SB759: Bill Text

SB759,,608 (2) If the powerholder is also the donor of the power of appointment, a blanket-exercise clause does not extend to the power of appointment unless there is not a gift-in-default clause or the gift-in-default clause is ineffective.

SB759,,609 702.304 Substantial compliance with donor-imposed formal requirement. A powerholder’s substantial compliance with a formal requirement of appointment imposed by the donor, including a requirement that the instrument exercising the power of appointment make reference or specific reference to the power, is sufficient if all of the following apply:

SB759,,610 (1) The powerholder knows of and intends to exercise the power of appointment.

SB759,,611 (2) The powerholder’s manner of attempted exercise of the power of appointment does not impair a material purpose of the donor in imposing the requirement.

SB759,,612 702.305 Permissible appointment. (1) A powerholder of a general power of appointment that permits appointment to the powerholder or the powerholder’s estate may make any appointment, including an appointment in trust or creating a new power of appointment, that the powerholder could make in disposing of the powerholder’s own property.

SB759,,613 (2) A powerholder of a general power of appointment that permits appointment only to the creditors of the powerholder or the creditors of the powerholder’s estate may appoint only to those creditors.

SB759,,614 (3) Unless the terms of the instrument creating a power of appointment manifest a contrary intent, the powerholder of a nongeneral power of appointment may do any of the following:

SB759,,615 (a) Make an appointment in any form, including an appointment in trust, in favor of a permissible appointee.

SB759,,616 (b) Create a general or nongeneral power of appointment in a permissible appointee that may be exercisable in favor of persons other than permissible appointees of the original nongeneral power of appointment.

SB759,,617 (c) Create a nongeneral power of appointment in any person to appoint to one or more of the permissible appointees of the original nongeneral power of appointment.

SB759,,618 702.306 Appointment to a deceased appointee. Subject to s. 854.06, an exercise of a power of appointment is ineffective to the extent it is in favor of a deceased appointee.

SB759,,619 702.307 Impermissible appointment. (1) Except as otherwise provided in s. 702.306, an exercise of a power of appointment is ineffective to the extent it is in favor of an impermissible appointee.

SB759,,620 (2) An exercise of a power of appointment in favor of a permissible appointee is ineffective to the extent the appointment is a fraud on the power.

SB759,,621 702.308 Selective allocation doctrine. If a powerholder exercises a power of appointment in a disposition that also disposes of property the powerholder owns, the owned property and the appointive property must be allocated in the permissible manner that best carries out the powerholder’s intent.

SB759,,622 702.309 Capture doctrine: disposition of ineffectively appointed property under general power. To the extent a powerholder of a general power of appointment, other than a power to withdraw property from, revoke, or amend a trust, makes an ineffective appointment, all of the following apply:

SB759,,623 (1) The gift-in-default clause controls the disposition of the ineffectively appointed property.

SB759,,624 (2) (a) If there is no gift-in-default clause or to the extent the gift-in-default clause is ineffective, the ineffectively appointed property passes to one of the following:

SB759,,625 1. If the powerholder is a permissible appointee and living, the powerholder.

SB759,,626 2. If the powerholder is an impermissible appointee or deceased, the powerholder’s estate if the estate is a permissible appointee.

SB759,,627 (b) If there is no taker under par. (a), the ineffectively appointed property passes under a reversionary interest to the donor or the donor’s transferee or successor in interest.

SB759,,628 702.310 Disposition of unappointed property under released or unexercised general power. To the extent a powerholder releases or fails to exercise a general power of appointment other than a power to withdraw property from, revoke, or amend a trust, all of the following apply:

SB759,,629 (1) The gift-in-default clause controls the disposition of the unappointed property.

SB759,,630 (2) (a) If there is no gift-in-default clause or to the extent the gift-in-default clause is ineffective, except as otherwise provided in par. (b), the unappointed property passes to any of the following:

SB759,,631 1. If the powerholder is a permissible appointee and living, the powerholder.

SB759,,632 2. If the powerholder is an impermissible appointee or deceased, the powerholder’s estate if the estate is a permissible appointee.

SB759,,633 (b) To the extent the powerholder released the power, or if there is no taker under par. (a), the unappointed property passes under a reversionary interest to the donor or the donor’s transferee or successor in interest.

SB759,,634 702.311 Disposition of unappointed property under released or unexercised nongeneral power of appointment. To the extent a powerholder releases, ineffectively exercises, or fails to exercise a nongeneral power of appointment, all of the following apply:

SB759,,635 (1) The gift-in-default clause controls the disposition of the unappointed property.

SB759,,636 (2) (a) If there is no gift-in-default clause or to the extent the gift-in-default clause is ineffective, the unappointed property passes to the permissible appointees if all of the following apply:

SB759,,637 1. The permissible appointees are defined and limited.

SB759,,638 2. The terms of the instrument creating the power do not manifest a contrary intent.

SB759,,639 (b) If there is no taker under par. (a), the unappointed property passes under a reversionary interest to the donor or the donor’s transferee or successor in interest.

