the following applies:

SB759,,419 (a) The distribution is applied for the benefit of the beneficiary.

SB759,,420 (b) The beneficiary is under a legal disability or the trustee reasonably believes the beneficiary is incapacitated, and the distribution is made as permitted under this chapter.

SB759,,421 (c) The distribution is made as permitted under the terms of the first-trust instrument and the 2nd-trust instrument for the benefit of the beneficiary.

SB759,,422 (5) If an authorized fiduciary has limited distributive discretion over part but not all of the principal of a first trust, the fiduciary may exercise the decanting power under this section over that part of the principal over which the authorized fiduciary has limited distributive discretion.

SB759,,423 701.1313 Trust for beneficiary with disability. (1) In this section:

SB759,,424 (a) “Beneficiary with a disability” means a beneficiary of a first trust who the special-needs fiduciary believes in good faith is an individual with a disability.

SB759,,425 (b) “Special-needs fiduciary” means, with respect to a trust that has a beneficiary with a disability, any of the following:

SB759,,426 1. A trustee or other fiduciary, other than a settlor, that has discretion to distribute part or all of the principal of a first trust to one or more current beneficiaries.

SB759,,427 2. If no trustee or fiduciary has discretion under subd. 1., a trustee or other fiduciary, other than a settlor, that has discretion to distribute part or all of the income of the first trust to one or more current beneficiaries.

SB759,,428 3. If no trustee or fiduciary has discretion under subds. 1. and 2., a trustee or other fiduciary, other than a settlor, that is required to distribute part or all of the income or principal of the first trust to one or more current beneficiaries.

SB759,,429 (c) “Special-needs trust” means a trust the trustee believes would not be considered a resource for purposes of determining whether an individual with a disability is eligible for the supplemental security income program or the medical assistance program.

SB759,,430 (2) A special-needs fiduciary may exercise the decanting power under s. 701.1311 over the principal of a first trust as if the fiduciary had authority to distribute principal to a beneficiary with a disability subject to expanded distributive discretion if all of the following apply:

SB759,,431 (a) A 2nd trust is a special-needs trust that benefits the beneficiary with a disability.

SB759,,432 (b) The special-needs fiduciary determines that exercise of the decanting power will further the purposes of the first trust.

SB759,,433 (3) In an exercise of the decanting power under this section, the following rules apply:

SB759,,434 (a) Notwithstanding s. 701.1311 (3) (b), the interest in the 2nd trust of a beneficiary with a disability may do any of the following:

SB759,,435 1. Be an account in a pooled trust for the benefit of the beneficiary with a disability described in 42 USC 1396p (d) (4) (C) that includes the trust retention provisions permitted by 42 USC 1396p (d) (4) (C) (iv).

SB759,,436 2. Contain payback provisions complying with reimbursement requirements of Medicaid law under 42 USC 1396p (d) (4) (A) or (C).

SB759,,437 (b) Section 701.1311 (3) (c) does not apply to the interests of the beneficiary with a disability.

SB759,,438 (c) Except as affected by any change to the interests of the beneficiary with a disability or by the effects on remainder beneficiaries of a transfer to a 2nd trust under par. (a), if the special needs fiduciary has limited distributive discretion over the principal of the 2nd trust, or if there are 2 or more 2nd trusts, the 2nd trusts in the aggregate must grant each other beneficiary of the first trust beneficial interests in the 2nd trusts that are substantially similar to the beneficiary’s beneficial interests in the first trust.

SB759,,439 701.1314 Protection of charitable interest. (1) In this section:

SB759,,440 (a) “Determinable charitable interest” means an interest that is all of the following:

SB759,,441 1. A charitable interest.

SB759,,442 2. Entitled to receive a mandatory distribution currently, periodically, on the occurrence of a specified event, or after the passage of a specified time.

SB759,,443 3. Unconditional or held solely for charitable purposes.

SB759,,444 (b) “Unconditional” means not subject to the occurrence of a specified event that is not certain to occur, other than a requirement in a trust instrument that a charitable organization be in existence or qualify under a particular provision of the Internal Revenue Code, on the date of the distribution, if the charitable organization meets the requirement on the date of determination.