Chapter 701

701.0416 History History: 2013 a. 92; 2023 a. 127.

701.0417 701.0417 Combination and division of trusts.

701.0417(1) (1) After notice to each trust protector, each directing party, and the qualified beneficiaries, a trustee may do any of the following if the result does not impair rights of any beneficiary or adversely affect achievement of any trust purposes:

701.0417(1)(a) (a) Combine 2 or more trusts into a single trust.

701.0417(1)(b) (b) Divide a trust into 2 or more separate trusts.

701.0417(2) (2) Subject to the terms of the trust, the trustee may take into consideration differences in federal tax attributes and other pertinent factors in administering the trust property of any separate account or trust, in making applicable tax elections, and in making distributions. A separate trust created by severance under sub. (1) (b) is treated as a separate trust for all purposes from the date on which the severance is effective. The effective date of the severance may be retroactive to a date before the date on which the trustee exercises the power.

701.0417(3) (3) If a trustee combines 2 or more trusts into a single trust, the trustee shall identify which trust is the surviving trust.

701.0417(4) (4) In case of a division of a trust into 2 or more trusts, any distribution or allocation of assets as an equivalent of a dollar amount fixed by formula or otherwise shall be made at current fair market values unless the trust instrument expressly provided that another value may be used. If the trust instrument requires or permits a different value to be used, all property available for distribution, including cash, shall be distributed so that the property, including cash, is fairly representative of the net appreciation or depreciation in the value of the available property on the date or dates of distribution. A provision in the trust instrument that the trustee may fix values for purposes of distribution or allocation does not of itself constitute authorization to fix a value other than current fair market value.

701.0417 History History: 2013 a. 92 ss. 91, 294.

701.0419 701.0419 Transfers to trusts.

701.0419(1) (1) Validity and effect. The order of execution of a trust instrument and a will or other instrument purporting to transfer or appoint property to the trust evidenced by the trust instrument shall be disregarded in determining the validity of the transfer or appointment. No reference in any will to a trust shall cause assets in such trust to be included in property administered as part of the testator’s estate.

701.0419(2) (2) Governing terms. Property transferred or appointed by a will or by a beneficiary designation under an employee benefit plan, life insurance policy, or online tool, as defined in s. 711.03 (18), or other instrument permitting designation of a beneficiary to a trust, shall be administered in accordance with the terms of the trust as the terms of the trust may have been modified prior to the testator’s or designator’s death, even though the will, beneficiary designation, online tool, or other instrument was not reexecuted or republished after exercise of the power to modify, unless the will, beneficiary designation, online tool, or other instrument expressly provides otherwise.

701.0419(3) (3) Disposition when no existing trust. If at the death of a testator a trust has been completely revoked, or otherwise terminated, a provision in the testator’s will purporting to transfer or appoint property to the trust shall have the following effect, unless the will provides otherwise:

701.0419(3)(a) (a) If the testator was a necessary party to the revocation or other termination of the trust, the provision in the testator’s will shall be invalid.

701.0419(3)(b) (b) If the testator was not a necessary party to the revocation or other termination of such trust, the provision in the testator’s will shall be deemed to create a trust upon the terms of the trust instrument at the time the will was executed or as otherwise provided where sub. (2) is applicable.

701.0419 History History: 1971 c. 66; 1991 a. 316; 2013 a. 92 s. 132; Stats. 2013 s. 701.0419; 2015 a. 300.

subch. V of ch. 701 SUBCHAPTER V

CREDITOR’S CLAIMS; SPENDTHRIFT
AND DISCRETIONARY TRUSTS

701.0501 701.0501 Rights of beneficiary’s creditor or assignee.

701.0501(1) (1) 

701.0501(1)(a) (a) To the extent a beneficiary’s interest is not protected by a spendthrift provision, the court may authorize a judgment creditor or an assignee of the beneficiary to reach the beneficiary’s interest by attachment of present or future distributions to or for the benefit of the beneficiary or other means. The court may limit the award to such relief as is appropriate under the circumstances.

