Chapter 701

701.1133 701.1133 Transfers from income to reimburse principal.

701.1133(1) (1) If a trustee makes or expects to make a principal disbursement described in this section, the trustee may transfer an appropriate amount from income to principal in one or more accounting periods to reimburse principal or to provide a reserve for future principal disbursements.

701.1133(2) (2) Principal disbursements to which sub. (1) applies include the following, but only to the extent that the trustee has not been and does not expect to be reimbursed by a 3rd party:

701.1133(2)(a) (a) An amount chargeable to income but paid from principal because it is unusually large, including extraordinary repairs.

701.1133(2)(b) (b) A capital improvement to a principal asset, whether in the form of changes to an existing asset or the construction of a new asset, including special assessments.

701.1133(2)(c) (c) Disbursements made to prepare property for rental, including tenant allowances, leasehold improvements, and brokers’ commissions.

701.1133(2)(d) (d) Periodic payments on an obligation secured by a principal asset to the extent that the amount transferred from income to principal for depreciation is less than the periodic payments.

701.1133(2)(e) (e) Disbursements described in s. 701.1131 (1) (g).

701.1133(3) (3) If the asset whose ownership gives rise to the disbursements becomes subject to a successive income interest after an income interest ends, a trustee may continue to transfer amounts from income to principal as provided in sub. (1).

701.1133 History History: 2013 a. 92 s. 281.

701.1134 701.1134 Income taxes.

701.1134(1) (1) A tax required to be paid by a trustee based on receipts allocated to income must be paid from income.

701.1134(2) (2) A tax required to be paid by a trustee based on receipts allocated to principal must be paid from principal, even if the tax is called an income tax by the taxing authority.

701.1134(3) (3) A tax required to be paid by a trustee on the trust’s share of an entity’s taxable income must be paid as follows:

701.1134(3)(a) (a) From income to the extent that receipts from the entity are allocated only to income.

701.1134(3)(b) (b) From principal to the extent that receipts from the entity are allocated only to principal.

701.1134(3)(c) (c) Proportionately from principal and income to the extent that receipts from the entity are allocated to both income and principal.

701.1134(3)(d) (d) From principal to the extent that the tax exceeds the total receipts from the entity.

701.1134(4) (4) After applying subs. (1) to (3), the trustee shall adjust income or principal receipts to the extent that the trust’s taxes are reduced because the trust receives a deduction for payments made to a beneficiary.

701.1134 History History: 2013 a. 92 ss. 185, 282 to 287.

701.1135 701.1135 Adjustments between principal and income because of taxes.

701.1135(1) (1) A fiduciary may make adjustments between principal and income to offset the shifting of economic interests or tax benefits between income beneficiaries and remainder beneficiaries which arise from:

701.1135(1)(a) (a) Elections and decisions, other than those described in sub. (2), that the fiduciary makes from time to time regarding tax matters.

701.1135(1)(b) (b) An income tax or any other tax that is imposed upon the fiduciary or a beneficiary as a result of a transaction involving or a distribution from the estate or trust.

701.1135(1)(c) (c) The ownership by an estate or trust of an interest in an entity whose taxable income, whether or not distributed, is includable in the taxable income of the estate or trust or of a beneficiary.

701.1135(2) (2) If the amount of an estate tax marital deduction or charitable contribution deduction is reduced because a fiduciary deducts an amount paid from principal for income tax purposes instead of deducting it for estate tax purposes, and as a result estate taxes paid from principal are increased and income taxes paid by an estate, trust, or beneficiary are decreased, each estate, trust, or beneficiary that benefits from the decrease in income tax shall reimburse the principal from which the increase in estate tax is paid. The total reimbursement must equal the increase in the estate tax to the extent that the principal used to pay the increase would have qualified for a marital deduction or charitable contribution deduction but for the payment. The proportionate share of the reimbursement for each estate, trust, or beneficiary whose income taxes are reduced must be the same as its proportionate share of the total decrease in income tax. An estate or trust shall reimburse principal from income.

701.1135 History History: 2013 a. 92 s. 290.

701.1136 701.1136 Income payments and accumulations.

701.1136(1) (1) Distribution of income. Except as otherwise determined by the trustee or a court under s. 701.1106 with respect to unitrust distributions, if a trust instrument fails to specify how frequently a current beneficiary is to receive income from the trust, the trustee shall distribute the income to which the current beneficiary is entitled at least annually.

701.1136(2) (2) Permitted accumulations. No provision directing or authorizing accumulation of income is invalid.

701.1136(3) (3) Charitable trust accumulations. A trust containing a direction or authorization to accumulate income from property devoted to a charitable purpose shall be subject to the general equitable supervision of the court with respect to any such accumulation of income, including its reasonableness, amount and duration.

