Feb. 18, 2015 – Imagine facing a legal question and unable to find an answer. Every lawyer’s nightmare? Perhaps. But that was often the challenge estate planning attorneys faced prior to passage of the new Wisconsin Uniform Trust Code, says Randy Nelson of Weiss Berzowski Brady LLP.

Now, instead of facing the dilemma of “How do I advise my client?” the new trust code “sets out a series of default rules that I can then review with the trustee, the settlor, the beneficiary, and say, ‘Okay, here’s what the default rule is.’”

Nelson chaired the joint committee of the State Bar of Wisconsin and the Wisconsin Bankers Association responsible for the Wisconsin Uniform Principal and Income Act that was passed in 2005, and was a member of the drafting committee responsible for the Wisconsin Uniform Trust Code that was passed in 2013. The trust code went into effect July 1, 2014.

Nelson said the Uniform Laws Commission created the Uniform Trust Code as a basis for states to either clarify existing law or create new law where none really existed. Wisconsin, Nelson says, previously lacked “detailed law dealing with the administration of trusts” before the update.

“There were many areas in trust administration where, as a practitioner, you would face a question that you know comes up all the time and you would look for the black-letter law that tells you what the answer is … you would find nothing.” The new Wisconsin Trust Code, says Nelson, “is designed to fill in those blanks.” While, in some cases, the code was designed to update Wisconsin law, in others “our committee actually changed the uniform law so that it would be consistent with our existing Wisconsin law because we liked our Wisconsin law as it was and did not want the new trust code to change that.”

Default Rules Key to New Trust Code

“One of the keys of the Wisconsin Trust Code is that it establishes default rules,” says Nelson. If the trust document is silent on a particular provision, it sets out the rules that apply. However, the code is also flexible, ensuring that “most of the rules that are spelled out in the trust code can be modified by the attorney as the drafter of the trust document.”

It is important that attorneys understand what the default rules are so as to “determine whether these are things that our clients are going to want, or whether our client’s objectives may sometimes be inconsistent with those rules,” says Nelson. In that case, the lawyer would need to modify the trust document. “So, it does add another issue for us, as planners, to deal with in trying to accomplish our client’s objectives.”

According to Nelson, one of the most significant default rules deals with the trustee’s duty to inform and report to the beneficiaries of the trust. Nelson says it’s “an area that, as practitioners, we’re going to really have to understand those rules in great detail and determine when it is appropriate to discuss those rules with the client to help the client decide whether they want to make a change.”

Uniform Trust Code: A Great Resource

Looking to better understand the Wisconsin Trust Code? Nelson recommends keeping a copy of the Uniform Trust Code close at hand. It contains, “not just the suggested statute, but includes commentary, which adds explanation to what the statute is trying to accomplish, why it’s there, what the philosophy was,” says Nelson. However, attorneys are going to have to be very careful because the Wisconsin Trust Code does not always follow the Uniform Trust Code. “So before relying on one of those comments, the attorney is really going to need to compare the Wisconsin Trust Code provision to the Uniform Trust Code provision.

Nelson presented, “The New Wisconsin Trust Code: How Your Drafting Impacts Who Gets What Information” at the State Bar of Wisconsin PINNACLE 2014 Wisconsin Solo & Small Firm Conference.