701.0501(1)(b) (b) This subsection does not apply to a trust for an individual with a disability.

701.0501(2) (2) A trustee is not liable to any creditor of a beneficiary for any distributions made to or for the benefit of the beneficiary if any of the following applies:

701.0501(2)(a) (a) The beneficiary’s interest is protected by a spendthrift provision.

701.0501(2)(b) (b) The trust is a trust for an individual with a disability.

701.0501 History History: 2013 a. 92.

701.0502 701.0502 Spendthrift provision.

701.0502(1) (1) A spendthrift provision is valid only if any of the following applies:

701.0502(1)(a) (a) The beneficiary is a person other than the settlor and is not treated as the settlor under s. 701.0505 (2).

701.0502(1)(b) (b) The trust is a trust for an individual with a disability.

701.0502(2) (2) Subject to sub. (1), a term of a trust providing that the interest of a beneficiary is held subject to a spendthrift trust, or words of similar import, restrains both a voluntary and involuntary transfer of the beneficiary’s interest.

701.0502(3) (3) A beneficiary may not transfer an interest in a trust in violation of a valid spendthrift provision and, except as otherwise provided in this subchapter, a creditor or assignee of the beneficiary may not attach, garnish, execute on, or otherwise reach the interest or a distribution by the trustee before its receipt by the beneficiary.

701.0502(4) (4) Real property or tangible personal property that is owned by the trust but that is made available for a beneficiary’s occupancy or use in accordance with the trustee’s authority under the trust instrument may not be considered to have been distributed by the trustee or received by the beneficiary for purposes of allowing a creditor or assignee of the beneficiary to reach the property.

701.0502 History History: 2013 a. 92.

701.0503 701.0503 Exceptions to spendthrift provision.

701.0503(1) (1) Claims for child support. Notwithstanding s. 701.0502, upon application of a person having a valid order directing a beneficiary to make payment for support of the beneficiary’s child, the court may do any of the following:

701.0503(1)(a) (a) If the beneficiary is entitled to receive income or principal under the trust, order the trustee to satisfy part or all of the claim out of part or all of payments of income or principal as they are due, presently or in the future;

701.0503(1)(b) (b) If a beneficiary may receive income or principal at the trustee’s discretion under the trust, order the trustee to satisfy part or all of the claim out of part or all of future payments of income or principal that are made pursuant to the exercise of the trustee’s discretion in favor of such beneficiary.

701.0503(2) (2) Claims for public support. Notwithstanding s. 701.0502 and except as provided in sub. (3), if the settlor is legally obligated to pay for the public support of a beneficiary under s. 46.10, 49.345, or 301.12 or the beneficiary is legally obligated to pay for the beneficiary’s public support or for support furnished to the beneficiary’s spouse or minor child under s. 46.10, 49.345, or 301.12, upon application by the appropriate state department or county official, the court may do any of the following:

701.0503(2)(a) (a) If the beneficiary is entitled to receive income or principal under the trust, order the trustee to satisfy part or all of the liability out of part or all of payments of income or principal as they are due, presently or in the future;

701.0503(2)(b) (b)

701.0503(2)(b)1. 1. Except as provided in subd. 2., if the beneficiary may receive income or principal at the trustee’s discretion under the trust, order the trustee to satisfy part or all of the liability out of part or all of future payments of income or principal which are to be made pursuant to the exercise of the trustee’s discretion in favor of the beneficiary.

701.0503(2)(b)2. 2. In the case of a beneficiary who may receive income or principal of the trust at the trustee’s discretion and who is a settlor or a spouse or minor child of the settlor, order the trustee to satisfy part or all of the liability without regard to whether the trustee has then exercised or may thereafter exercise the trustee’s discretion in favor of the beneficiary.

701.0503(3) (3) Trust for an individual with a disability. Subsection (2) does not apply to any trust for an individual with a disability.

701.0503(4) (4) Subsequent modification of court’s order. Any order entered by a court under sub. (1) or (2) may be modified upon application of an interested person.

