SB759: Bill Text

SB759,,510 1. The first trust and a 2nd trust are both grantor trusts, in whole or in part, the first trust grants the settlor or another person the power to cause the first trust to cease to be a grantor trust, and the 2nd trust does not grant an equivalent power to the settlor or other person.

SB759,,511 2. The first trust is a nongrantor trust and a 2nd trust is a grantor trust, in whole or in part, with respect to the settlor, unless any of the following applies:

SB759,,512 a. The settlor has the power at all times to cause the 2nd trust to cease to be a grantor trust.

SB759,,513 b. The first-trust instrument contains a provision granting the settlor or another person a power that would cause the first trust to cease to be a grantor trust and the 2nd-trust instrument contains the same provision.

SB759,,514 701.1320 Duration of 2nd trust. (1) Subject to sub. (2), a 2nd trust may have a duration that is the same as or different from the duration of the first trust.

SB759,,515 (2) To the extent that property of a 2nd trust is attributable to property of the first trust, the property of the 2nd trust is subject to any rules governing maximum perpetuity, accumulation, or suspension of the power of alienation that apply to property of the first trust.

SB759,,516 701.1321 Need to distribute not required. An authorized fiduciary may exercise the decanting power whether or not under the first trust’s discretionary distribution standard the fiduciary would have made or could have been compelled to make a discretionary distribution of principal at the time of the exercise.

SB759,,517 701.1322 Saving provision. (1) If exercise of the decanting power would be effective under this subchapter except that the 2nd-trust instrument in part does not comply with this subchapter, the exercise of the power is effective and the following rules apply with respect to the principal of the 2nd trust attributable to the exercise of the power:

SB759,,518 (a) A provision in the 2nd-trust instrument that is not permitted under this subchapter is void to the extent necessary to comply with this subchapter.

SB759,,519 (b) A provision required by this subchapter to be in the 2nd-trust instrument that is not contained in the instrument is deemed to be included in the instrument to the extent necessary to comply with this subchapter.

SB759,,520 (2) If a trustee or other fiduciary of a 2nd trust determines that sub. (1) applies to a prior exercise of the decanting power, the fiduciary shall take corrective action consistent with the fiduciary’s duties.

SB759,,521 701.1323 Trust for care of animal. (1) The decanting power may be exercised over an animal trust that has an animal protector to the extent the trust could be decanted under this subchapter if each animal that benefits from the trust were an individual, if the animal protector consents in a signed record to the exercise of the power.

SB759,,522 (2) An animal protector has the rights under this subchapter of a qualified beneficiary.

SB759,,523 (3) Notwithstanding any other provision of this subchapter, if a first trust is an animal trust, in an exercise of the decanting power, the 2nd trust must provide that trust property may be applied only to its intended purpose for the period the first trust benefitted the animal.

SB759,,524 701.1324 Terms of 2nd trust. A reference in this chapter to a trust instrument or terms of the trust includes a 2nd-trust instrument and the terms of the 2nd trust.

SB759,,525 701.1325 Settlor. (1) For purposes of law of this state other than this subchapter and subject to sub. (2), a settlor of a first trust is deemed to be the settlor of the 2nd trust with respect to the portion of the principal of the first trust subject to the exercise of the decanting power.

SB759,,526 (2) In determining settlor intent with respect to a 2nd trust, the intent of a settlor of the first trust, a settlor of the 2nd trust, and the authorized fiduciary may be considered.

SB759,,527 701.1326 Later-discovered property. (1) Except as otherwise provided in sub. (3), if exercise of the decanting power was intended to distribute all the principal of the first trust to one or more 2nd trusts, later-discovered property belonging to the first trust and property paid to or acquired by the first trust after the exercise of the power is part of the trust estate of the 2nd trust or trusts.

SB759,,528 (2) Except as otherwise provided in sub. (3), if exercise of the decanting power was intended to distribute less than all the principal of the first trust to one or more 2nd trusts, later-discovered property belonging to the first trust or property paid to or acquired by the first trust after exercise of the power remains part of the trust estate of the first trust.

SB759,,529 (3) An authorized fiduciary may provide in an exercise of the decanting power or by the terms of a 2nd trust for disposition of later-discovered property belonging to the first trust or property paid to or acquired by the first trust after exercise of the power.

SB759,,530 701.1327 Obligations. A debt, liability, or other obligation enforceable against property of a first trust is enforceable to the same extent against the property when held by the 2nd trust after exercise of the decanting power.

