80 Op. Att'y Gen. 183 (1992)
 
80 OAG 183  184 185 186 187

OPINION NO. OAG 6-92,

Wisconsin Attorney General Opinions

2 March 1992

Ethics,

State Board Of; Public Officials;

An individual who is required to file a
Statement of Economic Interests and who is a
beneficiary of a trust which provides that
the individual will receive a share of the
trust's corpus upon the death of the
individual's parent if he or she survives the
parent, must identify on his or her Statement
of Economic Interests, the securities held by
the trust if the individual's interest in the
securities is valued at $5,000 or more.

R. ROTH JUDD, Executive Director Ethics Board

You ask whether an individual who is required
to file a Statement of Economic Interests
with the Ethics Board and who is a
beneficiary of a trust which provides that
the individual will receive a share of the
trust's corpus upon the death of the
individual's parent if he or she survives the
parent, must identify on his or her Statement
of Economic Interests, the securities held by
the trust if the individual's interest in the
securities is valued at $5,000 or more.

The answer is yes.

Section 19.44, Stats., requires that every
Statement of Economic Interests must contain

     the identity of every organization or
     body politic in which the individual who
     is required to file or that individual's
     immediate family, severally or in the
     aggregate, owns, directly or indirectly,
     securities having a value of $5,000 or
     more. . . .

Section 19.44(1)(b), Stats.

It has been suggested that the statutory
reporting requirement applies only to
individuals with a present right to receive
income from, or other present enjoyment of,
a trust and should not apply to someone
who is presently receiving
nothing from the trust.

That argument ignores the plain words of
the statute and the Ethics Board's rules.

The statute requires the reporting of
securities which are owned, either directly
or indirectly, if the official's interest is
valued at $5,000 or more.

As you note, the majority view in the United
States is that the beneficiary of a trust has
a form of ownership in the trust corpus.

2A Scott, The Law of Trusts
Section 130 at 406 (4th ed. 1987).

 
80 OAG 183  184 185 186 187

The board's rule, Wisconsin Administrative
Code Section ETH 2.06, provides that

    "economic interests held in the name of a
     . . . trustee . . . for the account of a
     person are owned by the person for whose
     benefit they are held."

The board has held, in a formal opinion, that
an individual has a calculable, reportable
interest in trust property if the individual
has a legal right to benefit from the trust
either in the present or the future.

8 Op. Eth. Bd. 69 (1985).

The board's interpretation and application of
laws it is charged with enforcing is entitled
to great weight.

Kimberly-Clark Corp. v. Public Service Comm.,
110 Wis.2d 455,
329 N.W.2d 143 (1983).

This situation is very little different from
an individual to whom a note is payable
sometime in the future.

That individual has a direct interest in that
note and has a present interest in that note.

In that case, or in the case of the
beneficiary of the trust, the future interest
has a present value which reflects the
individual's interest.

It is immaterial that the note holder or the
beneficiary of the trust may die before the
note is paid or the corpus of the trust
becomes available.

The issue is not whether there
is a definite future interest.

The issue is whether there
is a present interest.

Section 19.44(3)(b), which determines how an
interest in a trust is apportioned, provides
in pertinent part that:

     An individual who is eligible to receive
     income or other beneficial use of the
     principal of a trust is the owner of a
     proportional share of the principal in
     the proportion that the individual's
     beneficial interest in the trust bears
     to the total beneficial interests
     vested in all beneficiaries of the
     trust.

On its face this statute applies not only to
someone who is actually receiving income but
also to someone "whois eligible to receive
income or other beneficial use."
 

The Legislature did not intend to limit
reporting requirements to present income.

 
80 OAG 183  184 185 186 187

Under Wisconsin law the beneficiary of this
trust has an interest which is vested subject
to complete defeasance because "the interest
is created in favor of one or more
ascertained persons in being and would become
a present interest on the expiration of the
preceding interests but may end or may be
completely defeated as provided by the
transferor at, before or after the expiration
of the preceding interests."

Section 700.05 (3), Stats.

The beneficiary has a future interest,
section 700.03(2), but a future
interest is transferable.

Section 700.07, Stats. There is no doubt
that this future interest has vested
and has value.

If the instrument creating the trust is
unclear with respect to whether the right to
receive the benefit is vested or contingent,
the issue is resolved in favor of a vested,
rather than a contingent, interest.

See

Estate of Scherffius,
62 Wis.2d 687, 697a,
215 N.W.2d 547 (1974).

It could be argued that if this trust creates
a remainder which is subject to a condition
precedent, that is, if the interest is
created in favor of one or more unborn or
unascertained persons, section 700.05(4),
there would be no need to identify the trust
on the Statement of Economic Interests
because the interest has not vested.

See

Will of Wehr,
36 Wis.2d 154,
152 N.W.2d 868 (1967).

If the interest created by the trust is an
interest subject to a condition precedent as
opposed to an interest vested subject to
complete defeasance, the question is much
closer.

I would conclude, however, based on the
language of the statute and the board's
consistent interpretations, that even a
contingent interest must be reported on
the Statement of Economic Interests.

I would recommend, however, that the board
seek statutory clarification on that issue.

Requiring an official to report an interest
in the trust which he or she will receive if
the official survives the parent is
consistent with the other reporting
requirements of the ethics code and
consistent with the public policy reflected
in the ethics code.

As you note, the law contemplates making
public the identity of securities and
property in which public officials have a
substantial interest in order to avoid
conflicts between private interests and
official responsibilities and also to promote
public confidence.

Sec. 19.41, Stats.

 
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Interpreting the law as not requiring
disclosure in these circumstances would
frustrate those goals.

JED:AL

 
80 OAG 183  184 185 186 187