701.0503(5) (5) Exempt assets. Assets of a trust that are exempt from claims of creditors under other statutes are not subject to sub. (1) or (2).

701.0503 History History: 2013 a. 92 ss. 97, 103 to 107, 111, 112; Stats. 2013 s. 701.0503.

701.0503 Annotation Trust income that is income to the beneficiary under federal tax law is subject to a child support order regardless of whether a distribution is made to the beneficiary. Grohmann v. Grohmann, 189 Wis. 2d 532, 525 N.W.2d 261 (1995).

701.0503 Annotation In not revealing that he was a trust beneficiary, a father failed to make proper financial disclosure at the time of a divorce as was required by s. 767.127. The rationale of Grohmann, 189 Wis. 2d 532 (1995), is applicable to both grantor and nongrantor trusts if there is an obligation to report that trust’s income as one’s own because it is the obligation to report the income that makes the income reachable for calculations of a child support obligation. Stevenson v. Stevenson, 2009 WI App 29, 316 Wis. 2d 442, 765 N.W.2d 811, 07-2143.

701.0504 701.0504 Discretionary trusts; effect of standard.

701.0504(1) (1) For purposes of this subchapter, and except as provided in sub. (3), a beneficiary’s interest in a trust that is subject to the trustee’s discretion does not constitute an interest in property or an enforceable right even if the discretion is expressed in the form of a standard of distribution or the beneficiary is then serving as sole trustee or cotrustee.

701.0504(2) (2) Except as provided in this subchapter, a creditor or other claimant may not attach present or future distributions from a beneficiary’s interest in property or an enforceable right, obtain an order from a court forcing the judicial sale of the interest or compelling the trustee to make distributions, or reach the interest or right by any other means, even if the trustee has abused the trustee’s discretion.

701.0504(3) (3) Subsections (1) and (2) do not apply if a beneficiary is acting as sole trustee of a trust for his or her benefit and his or her discretion to make distributions to himself or herself is not limited by an ascertainable standard or the consent of a party holding an adverse interest to the beneficiary.

701.0504(4) (4) 

701.0504(4)(a) (a) Except as provided in par. (b), this section does not limit the right of a beneficiary to maintain a judicial proceeding against a trustee for an abuse of discretion or failure to comply with a standard for distribution.

701.0504(4)(b) (b) The right of a beneficiary described in par. (a) may not be exercised by a creditor.

701.0504 History History: 2013 a. 92.

701.0505 701.0505 Creditor’s claim against settlor.

701.0505(1) (1) 

701.0505(1)(a) (a) Whether or not the terms of a trust include a spendthrift provision and except as provided in par. (b), the following rules apply to claims of a settlor’s creditors:

701.0505(1)(a)1. 1. During the lifetime of the settlor, the property of a revocable trust is subject to claims of the settlor’s creditors.

701.0505(1)(a)2. 2. With respect to an irrevocable trust that is not a trust for an individual with a disability, upon application of a judgment creditor of the settlor, 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 the judgment out of part or all of the payments of income or principal as they are due, presently or in the future, or which are payable in the trustee’s discretion. A settlor’s right to receive reimbursement for income taxation arising from grantor trust treatment of the trust pursuant to sections 671 to 679 of the Internal Revenue Code is not considered a right to income or principal for purposes of this section. If a trust has more than one settlor, the amount the judgment creditor of a particular settlor may reach may not exceed the settlor’s interest in the trust.

701.0505(1)(a)3. 3. After the death of a settlor, and subject to the settlor’s right to direct the source from which liabilities will be paid, the property of a trust that was revocable at the settlor’s death is subject to claims of the settlor’s creditors, costs of administration of the settlor’s estate, the expenses of the settlor’s funeral and disposal of remains, and statutory allowances to a surviving spouse and children to the extent the settlor’s probate estate is inadequate to satisfy those claims, costs, expenses, and allowances.

701.0505(1)(b) (b) Assets of a trust that are exempt from claims of creditors under other statutes are not subject to par. (a).