SB759,118 Section 118. Chapter 702 of the statutes is repealed and recreated to read:

SB759,,532 CHAPTER 702

SB759,,533 UNIFORM POWERS OF APPOINTMENT ACT

SB759,,534 SUBCHAPTER I

SB759,,535 GENERAL PROVISIONS

SB759,,536 702.101 Short title. This act may be cited as the Uniform Powers of Appointment Act.

SB759,,537 702.102 Definitions. In this chapter:

SB759,,538 (1) “Appointee” means a person to which a powerholder makes an appointment of appointive property.

SB759,,539 (2) “Appointive property” means the property or property interest subject to a power of appointment.

SB759,,540 (3) “Blanket-exercise clause” means a clause in an instrument that exercises a power of appointment and is not a specific-exercise clause. “Blanket-exercise clause” includes a clause that does any of the following:

SB759,,541 (a) Expressly uses the words “any power” in exercising a power of appointment the powerholder has.

SB759,,542 (b) Expressly uses the words “any property” in appointing any property over which a powerholder has a power of appointment.

SB759,,543 (c) Disposes of all property subject to disposition by the powerholder.

SB759,,544 (4) “Broad limited power of appointment” means a power of appointment exercisable in favor of anyone other than the powerholder, the powerholder’s estate, the powerholder’s creditors, or the creditors of the powerholder’s estate.

SB759,,545 (5) “Donor” means a person that creates a power of appointment.

SB759,,546 (6) “Exclusionary power of appointment” means a power of appointment exercisable in favor of one or more permissible appointees to the exclusion of the other permissible appointees.

SB759,,547 (7) “General power of appointment” means a power of appointment exercisable in favor of the powerholder, the powerholder’s estate, a creditor of the powerholder, or a creditor of the powerholder’s estate.

SB759,,548 (8) “Gift-in-default clause” means a clause that identifies a taker in default of appointment.

SB759,,549 (9) “Impermissible appointee” means a person that is not a permissible appointee.

SB759,,550 (10) “Instrument” means a writing.

SB759,,551 (11) “Nongeneral power of appointment” means a power of appointment that is not a general power of appointment.

SB759,,552 (12) “Permissible appointee” means a person in whose favor a powerholder may exercise a power of appointment.

SB759,,553 (13) “Person” means an individual, estate, trust, business or nonprofit entity, public corporation, government or governmental subdivision, agency, or instrumentality, or other legal entity.

SB759,,554 (14) “Power of appointment” means a power that enables a powerholder acting in a nonfiduciary capacity to designate a recipient of an ownership interest in or another power of appointment over the appointive property. “Power of appointment” does not include a power of attorney.

SB759,,555 (15) “Powerholder” means a person in which a donor creates a power of appointment.

SB759,,556 (16) “Presently exercisable power of appointment” means a power of appointment exercisable by the powerholder at the relevant time. “Presently exercisable power of appointment” includes a power of appointment that is not exercisable until the occurrence of a specified event, the satisfaction of an ascertainable standard, or the passage of a specified time, and only after the occurrence of the specified event, the satisfaction of the ascertainable standard, or the passage of the specified time, but does not include a power exercisable only at the powerholder’s death.

SB759,,557 (17) “Specific-exercise clause” means a clause in an instrument that specifically refers to and exercises a particular power of appointment.

SB759,,558 (18) “Taker in default of appointment” means a person that takes all or part of the appointive property to the extent the powerholder does not effectively exercise the power of appointment.

SB759,,559 (19) “Terms of the instrument” means the manifestation of the intent of the maker of the instrument regarding the instrument’s provisions as expressed in the instrument or as may be established by other evidence that would be admissible in a legal proceeding.

SB759,,560 702.103 Governing law. Unless the terms of the instrument creating a power of appointment manifest a contrary intent, the creation, revocation, or amendment of a power of appointment is governed by the law of the donor’s domicile at the relevant time. The exercise, release, or disclaimer of a power of appointment, or the revocation or amendment of an exercise, release, or disclaimer of a power of appointment is governed by the law of the powerholder’s domicile at the relevant time.

SB759,,561 702.104 Common law and principles of equity. The common law and principles of equity supplement this chapter, except to the extent modified by this chapter or any other state law.

SB759,,562 702.105 Default rules. The terms of a governing instrument prevail over any provision of this subchapter.

