Section 701.1123. Deferred compensation, annuities, and similar payments.

 

(1)  In this section:

(a) “Marital deduction trust" means a trust for which an election to qualify for a marital deduction under section 2056 (b) (7), 2056A (a) (3), or 2523 (f) of the Internal Revenue Code has been made or a trust that qualified for the marital deduction under other provisions of section 2056 or 2523 of the Internal Revenue Code.

(b) “Payment" means an amount of money or property received by a trustee that is any of the following:

1. Part of a series, or eligible to be part of a series, of distributions payable over a fixed number of years or during the life of one or more individuals because of services rendered or property transferred to the payer in exchange for the future distributions.

2. Distributed from a plan, regardless of the reason for the distribution.

(c) “Plan" means a contractual, custodial, trust, or other arrangement that provides for distributions to a trust. “Plan" includes a private or commercial annuity, an individual retirement account, a Roth individual retirement account, a qualified retirement plan such as a pension, profit-sharing, stock-bonus, or stock-ownership plan, or any nonqualified deferred compensation plan.

(d) “Plan income" means any of the following:

1. With respect to payments received from a plan that maintains separate accounts for its participants or account holders, either the amount of the separate account held for the benefit of the trust that, if the separate account were a trust, would be allocated to income for that accounting period, or 4 percent of the value of the plan account on the first day of the accounting period. The trustee shall choose the method of determining “plan income" under this subdivision, and may change the method of determining “plan income" under this subdivision for any subsequent accounting period.

2. With respect to payments received from a plan that does not maintain separate accounts for its participants or account holders, 4 percent of the total present value of the trust's interest in the plan as of the first day of the accounting period, based on reasonable actuarial assumptions as determined by the trustee.

(e) “Separate account" means an account established or maintained under a plan under which income, gains, and losses, whether or not realized, from assets allocated to the account, are credited to or charged against the account without regard to other income, gains, or losses of the plan.

(2)  To the extent that a payment is characterized as interest, a dividend, or a payment made in lieu of interest or a dividend, a trustee shall allocate the payment to income. The trustee shall allocate to principal the balance of the payment and any other payment received in the same accounting period that is not characterized as interest, a dividend, or a payment in lieu of interest or a dividend.

(3)  For each accounting period of a trust in which the trust receives a payment but no part of any payment is allocated to income under sub. (2) , the trustee shall allocate to income that portion of the aggregate value of all payments received by the trustee in that accounting period that is equal to the amount of plan income that is attributable to the trust's interest in the plan from which payment is received for that accounting period. The trustee shall allocate the balance of any payments to principal.

(4)  

(a) Notwithstanding sub. (3) , a trustee of a marital deduction trust shall determine plan income for an accounting period as if the plan were a trust subject to this subchapter. If the trustee of a marital deduction trust cannot determine the plan income, the plan income is 4 percent of the total present value of the trust's income in the plan on the first day of the accounting period, based on reasonable actuarial assumptions as determined by the trustee of the marital deduction trust.

(b) Notwithstanding subs. (2) and (3) , a trustee of a marital deduction trust shall allocate a payment from a plan to income to the extent of the plan income and distribute that amount to the surviving spouse. The trustee of the marital deduction trust shall allocate the balance of the payment to principal. Upon the request of the surviving spouse, the trustee of a marital deduction trust shall allocate principal to income to the extent the plan income exceeds payments made from the plan to the trust during the accounting period.

(c) Upon the request of the surviving spouse of the settlor, a trustee of a marital deduction trust shall demand that a person administering a plan distribute the plan income to the trust.

(5)  If, to obtain an estate or gift tax marital deduction for an interest in a trust, a trustee must allocate more of a payment to income than provided for by this section, the trustee shall allocate to income the additional amount necessary to obtain the marital deduction.

(6)  This section does not apply to a payment to which s. 701.1124 applies.

2013 a. 92 ss. 182 , 183 , 264 , 266 to 270 .