Judicial review of discretionary power

701.1109 Judicial review of discretionary power. (1) Nothing in this subchapter creates a duty to make an adjustment under s. 701.1104 or to convert a trust to a unitrust under s. 701.1106. Unless it determines that the decision to make an adjustment or to convert to a unitrust was an abuse of the fiduciary’s discretion, a court may not grant relief from any decision a fiduciary makes regarding the exercise of a discretionary power conferred by s. 701.1104 or 701.1106. (2) An action taken under s. 701.1104 or 701.1106 is not an abuse of a fiduciary’s discretion if the fiduciary gave written notice of the proposed action under s. 701.1105 and did not receive a timely written objection to the notice. It is not an abuse of discretion not to exercise the power to adjust under s. 701.1104 or to convert under s. 701.1106. (3) A fiduciary’s decision is not an abuse of discretion merely because the court would have exercised the power in a different manner or would not have exercised the power. (4) If the court determines that a fiduciary has abused the fiduciary’s discretion, the remedy shall be to restore the income and remainder beneficiaries to the positions that they would have occupied had the discretion not been abused, according to the following rules: (a) To the extent that the abuse of discretion has resulted in no distribution to a beneficiary or in a distribution that is too small, the court shall order the fiduciary to distribute from the trust to the beneficiary an amount that the court determines will restore the beneficiary, in whole or in part, to the beneficiary’s appropriate position. (b) To the extent that the abuse of discretion has resulted in a distribution to a beneficiary that is too large, the court shall place the beneficiaries, the trust, or both, in whole or in part, in their appropriate positions by ordering the fiduciary to withhold an amount from one or more future distributions to the beneficiary who received the distribution that was too large or by ordering that beneficiary to return some or all of the distribution to the trust. (c) To the extent that the court is unable, after applying pars. (a) and (b), to place the beneficiaries, the trust, or both in the positions that they would have occupied had the discretion not been abused, the court may order the fiduciary to pay an appropriate amount from its own funds to one or more of the beneficiaries, the trust, or both. (5) Upon petition by the fiduciary, the court having jurisdiction over a trust shall determine whether a proposed exercise or nonexercise by the fiduciary of a discretionary power conferred under this section will result in an abuse of the fiduciary’s discretion. The petition must describe the proposed exercise or nonexercise of the power and contain sufficient information to inform the beneficiaries of the reasons for the proposal, the facts upon which the fiduciary relies, and an explanation of how the income and remainder beneficiaries will be affected by the proposed exercise or nonexercise of the power. A beneficiary who challenges the proposed exercise or nonexercise of the power has the burden of establishing that it will result in an abuse of discretion. History: 2013 a. 92 ss. 245 to 250. Determination and distribution of net income. In the case of an estate of a decedent or after an income interest in a trust ends, the following rules apply: (1) A fiduciary of an estate or of a terminating income interest shall determine the amount of net income and net principal receipts received from property specifically given to a beneficiary under the rules in ss. 701.1112 to 701.1135 that apply to trustees and the rules in sub. (5). The fiduciary shall distribute the net income and net principal receipts to the beneficiary who is to receive the specific property. (2) A fiduciary shall determine the remaining net income of a decedent’s estate or a terminating income interest under the rules in ss. 701.1112 to 701.1135 that apply to trustees and by: (a) Including in net income all income from property used to discharge liabilities. (b) Paying from income or principal, in the fiduciary’s discretion, fees of attorneys, accountants, and fiduciaries; court costs and other expenses of administration; and interest on death taxes, but the fiduciary may pay those expenses from income of property passing to a trust for which the fiduciary claims an estate tax marital or charitable deduction only to the extent that the payment of those expenses from income will not cause the reduction or loss of the deduction. (c) Paying from principal all other disbursements made or incurred in connection with the settlement of a decedent’s estate or the winding up of a terminating income interest, including debts, funeral expenses, disposition of remains, family allowances, and death taxes and related penalties that are apportioned to the estate or terminating income interest by the will, the terms of the trust, or applicable law. (3) A fiduciary shall distribute to a beneficiary, including a trustee, who receives a pecuniary amount not determined by a pecuniary formula related to a transfer tax interest at the legal rate set forth in s. 138.04 on any unpaid portion of the pecuniary amount for the period commencing one year after the decedent’s death or after the income interest in the trust ends. The interest under this subsection shall be distributed from net income determined under sub. (2) or from principal to the extent that net income is insufficient. For purposes of this subsection, the deferred marital property elective share amount elected by a surviving spouse under s. 861.02 (1) is a bequest of a pecuniary amount not determined by a pecuniary formula related to a transfer tax. (4) A fiduciary shall distribute the net income remaining after distributions required under subs. (1) to (3) in the manner described in s. 701.1111 to all other beneficiaries, including a beneficiary who receives a pecuniary amount determined by a pecuniary formula related to a transfer tax. (5) A fiduciary may not reduce principal or income receipts from property described in sub. (1) because of a payment described in s. 701.1130 or 701.1131 to the extent that the will, the terms of the trust, or applicable law requires the fiduciary to make the payment from assets other than the property or to the extent that the fiduciary recovers or expects to recover the payment from a 3rd party. The net income and principal receipts from the property are determined by including all of the amounts the fiduciary receives or pays with respect to the property, whether those amounts accrued or became due before, on, or after the date of a decedent’s death or an income interest’s terminating event, and by making a reasonable provision for amounts that the fiduciary believes the estate or terminating income interest may become obligated to pay after the property is distributed. History: 2013 a. 92 s. 251.