SB759,,563 SUBCHAPTER II

SB759,,565 CREATION, REVOCATION, AND AMENDMENT OF POWER OF APPOINTMENT

SB759,,566 702.201 Creation of power of appointment. (1) A power of appointment is created only if the instrument creating the power satisfies all of the following:

SB759,,567 (a) The instrument is valid under applicable law.

SB759,,568 (b) Except as provided in sub. (2), the instrument governs the disposition of the appointive property.

SB759,,569 (c) The terms of the instrument manifest the donor’s intent to create in a powerholder a power of appointment over the appointive property exercisable in favor of a permissible appointee.

SB759,,570 (2) Subsection (1) (b) does not apply to a power of appointment that is created by the exercise of a power of appointment.

SB759,,571 (3) A power of appointment may not be created in a deceased individual.

SB759,,572 (4) A power of appointment may be created in an unborn or unascertained powerholder.

SB759,,573 702.202 Nontransferability. A powerholder may not transfer a power of appointment. If a powerholder dies without exercising or releasing a power of appointment, the power lapses.

SB759,,574 702.203 Presumption of unlimited authority. Subject to ss. 702.204 and 702.205, and unless the terms of the instrument creating a power of appointment manifest a contrary intent, a power of appointment is all of the following:

SB759,,575 (1) A presently exercisable power of appointment.

SB759,,576 (2) An exclusionary power of appointment.

SB759,,577 (3) A general power of appointment.

SB759,,578 702.204 Exception to presumption of unlimited authority. Unless the terms of the instrument creating a power of appointment manifest a contrary intent, the power is a nongeneral power of appointment if all of the following apply:

SB759,,579 (1) The power is exercisable only at the powerholder’s death.

SB759,,580 (2) The permissible appointees of the power are a defined and limited class that does not include the powerholder’s estate, the powerholder’s creditors, or the creditors of the powerholder’s estate.

SB759,,581 702.205 Rules of classification. (1) In this section, “adverse party” means a person with a substantial beneficial interest in appointive property that would be affected adversely by a powerholder’s exercise or nonexercise of a power of appointment in favor of the powerholder, the powerholder’s estate, a creditor of the powerholder, or a creditor of the powerholder’s estate.

SB759,,582 (2) If a powerholder may exercise a power of appointment only with the consent or joinder of an adverse party, the power is a nongeneral power of appointment.

SB759,,583 (3) If the permissible appointees of a power of appointment are not defined and limited, the power is an exclusionary power of appointment.

SB759,,584 702.206 Power to revoke or amend. A donor may revoke or amend a power of appointment only to the extent that any of the following applies:

SB759,,585 (1) The instrument creating the power is revocable by the donor.

SB759,,586 (2) The donor reserves a power of revocation or amendment over the power of appointment in the instrument.

SB759,,587 SUBCHAPTER III

SB759,,588 EXERCISE OF POWER OF APPOINTMENT

SB759,,589 702.301 Requisites for exercise of power of appointment. (1) (a) A power of appointment is exercised only if all of the following apply:

SB759,,590 1. The instrument exercising the power is valid under applicable law.

SB759,,591 2. The terms of the instrument exercising the power do all of the following:

SB759,,592 a. Manifest the powerholder’s intent to exercise the power.

SB759,,593 b. Subject to s. 702.304, satisfy the requirements of exercise, if any, imposed by the donor.

SB759,,594 (b) A power of appointment is exercised under par. (a) only to the extent the appointment is a permissible exercise of the power.

SB759,,595 (2)  If the donor requires the consent of the donor or any other person for the exercise of a power of appointment, the consent must be expressed in the instrument exercising the power of appointment or in a separate written instrument, signed in either case by the persons whose consent is required. If any person whose consent is required dies or becomes legally incapable of consenting, the power of appointment may be exercised by the powerholder without the consent of that person unless the terms of the instrument creating the power of appointment manifest a contrary intent.

SB759,,596 (3) (a) Except as provided in par. (b) and unless the terms of the instrument creating a power of appointment manifest a contrary intent, if a power of appointment is vested in 2 or more persons, the joint powerholders may only exercise the power of appointment unanimously.

SB759,,597 (b) If a power of appointment is vested in 2 or more persons and one or more of the joint powerholders die, become incapable of exercising the power of appointment, or renounce, release, or disclaim the power of appointment, the power of appointment may be exercised unanimously by the other powerholders.

SB759,,598 702.302 Intent to exercise: determining intent from residuary clause. (1) In this section:

SB759,,599 (a) “Residuary clause” does not include a residuary clause containing a blanket-exercise clause or a specific-exercise clause.