Chapter 701

701.0818 701.0818 Trust protectors.

701.0818(1) (1) Appointment. A settlor in a trust instrument, a court in a trust instrument or court order, or interested persons in a nonjudicial settlement agreement may provide for the appointment of a trust protector, whether referred to as a trust protector, another title, or no title. A trust protector has only the powers granted to the trust protector in the trust instrument, court order, or nonjudicial settlement agreement.

701.0818(2) (2) Trust protector powers; legal capacity.

701.0818(2)(a) (a) A settlor in a trust instrument, a court in a trust instrument or court order, or interested persons in a nonjudicial settlement agreement may specify the legal capacity in which a particular power is exercisable by a trust protector and whether a power granted to the trust protector in a capacity other than a fiduciary capacity must be exercised in good faith.

701.0818(2)(b) (b) If the settlor, court, or interested persons do not specify the legal capacity in which a particular power is exercisable by the trust protector, all of the following apply:

701.0818(2)(b)1. 1. The power is exercisable in a fiduciary capacity if it is a power to do any of the following:

701.0818(2)(b)1.a. a. Interpret or enforce the terms of the trust at the request of the trustee.

701.0818(2)(b)1.b. b. Review and approve the trustee’s reports or accounting.

701.0818(2)(b)1.c. c. Resolve disputes between the trustee or a directing party and a beneficiary.

701.0818(2)(b)1.d. d. Consent to or veto distributions to a beneficiary.

701.0818(2)(b)1.e. e. Consent to or veto investment actions.

701.0818(2)(b)2. 2. If it is not a power described in subd. 1. a. to e., the power is exercisable in a nonfiduciary capacity, including a power to do any of the following:

701.0818(2)(b)2.a. a. Modify or amend the trust instrument to respond to opportunities related to, or changes in, restraints on alienation or other state laws restricting the terms of a trust, the distribution of trust property, or the administration of the trust.

701.0818(2)(b)2.b. b. Modify or amend the trust instrument to achieve a different tax status or to respond to changes in federal or state law.

701.0818(2)(b)2.c. c. Change the principal place of administration, the tax situs of the trust, or the governing law of the trust.

701.0818(2)(b)2.d. d. Eliminate or modify the interests of a beneficiary, add a new beneficiary or class of beneficiaries, or select a beneficiary from an indefinite class.

701.0818(2)(b)2.e. e. Modify the terms of a power of appointment granted under the trust.

701.0818(2)(b)2.f. f. Remove, replace, or appoint a trustee, trust protector, or directing party or a successor trustee, trust protector, or directing party.

701.0818(2)(b)2.g. g. Terminate the trust.

701.0818(2)(b)2.h. h. Exercise a decanting power under subch. XIII or direct an authorized fiduciary, as defined in s. 701.1302 (1), to exercise a decanting power under subch. XIII.

701.0818(2)(b)2.i. i. Advise the trustee on matters concerning a beneficiary, including whether to provide information to a beneficiary under s. 701.0813.

701.0818(2)(b)2.j. j. Correct errors or ambiguities in the terms of the trust that might otherwise require court construction or defeat the settlor’s intent.

701.0818(2)(b)3. 3. Notwithstanding subds. 1. and 2., a trust protector who is also the settlor may exercise any power granted to the trust protector in the trust protector’s personal interests.

701.0818(2)(b)4. 4. Notwithstanding subd. 2., a trust protector who is also a qualified beneficiary may exercise any power granted to the trust protector that is exercisable in a nonfiduciary capacity in the trust protector’s personal interests.

701.0818(2)(c) (c) Notwithstanding pars. (a) and (b) and any provision in the trust instrument to the contrary, a trust protector who is also serving as the trustee or a directing party shall exercise any power granted to the trust protector in a fiduciary capacity.

701.0818(3) (3) Trust protector duties.

701.0818(3)(a) (a) If a power is exercisable in a fiduciary capacity, the trust protector shall act in good faith and shall exercise the power in a manner that is consistent with the terms and purposes of the trust instrument, court order, or nonjudicial settlement agreement and the interests of the beneficiaries.

701.0818(3)(b) (b) If a power is exercisable in a nonfiduciary capacity, the trust protector shall act in good faith unless the trust instrument, court order, or nonjudicial settlement agreement provides otherwise.

701.0818(3)(c) (c) A trust protector does not have a duty to exercise its powers, to monitor the conduct of the trustee or a directing party, or to monitor changes in the law or circumstances of the beneficiaries.

701.0818(4) (4) Liability. A trust protector is liable for any loss that results from a breach of the trust protector’s duties, except as follows:

701.0818(4)(a) (a) If the trust protector is also the settlor, the trust protector is not liable for any loss that results from a breach of the trust protector’s duties.

