701.1107 Express unitrusts.

(1) In this section, “express unitrust" means any trust that by its trust instrument requires the distribution at least annually of a unitrust amount equal to a fixed percentage of the net fair market value of the trust's assets, valued at least annually, other than a trust solely for charitable purposes or a charitable split-interest trust under section 664 (d) or 170 (f) (2) (B) of the Internal Revenue Code.

(2) The following apply to an express unitrust:

(a) To the extent not otherwise provided for in the trust instrument, the unitrust amount of not less than 3 percent nor more than 5 percent may be determined by reference to the net fair market value of the trust's assets averaged over a preceding period determined by the trustee, which is at least 3 years but not more than 5 years.

(b) Distribution of such a fixed percentage unitrust amount of not less than 3 percent nor more than 5 percent is a distribution of all of the income of the unitrust and is an income interest.

(c) Such a distribution of a fixed percentage of not less than 3 percent nor more than 5 percent is a reasonable apportionment of the total return of the trust.

(d) A trust that provides for a fixed annual percentage payout in excess of 5 percent per year of the net fair market value of the trust is considered to be a 5 percent express unitrust, paying out all of the income of the unitrust, and to have paid out principal of the trust to the extent that the fixed percentage payout exceeds 5 percent per year.

(e) The trust instrument may grant discretion to the trustee to adopt a consistent practice of treating capital gains as part of the unitrust distribution, to the extent that the unitrust distribution exceeds the income determined as if the trust were not a unitrust, or it may specify the ordering of such classes of income.

(f) Unless the terms of the trust specifically provide otherwise, a distribution of the unitrust amount is considered to have been made from the following sources in the following order of priority:

1. Net income determined as if the trust were not a unitrust.

2. Ordinary income for federal income tax purposes that is not net income under subd. 1.

3. Net realized short-term capital gains for federal income tax purposes.

4. Net realized long-term capital gains for federal income tax purposes.

5. Principal.

(g) The trust instrument may provide that assets used by the trust beneficiary, such as a residence or tangible personal property, may be excluded from the net fair market value for computing the unitrust amount. Such use may be considered equivalent to the income or unitrust amount.

(h) In the absence of contrary provisions in the trust instrument of an express unitrust, the provisions of s. 701.1106 (3) (a), (d), and (e) apply.

History: 2013 a. 92 s. 243.