701.1136(4) (4) Disposition of accumulated income. Income not required to be distributed by the trust instrument may, in the trustee’s discretion, be held in reserve for future distribution as income or be added to principal subject to retransfer to income of the dollar amount originally transferred to principal. At the termination of the income interest, any undistributed income shall be distributed as principal.

701.1136 History History: 2005 a. 10; 2013 a. 92 s. 292; Stats. 2013 s. 701.1136; 2023 a. 127.

subch. XII of ch. 701 SUBCHAPTER XII

MISCELLANEOUS PROVISIONS

701.1201 701.1201 Private foundations.

701.1201(1) (1) 

701.1201(1)(a) (a) In the administration of any trust that is a private foundation, as defined in section 509 of the Internal Revenue Code, a charitable trust, as described in section 4947 (a) (1) of the Internal Revenue Code, or a split-interest trust as described in section 4947 (a) (2) of the Internal Revenue Code, all of the following acts shall be prohibited:

701.1201(1)(a)1. 1. Engaging in any act of self-dealing, as defined in section 4941 (d) of the Internal Revenue Code, that would give rise to any liability for the tax imposed by section 4941 (a) of the Internal Revenue Code.

701.1201(1)(a)2. 2. Retaining any excess business holdings, as defined in section 4943 (c) of the Internal Revenue Code, that would give rise to any liability for the tax imposed by section 4943 (a) of the Internal Revenue Code.

701.1201(1)(a)3. 3. Making any investments that would jeopardize the carrying out of any of the exempt purposes of the trust, within the meaning of section 4944 of the Internal Revenue Code, so as to give rise to any liability for the tax imposed by section 4944 (a) of the Internal Revenue Code.

701.1201(1)(a)4. 4. Making any taxable expenditures, as defined in section 4945 (d) of the Internal Revenue Code, that would give rise to any liability for the tax imposed by section 4945 (a) of the Internal Revenue Code.

701.1201(1)(b) (b) This subsection does not apply either to those split-interest trusts or to amounts thereof that are not subject to the prohibitions applicable to private foundations by reason of the provisions of section 4947 of the Internal Revenue Code.

701.1201(2) (2) In the administration of any trust that is a private foundation, as defined in section 509 of the Internal Revenue Code, or that is a charitable trust, as described in section 4947 (a) (1) of the Internal Revenue Code, there shall be distributed, for the purposes specified in the trust instrument, for each taxable year, amounts at least sufficient to avoid liability for the tax imposed by section 4942 (a) of the Internal Revenue Code.

701.1201(3) (3) Subsections (1) and (2) do not apply to any trust to the extent that a court of competent jurisdiction determines that the application would be contrary to the terms of the trust and that the same may not properly be changed to conform to such subsections.

701.1201 History History: 1971 c. 66; 1991 a. 39; 2013 a. 92 ss. 174, 175; Stats. 2013 s. 701.1201.

701.1202 701.1202 Electronic records and signatures. The provisions of this chapter governing the legal effect, validity, or enforceability of electronic records or signatures, and of contracts formed or performed with the use of such records or signatures conform to the requirements of section 102 of the federal Electronic Signatures in Global and National Commerce Act, 15 USC 7002, and supersede, modify, and limit the federal Electronic Signatures in Global and National Commerce Act, 15 USC 7001 to 7031.

701.1202 History History: 2013 a. 92.

701.1203 701.1203 Uniformity of application and construction. This chapter shall be applied and construed to effectuate its general purpose to make uniform the law with respect to the subject of this chapter among states enacting it.

701.1203 History History: 2013 a. 92.

701.1204 701.1204 Applicability of general transfers at death provisions. Chapter 854 applies to transfers at death under trust instruments.

701.1204 History History: 1997 a. 188; 2013 a. 92 s. 300; Stats. 2013 s. 701.1204.

701.1204 Annotation Wisconsin’s New Probate Code. Erlanger. Wis. Law. Oct. 1998.

701.1205 701.1205 Applicability.

701.1205(1) (1) Except as otherwise provided in sub. (2) and ss. 701.0602, 701.0813, and 701.0903 (4), this chapter is applicable to a trust existing on July 1, 2014, as well as a trust created after such date, and shall govern trustees acting under such trusts. If application of any provision of this chapter to a trust in existence on July 1, 2014, is unconstitutional, it shall not affect application of the provision to a trust created after that date.