701.0818(4)(b) (b) If the trust protector is also a qualified beneficiary, the trust protector is not liable for any loss that results from a breach of the trust protector’s duties for a power that is exercised in a nonfiduciary capacity.

701.0818(5) (5) Resignation and release of powers. A trust protector may resign or release a power granted to the trust protector by giving written notice to the trustee and to any successor trust protector.

701.0818(6) (6) Prohibited actions. A trust protector may not exercise a power granted to the trust protector to do any of the following:

701.0818(6)(a) (a) Except as provided in sub. (2) (b) 3. and 4., create or expand any beneficial interest, power of appointment, right of withdrawal, or right to receive trust property as a result of the exercise of a power of appointment if the creation or expansion would benefit the trust protector, the trust protector’s estate, the trust protector’s creditors, or creditors of the trust protector’s estate.

701.0818(6)(b) (b) Modify or amend a trust to do any of the following:

701.0818(6)(b)1. 1. Remove a requirement pursuant to 42 USC 1396p (d) (4) to pay back a governmental entity for benefits provided to the permissible beneficiary at the death of that beneficiary.

701.0818(6)(b)2. 2. Reduce or eliminate an income interest of an income beneficiary of any of the following trusts:

701.0818(6)(b)2.a. a. A trust for which a marital deduction has been taken for federal or state estate tax purposes under section 2056, 2056A, or 2523 of the Internal Revenue Code or any comparable provision of applicable state law, during the life of the settlor’s spouse.

701.0818(6)(b)2.b. b. A charitable remainder trust under section 664 of the Internal Revenue Code, during the life of the noncharitable beneficiary.

701.0818(6)(b)2.c. c. A trust in which the settlor has a qualified interest under section 2702 (b) of the Internal Revenue Code, during any period in which the settlor is a beneficiary.

701.0818(6)(b)2.d. d. A trust for which an election as a qualified Subchapter S Trust under section 1361(d) of the Internal Revenue Code is in place.

701.0818(6)(c) (c) Modify any beneficial interest in a trust that qualified for a marital deduction or charitable deduction from federal or state estate tax in a manner that would have caused the trust not to qualify for the deduction.

701.0818(7) (7) Settlor rights. A trust protector is not subject to the direction of the settlor and the settlor may not bring a cause of action against the trust protector. A trust protector may consider a settlor’s goals, objectives, and philosophies in establishing the trust and the trust’s structure when exercising the powers granted to the trust protector and may do so regardless of whether the settlor is deceased.

701.0818(8) (8) Duties of a trustee and a directing party.

701.0818(8)(a) (a) A trustee and a directing party shall act in accordance with a trust protector’s exercise of a power granted to the trust protector. A trustee and a directing party are not liable for acting in accordance with the trust protector’s exercise of a power granted to the trust protector unless the attempted exercise is manifestly contrary to the power granted to the trust protector or the trustee or the directing party knows that the attempted exercise would constitute a serious breach of a duty that the trust protector owes to the beneficiaries of the trust.

701.0818(8)(b) (b) A trustee and a directing party do not have a duty to monitor the conduct of the trust protector, provide advice to or consult with the trust protector, or communicate with, warn, or apprise any beneficiary concerning instances in which the trustee or the directing party would or might have exercised the trustee’s or the directing party’s discretion in a manner different from the manner in which the trust protector exercised its discretion.

701.0818(9) (9) Right to information.

701.0818(9)(a) (a) A trust protector may request information about the trust from the trustee and, if the requested information is related to a power granted to the trust protector, the trustee shall provide the requested information to the trust protector. If a trustee is bound by any confidentiality restrictions with respect to information requested by a trust protector, the trustee may require that the trust protector agree to be bound by the confidentiality restrictions before delivering such information to the trust protector. A trustee is not liable to any beneficiary for any loss or damages resulting from the trustee providing information to the trust protector that is related to the power granted to the trust protector.

701.0818(9)(b) (b) Except as otherwise provided in this chapter, a trustee does not have to provide any information to the trust protector that the trust protector does not request.

701.0818(10) (10) Payment or reimbursement of attorney fees and costs. A trustee shall, in accordance with s. 701.1004, pay or reimburse a trust protector for attorney fees and costs to defend any claim made against the trust protector.

701.0818(11) (11) Application of other sections to trust protectors. Sections 701.0701, 701.0708, 701.0709, 701.1001 to 701.1003, and 701.1005 to 701.1010 apply to a trust protector as if the trust protector is the trustee.

701.0818(12) (12) Jurisdiction. A person who accepts an appointment as a trust protector of a trust submits to the jurisdiction of the courts of this state, as provided in s. 701.0202 (1).

701.0818 History History: 2013 a. 92; 2023 a. 127.

701.0819 701.0819 Marital deduction transfers.

701.0819(1) (1) For purposes of this section, “marital deduction transfer” means a lifetime or testamentary transfer of property that is intended to qualify for the marital deduction as indicated by the terms of the trust.

