SB 384

The Wisconsin Trust Code

This bill replaces current law related to trusts with the Wisconsin Trust Code

(Code), a modified version of the Uniform Trust Code, as amended in 2005 (UTC).

The Code is primarily a set of basic default rules that applies to certain trusts in this

state. With some exceptions, the terms of a trust may override or modify the Code's

default rules. There are, however, some mandatory provisions in the Code that may

not be overridden or modified by the terms of a trust, including the requirements for

creating a trust, the duty of a trustee to act in good faith, the effect of a spendthrift

provision, limits on provisions that limit a trustee's liability, periods of limitation for

commencing a judicial proceeding related to a trust, and the power of the court to

take certain actions. The Code also includes default rules that are not included in

the UTC, including rules related to a trustee's power to appoint assets to another

trust, trust protectors, directed trusts, and life insurance contracts owned by trusts.

In addition to creating the Code, the bill clarifies the definitions of "general

power of appointment" and "special power of appointment" and clarifies when a

creditor can reach assets that are subject to a power of appointment. The bill also

extends the prudent investor rule to directing parties and trust protectors who have

a power over the investment of a trust, and clarifies rules relating to a trustee's

retention of securities received by a trustee. A further explanation of these changes

is provided after the overview of the Code.

Under this bill, the 11 articles of the UTC are created as subchapters of the

Code. Two differences in the structure of the UTC and the Code are: 1) the Uniform

Prudent Investor Act, as adopted in this state, is referenced in the Code but

otherwise remains outside the Code; and 2) the Uniform Principal and Income Act,

which was previously adopted in this state, is included as subchapter 11 of the Code,

moving the miscellaneous provisions of the Code to subchapter 12.

The following is an overview of each subchapter of the Code:

Subchapter 1: General Provisions and Definitions

Subchapter 1 provides definitions for terms that are used throughout the Code,

including a number of new terms and definitions. The new terms introduced in

subchapter 1 include "qualified beneficiary," "directed trust property," and "trust

protector." Under the Code, a "qualified beneficiary" is a person who is a current

beneficiary of trust income or principal, a person who would be eligible to receive

trust income or principal if the current beneficiaries' interests in the trust terminate,

or a person who would receive a distribution if the trust terminates. "Directed trust

property" is defined as property that is invested or managed by a directing party and

for which the trustee has no investment or management responsibility. A "trust

protector" is defined as a person who is given a specified power over the trust in a

capacity other than as a trustee or a directing party. The terms "directed trust

property," "directing party," and "trust protector" are not included in the UTC.