SB759,,640 702.312 Disposition of unappointed property if partial appointment to taker in default. Unless the terms of an instrument creating or exercising a power of appointment manifest a contrary intent, if the powerholder makes a valid partial appointment to a taker in default of appointment, the taker in default of appointment may share fully in unappointed property.

SB759,,641 702.313 Appointment to taker in default. If a powerholder makes an appointment to a taker in default of appointment and the appointee would have taken the property under a gift-in-default clause had the property not been appointed, the power of appointment is considered not to have been exercised and the appointee takes under the gift-in-default clause.

SB759,,642 702.314 Powerholder’s authority to revoke or amend exercise. A powerholder may revoke or amend an exercise of a power of appointment only to the extent that any of the following applies:

SB759,,643 (1) The powerholder reserves a power of revocation or amendment in the instrument exercising the power of appointment and, if the power is a nongeneral power of appointment, the terms of the instrument creating the power of appointment do not prohibit the reservation.

SB759,,644 (2) The terms of the instrument creating the power of appointment provide that the exercise of the power of appointment is revocable or amendable.

SB759,,645 702.315 Presumption of nonexercise of a power of appointment. (1) A personal representative, trustee, or other fiduciary who holds property subject to a power of appointment may administer that property as if the power of appointment was not exercised if the personal representative, trustee, or other fiduciary has no notice of the existence of any of the following within 6 months after the death of the powerholder:

SB759,,646 (a) A document purporting to be a will of the powerholder if the power of appointment is exercised by the will.

SB759,,647 (b) Other documentation of the powerholder purporting to exercise the power of appointment if the power of appointment is exercisable other than by a will.

SB759,,648 (2) A personal representative, trustee, or other fiduciary who acts in good faith is not liable to any person for administering property as if a power of appointment was not exercised as provided in sub. (1).

SB759,,649 SUBCHAPTER IV

SB759,,651 DISCLAIMER OR RELEASE; CONTRACT TO APPOINT OR NOT TO APPOINT

SB759,,652 702.401 Disclaimer. (1) A powerholder may disclaim all or part of a power of appointment as provided under ss. 700.27 and 854.13.

SB759,,653 (2) A permissible appointee, appointee, or taker in default of appointment may disclaim all or part of an interest in appointive property, as provided under ss. 700.27 and 854.13.

SB759,,654 702.402 Authority to release. A powerholder may release a power of appointment, in whole or in part, except to the extent the terms of the instrument creating the power prevent the release.

SB759,,655 702.403 Method of release. A powerholder of a releasable power of appointment may release the power in whole or in part by any of the following methods:

SB759,,656 (1) Substantial compliance with a method provided in the terms of the instrument creating the power.

SB759,,657 (2) If the terms of the instrument creating the power do not provide a method, a writing that manifests the powerholder’s intent by clear and convincing evidence.

SB759,,658 702.404 Revocation of amendment of release. A powerholder may revoke or amend a release of a power of appointment only to the extent that any of the following applies:

SB759,,659 (1) The instrument of release is revocable by the powerholder.

SB759,,660 (2) The powerholder reserves a power of revocation or amendment in the instrument of release.

SB759,,661 702.405 Power to contract: presently exercisable power of appointment. A powerholder of a presently exercisable power of appointment may contract to do any of the following:

SB759,,662 (1) Not to exercise the power.

SB759,,663 (2) To exercise the power if the contract when made does not confer a benefit on an impermissible appointee.

SB759,,664 702.406 Power to contract: power of appointment not presently exercisable. A powerholder of a power of appointment that is not presently exercisable may contract to exercise or not to exercise the power only if all of the following apply:

SB759,,665 (1) The powerholder is also the donor of the power.

SB759,,666 (2) The powerholder reserved the power in a revocable trust.

SB759,,667 702.407 Remedy for breach of contract to appoint or not to appoint. The remedy for a powerholder’s breach of a contract to appoint or not to appoint appointive property is limited to damages payable out of the appointive property or, if appropriate, specific performance of the contract.

SB759,,668 SUBCHAPTER V

SB759,,670 RIGHTS OF POWERHOLDER’S CREDITORS IN APPOINTIVE PROPERTY

SB759,,671 702.501 Creditor claim: general power created by powerholder. (1) In this section, “power of appointment created by the powerholder” includes a power of appointment created in a transfer by another person to the extent the powerholder contributed value to the transfer.

SB759,,672 (2) Appointive property subject to a general power of appointment created by a powerholder is subject to a claim of a creditor of the powerholder or of the powerholder’s estate to the extent provided in ch. 242 and any other applicable law relating to fraudulent conveyances.

SB759,,673 (3) Subject to sub. (2), appointive property subject to a general power of appointment created by a powerholder is not subject to a claim of a creditor of the powerholder or the powerholder’s estate to the extent the powerholder irrevocably appointed the property in favor of a person other than the powerholder or the powerholder’s estate.