701.0505(2) (2) For purposes of this subchapter, all of the following apply:

701.0505(2)(a) (a) During the period the power may be exercised, the holder of a power of withdrawal is treated in the same manner as the settlor of a revocable trust to the extent of the property subject to the power.

701.0505(2)(b) (b) A beneficiary of a trust may not be considered a settlor solely because of a lapse, waiver, or release of any of the following:

701.0505(2)(b)1. 1. A power described under par. (c).

701.0505(2)(b)2. 2. The beneficiary’s right to withdraw part of the trust property, to the extent that the value of the property affected by the lapse, waiver, or release in any year does not exceed the greater of the following:

701.0505(2)(b)2.a. a. The amount referenced in section 2041 (b) (2) or 2514 (e) of the Internal Revenue Code.

701.0505(2)(b)2.b. 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 deemed to make a transfer to the trust pursuant to an election to split gifts under section 2513 (a) of the Internal Revenue Code.

701.0505(2)(c) (c) A beneficiary of a trust is not a settlor, has not made a voluntary or involuntary transfer of the beneficiary’s interest in the trust, and does not have the power to make a voluntary or involuntary transfer of the beneficiary’s interest in the trust solely because the beneficiary holds, exercises, or allows in any capacity, any of the following:

701.0505(2)(c)1. 1. A presently exercisable power to consume, invade, appropriate, or distribute property to or for the benefit of the beneficiary if the power is any of the following:

701.0505(2)(c)1.a. a. Exercisable only with the consent of another person holding an interest adverse to the beneficiary’s interest.

701.0505(2)(c)1.b. b. Limited by an ascertainable standard of the beneficiary.

701.0505(2)(c)2. 2. A presently exercisable power to appoint any property of the trust to or for the benefit of a person other than the beneficiary, a creditor of the beneficiary, the beneficiary’s estate, or a creditor of the beneficiary’s estate.

701.0505(2)(c)3. 3. A testamentary power of appointment.

701.0505(2)(c)4. 4. A presently exercisable right described in sub. (2) (b).

701.0505(2)(d) (d) A beneficiary of a trust is not a settlor solely because the beneficiary is entitled to nondiscretionary distributions from the trust.

701.0505(2)(e) (e)

701.0505(2)(e)1. 1. Contributions to the following trusts are not considered to have been contributed by the settlor:

701.0505(2)(e)1.a. a. An irrevocable marital trust that is treated as qualified terminable interest property under section 2523 (f) of the Internal Revenue Code if after the death of the settlor’s spouse the settlor is a beneficiary of the trust or an irrevocable trust that receives property from the trust.

701.0505(2)(e)1.b. b. An irrevocable marital trust that is treated as a general power of appointment trust under section 2523 (e) of the Internal Revenue Code if after the death of the settlor’s spouse the settlor is a beneficiary of the trust or an irrevocable trust that receives property from the trust.

701.0505(2)(e)1.c. c. An irrevocable trust for the settlor’s spouse if after the death of the settlor’s spouse the settlor is a beneficiary of the trust or an irrevocable trust that receives property from the trust.

701.0505(2)(e)1.d. d. An irrevocable trust for the benefit of a person, the settlor of which is the person’s spouse, regardless of whether or when the person was the settlor of an irrevocable trust for the benefit of that spouse.

701.0505(2)(e)1.e. e. An irrevocable trust for the benefit of a person to the extent that the property of the trust was subject to a general power of appointment in another person.

701.0505(2)(e)2. 2. A person who would otherwise be treated as a settlor of a trust described in subd. 1. a. to e. is not treated as a settlor of the trust.

701.0505(2)(e)3. 3. For purposes of this paragraph, notwithstanding s. 701.0103 (3), “beneficiary” means a person who satisfies s. 701.0103 (3) (a) or (b) and who is designated in a trust instrument or through the exercise of a nongeneral or general power of appointment.

701.0505(3) (3) Any order entered by a court under this section is subject to modification upon application of an interested person.