701.1205(2) (2) Subchapter XI of this chapter applies to a trust or decedent’s estate existing on July 1, 2014, and to a trust or decedent’s estate created or coming into existence after that date, except as otherwise expressly provided in subch. XI or by the decedent’s will or the terms of the trust. With respect to a trust or decedent’s estate existing on July 1, 2014, ss. 701.1110 to 701.1135 shall apply at the beginning of the trust’s or estate’s first accounting period, as defined in s. 701.1102 (1), that begins on or after July 1, 2014.

701.1205(3) (3) 

701.1205(3)(a) (a) Except as provided in par. (b), this chapter applies to a judicial proceeding concerning a trust commenced before, on, or after July 1, 2014.

701.1205(3)(b) (b) If a court finds that application of a particular provision of this chapter to a judicial proceeding commenced before July 1, 2014, will substantially interfere with the effective conduct of the judicial proceedings or prejudice the rights of the parties, the particular provision of this chapter does not apply to that judicial proceeding and the court shall apply ch. 701, 2011 stats., as the court finds to be necessary to prevent interference with the effective conduct of the judicial proceeding and to avoid prejudicing the rights of the parties.

701.1205 History History: 1971 c. 66; 1977 c. 309; 2005 a. 10, 216; 2013 a. 92 ss. 191, 296 to 298; Stats. 2013 s. 701.1205; 2013 a. 151.

subch. XIII of ch. 701 SUBCHAPTER XIII

UNIFORM TRUST DECANTING ACT

701.1301 701.1301 Short title. This subchapter may be cited as the Uniform Trust Decanting Act.

701.1301 History History: 2023 a. 127.

701.1302 701.1302 Definitions. In this subchapter:

701.1302(1) (1) “Authorized fiduciary” means any of the following:

701.1302(1)(a) (a) A trustee, a directing party, or another fiduciary, other than a settlor, that has discretion to distribute or direct a trustee to distribute part or all of the principal of the first trust to one or more current beneficiaries.

701.1302(1)(b) (b) A special fiduciary appointed under s. 701.1309.

701.1302(1)(c) (c) A special-needs fiduciary under s. 701.1313.

701.1302(1)(d) (d) A trust protector who has been granted a decanting power, which may be exercised in a fiduciary or nonfiduciary capacity, under s. 701.0818 (2) (b) 2. h.

701.1302(2) (2) “Decanting power” means the power of an authorized fiduciary under this subchapter to distribute property of a first trust to one or more 2nd trusts or to modify the terms of the first trust.

701.1302(3) (3) “Expanded distributive discretion” means a discretionary power of distribution that is not limited to an ascertainable standard or a reasonably definite standard.

701.1302(4) (4) “First trust” means a trust over which an authorized fiduciary may exercise the decanting power.

701.1302(5) (5) “First-trust instrument” means the trust instrument for a first trust.

701.1302(6) (6) “Reasonably definite standard” means a clearly measurable standard under which a holder of a power of distribution is legally accountable within the meaning of section 674 (b) (5) (A) of the Internal Revenue Code and any applicable regulations.

701.1302(7) (7) “Second trust” means any of the following:

701.1302(7)(a) (a) A first trust after modification under this subchapter.

701.1302(7)(b) (b) A trust to which a distribution of property from a first trust is or may be made under this subchapter.

701.1302(8) (8) “Second-trust instrument” means the trust instrument for a 2nd trust.

701.1302 History History: 2023 a. 127.

701.1303 701.1303 Scope.

701.1303(1) (1) Except as otherwise provided in subs. (2) and (3), this subchapter applies to an express trust that is irrevocable or revocable by the settlor only with the consent of the trustee or a person holding an adverse interest.

701.1303(2) (2) This subchapter does not apply to a trust held solely for charitable purposes.

701.1303(3) (3) Subject to s. 701.1315, a trust instrument may restrict or prohibit exercise of the decanting power.

701.1303(4) (4) This subchapter does not limit the power of an authorized fiduciary or other person to distribute or appoint property in further trust or to modify a trust under the trust instrument, law of this state other than this subchapter, common law, a court order, or a nonjudicial settlement agreement.

701.1303(5) (5) This subchapter does not affect the ability of a settlor to provide in a trust instrument for the distribution of the trust property or appointment in further trust of the trust property or for modification of the trust instrument.

701.1303 History History: 2023 a. 127.

701.1304 701.1304 Fiduciary duty.

701.1304(1) (1) In exercising the decanting power, an authorized fiduciary shall act in accordance with its fiduciary duties, including the duty to act in accordance with the purposes of the first trust. If a trustee or other authorized fiduciary is directed by another authorized fiduciary to exercise the decanting power, the trustee or other directed authorized fiduciary shall act to comply with the exercise of the decanting power and the trustee or other directed authorized fiduciary shall not be liable for the action regardless of any fiduciary duty that the trustee or other directed authorized fiduciary might otherwise have.