701.0819(2) (2) In interpreting, construing, or administering a trust instrument, absent a clear expression of intent by the settlor to the contrary, a trustee shall apply the following presumptions that may only be rebutted by clear and convincing evidence:

701.0819(2)(a) (a) The settlor intended to take advantage of tax deductions, exemptions, exclusions, and credits.

701.0819(2)(b) (b) The settlor intended that any transfer made to a spouse outright and free of trust qualify for the gift or estate tax marital deduction and is a marital deduction transfer.

701.0819(2)(c) (c) If the trust instrument refers to a trust as a marital trust, qualified terminable interest property trust, or spousal trust, or refers to qualified terminable interest property, section 2044, 2056, 2056A, or 2523 of the Internal Revenue Code, or a similar provision of applicable state law, the settlor intended that the trust and property passing to the trust qualify for the applicable gift or estate tax marital deduction and that the transfer qualifies for the marital deduction for federal and state gift or estate tax purposes.

701.0819(3) (3) If a trust receives a marital deduction transfer, the trust instrument shall be construed to comply with the marital deduction provisions of the Internal Revenue Code.

701.0819(4) (4) If a trust receives a marital deduction transfer, the trustee has all the powers, duties, and discretionary authority necessary to comply with the marital deduction provisions of the Internal Revenue Code. The trustee may not take any action or have any power that may impair the availability of the marital deduction, but this does not require the trustee to make the election under either section 2056 (b) (7), 2056A (a) (3), or 2523 (f) of the Internal Revenue Code.

701.0819 History History: 2013 a. 92.

subch. IX of ch. 701 SUBCHAPTER IX

INVESTMENT MANAGEMENT OF TRUSTS

701.0901 701.0901 Application of the Wisconsin Prudent Investor Act. Except as provided in this subchapter, the investment management of the property of a trust is governed by ch. 881.

701.0901 History History: 2013 a. 92.

701.0902 701.0902 Directed trust property.

701.0902(1) (1) A directing party who has power over directed trust property shall do all of the following:

701.0902(1)(a) (a) Direct the trustee on the retention, purchase, sale, exchange, tender, encumbrance, or any other investment transaction of the directed trust property and the investment and reinvestment of principal and income.

701.0902(1)(b) (b) Direct the trustee with respect to the management, control, and voting powers, including voting proxies, of the directed trust property.

701.0902(1)(c) (c) Select and determine reasonable compensation of one or more outside investment advisors, managers, consultants, or counselors, which may include the trustee, and delegate investment authority to them pursuant to the investment delegation provisions under s. 881.01 (10).

701.0902(1)(d) (d) Determine the frequency of and methodology for valuing directed trust property and provide the value of property for which there is no readily available daily market value.

701.0902(2) (2) A trustee who has no power over directed trust property does not have a duty to do any of the following with respect to the directed trust property:

701.0902(2)(a) (a) Prepare or review investment policy statements.

701.0902(2)(b) (b) Perform investment or suitability reviews, inquiries, or investigations.

701.0902(2)(c) (c) Determine or verify the value of directed trust property for which there is no readily available daily market value.

701.0902(2)(d) (d) Monitor the conduct or investment performance of the directing party.

701.0902 History History: 2013 a. 92.

701.0903 701.0903 Nonapplication of prudent investor rule to life insurance contracts owned by trusts.

701.0903(1) (1) Notwithstanding s. 881.01, if a principal purpose of a trust is to hold a life insurance contract or to purchase a life insurance contract from contributions made to the trust, the trustee does not have a duty to determine whether the life insurance contract is or remains a proper investment of the trust. For purposes of this subsection, determining whether a life insurance contact is or remains a proper investment includes all of the following:

701.0903(1)(a) (a) Investigating the financial strength or changes in the financial strength of the life insurance company maintaining the life insurance contract.

701.0903(1)(b) (b) Determining whether to exercise any policy option, right, or privilege available under the life insurance contract.

701.0903(1)(c) (c) Diversifying the life insurance contract relative to any other life insurance contracts or any other assets of the trust.

701.0903(1)(d) (d) Inquiring about or investigating the health or financial condition of an insured.

701.0903(1)(e) (e) Preventing the lapse of a life insurance contract if the trust does not receive contributions or hold other readily marketable assets to pay the life insurance contract premiums.

701.0903(2) (2) A trustee is not liable for a loss that arises because the trustee did not take an action specified in sub. (1).

701.0903(4) (4) This section does not apply to a trust that was executed before July 1, 2014, unless the trustee notifies the qualified beneficiaries that the trustee elects to be governed by this section and provides the qualified beneficiaries with a copy of this section.

701.0903(5) (5) Subject to sub. (4), this section applies to a life insurance contract acquired, retained, or owned by a trustee before, on, or after July 1, 2014.