SB759,,674 (4) Subject to subs. (2) and (3), and notwithstanding the presence of a spendthrift provision or whether the claim arose before or after the creation of the power of appointment, appointive property subject to a general power of appointment created by a powerholder is subject to a claim of a creditor of any of the following:

SB759,,675 (a) If the power of appointment is a presently exercisable power of appointment, the powerholder, to the same extent as if the powerholder owned the appointive property.

SB759,,676 (b) If the power of appointment is exercisable at the powerholder’s death, the powerholder’s estate, to the extent the estate is insufficient to satisfy the claim and subject to the right of a decedent to direct the source from which liabilities are paid.

SB759,,677 702.502 Creditor claim: general power not created by powerholder. (1) Except as otherwise provided in sub. (2), appointive property subject to a general power of appointment created by a person other than the powerholder is subject to a claim of a creditor of any of the following:

SB759,,678 (a) If the power of appointment is a presently exercisable power of appointment, the powerholder to the extent the powerholder’s property is insufficient.

SB759,,679 (b) If the power of appointment is exercisable at the powerholder’s death, the powerholder’s estate or revocable trust, subject to the right of a decedent to direct the source from which liabilities are paid, but only to the extent of the powerholder’s exercise of that general power of appointment and only to the extent that the claim of the creditor has been filed and allowed in the powerholder’s estate or filed with and approved by the trustee of a revocable trust but not paid because the assets of the estate or revocable trust are insufficient. For purposes of this paragraph, a revocable trust is a trust that is revocable, as defined in s. 701.0103 (22), by the powerholder or jointly by the powerholder and the powerholder’s spouse.

SB759,,680 (2) Subject to s. 702.504 (3), a power of appointment created by a person other than the powerholder that is subject to an ascertainable standard relating to an individual’s health, education, support, or maintenance within the meaning of 26 USC 2041 (b) (1) (A) or 2514 (c) (1), is considered for purposes of this subchapter as a nongeneral power of appointment.

SB759,,681 (3) If during the powerholder’s lifetime, the powerholder exercises a general power of appointment created by a person other than the powerholder, a creditor of the powerholder can reach the appointed interests to the same extent that under the law relating to fraudulent conveyances the creditor could reach property that the powerholder has owned and transferred during the powerholder’s lifetime.

SB759,,682 702.503 Power to withdraw. (1) For purposes of this subchapter, and except as otherwise provided in sub. (2), a power to withdraw property from a trust is considered, during the time the power may be exercised, as a presently exercisable general power of appointment to the extent of the property subject to the power to withdraw.

SB759,,683 (2) On the lapse, release, or waiver of a power to withdraw property from a trust, the power is treated as a presently exercisable general power of appointment only to the extent the value of the property affected by the lapse, release, or waiver exceeds the greater of the following:

SB759,,684 (a) The amount referenced in section 2041 (b) (2) or 2514 (e) of the Internal Revenue Code.

SB759,,685 (b) The amount referenced in section 2503 (b) of the Internal Revenue Code for each individual other than the beneficiary who makes a transfer to the trust or who is considered to make a transfer to the trust pursuant to an election to split gifts under section 2513 (a) of the Internal Revenue Code.

SB759,,686 702.504 Creditor claim: nongeneral power of appointment. (1) Except as otherwise provided in subs. (2) and (3), appointive property subject to a nongeneral power of appointment is exempt from a claim of a creditor of the powerholder or the powerholder’s estate.

SB759,,687 (2) Appointive property subject to a nongeneral power of appointment is subject to a claim of a creditor of the powerholder or the powerholder’s estate to the extent that the powerholder owned the property and, reserving the nongeneral power, transferred the property in violation of the law relating to fraudulent conveyances.

SB759,,688 (3) For purposes of this subchapter, if the initial gift in default of appointment is to the powerholder or the powerholder’s estate, a nongeneral power of appointment is treated as a general power of appointment.

SB759,,689 702.505. Third parties in good faith protected. Any person acting without actual notice of claims of creditors under this subchapter incurs no liability to those creditors for transferring property that is subject to a power of appointment or that has been appointed. A purchaser without actual notice and for a valuable consideration takes an interest in property, legal or equitable, and takes the interest free of any rights that a powerholder’s creditor may have under this subchapter.

SB759,,690 SUBCHAPTER VI

SB759,,691 MISCELLANEOUS PROVISIONS

SB759,,692 702.601 Recording instruments relating to a power of appointment. (1) Each of the following instruments relating to a power of appointment is entitled to be recorded as a conveyance upon compliance with s. 706.05 (1):

SB759,,693 (a) An instrument, other than a will, exercising a power of appointment.

SB759,,694 (b) An instrument expressing consent to exercise a power of appointment.

SB759,,695 (c) A disclaimer.

SB759,,696 (d) A release.

SB759,,697 (2) If a power of appointment is exercised by a will, a certified copy of the will and of the certificate of probate thereof may be recorded.

SB759,,698 702.602 Uniformity of application and construction. In applying and construing this section, consideration shall be given to the need to promote uniformity of the law with respect to its subject matter among states that enact it.