On December 13, 2013, Governor Walker signed into law the Wisconsin version of the Uniform Trust Code (the actual Act number is not available at the time of this writing). This new law was the product of a nearly seven year effort of a joint subcommittee of the State Bar and the Wisconsin Bankers Association which included Certus attorneys, Cathy Priebe and Mark Shiller.
While the Wisconsin Act’s provisions will apply, with some exceptions, to existing trusts as well as those created in the future, the Wisconsin Act will become effective on July 1, 2014. This provides practitioners an opportunity to get their arms around the new law and will allow for educational opportunities so that our Bar can hit the ground running come July 1st of next year. If that is of interest to you, please watch for the State Bar’s upcoming offerings of webinars and live seminars in the first part of 2014.
An exhaustive treatment of the Wisconsin Act is beyond the scope of this article. However, particularly given the controversial nature of the Uniform Act’s approach on certain topics and new provisions included in the Wisconsin Act, we highlight the following selection of some of the more notable aspects of the new law.
- Most provisions of the Wisconsin Act can be overridden by drafting. The mandatory provisions include the requirements to create a trust, a trustee’s duty to act in good faith, the authority of a court to modify or terminate a trust and over a few other matters, the effect of spendthrift provisions, and the effect of certain aspects of exculpatory provisions.
- The ability to use non-judicial settlements to resolve trust disputes is expanded.
- Concepts of virtual representation are significantly expanded.
- Wisconsin testamentary trusts will no longer be subject to continuing court supervision unless it is ordered in response to a petition requesting such supervision.
- Pet trusts are specifically permitted.
- The default threshold for uneconomic trusts is increased to $100,000, which threshold will be indexed for inflation.
- The Wisconsin Act includes a statute regarding decanting of trusts. While IRS regulations are still under consideration, and the uncertainties associated with how the IRS will view the decanting of trusts, this non-UTC statute may provide significant flexibility in trust planning.
- Wisconsin did not follow the Uniform Act’s significant expansion of creditor rights. In general, our beneficiary- and settlor-friendly approach remains unchanged.
- Trusts are presumed revocable, and not irrevocable, when silent on the subject. This is the opposite of current law.
- Titling an asset in the name of the trust is considered the equivalent of title in the name of the trust’s trustees. This is not necessarily inconsistent with current law, but is at least a clarification of the not uncommon practice of using just a trust’s name in asset titling and beneficiary designations.
- The Wisconsin Act includes a provision related to directed trusts. Trusts may provide for a directing party over a variety of matters, including investments. This technique may be useful for dividing authority, responsibility and liability with the various tasks and obligations that traditionally fall solely to the trustee.
- The Wisconsin Act includes a very detailed statute related to trust protectors. The statute is unique in providing certain presumptions associated with whether certain powers of a trust protector are exercisable in a fiduciary or non-fiduciary capacity.
- The default time frame to raise an objection to trust accounts is reduced from two years to one year.
The Wisconsin Act ultimately included several provisions that were outside the joint subcommittee’s focus. Notably, the law just signed pulls back from the somewhat controversial (at least from the estate planning and elder law bar’s point of view) Estate Recovery provisions that had been included in the budget. In addition, changes were made to Chapter 702 which covers powers of appointment. In addition to clarifying the classification of powers of appointment between general and special powers of appointment to confirm that Wisconsin law is consistent with original intent and the federal tax classification of powers of appointment, a donee’s creditors will have reduced access to trust assets subject to an unexercised general power of appointment granted to such donee.