2023 Wisconsin Trust Law Updates

A trust is a versatile and highly useful tool that can be used to protect, grow and distribute your assets. A trust is also a handy tool for avoiding the probate process in the event of your death. Wisconsin trust law is not undergoing any changes or updates in 2023, but if you have yet to explore creating and using a trust in Wisconsin, this article can assist you in becoming familiar with trust law basics. Read on to learn more about Wisconsin trust law in 2023.  

What Is A Trust?

A trust is a legal document that allows a third party to hold assets. The trust will name beneficiaries, who are the named individuals or companies that are to benefit from the assets held on the trust. That benefit can be either the income that the assets generate or the assets themselves will pass to the beneficiary from the trust at some time when certain conditions are met.  

The creator of the trustee usually names a trustee to manage the trust. A lot of the time, the trust's creator will name themselves the trustee to maintain control over the management of the trust's assets. The creator of the trust can also name themselves a beneficiary for the duration of their life, so they continue to benefit from the assets held in the trust.  

Revocable trust - a revocable trust is just what its title says, a trust that can be modified or dissolved at any time.  

Irrevocable trust – just like its name says, this kind of trust is rarely used because once it is created and funded, it is very difficult to "break" or change the trust. Irrevocable trusts are typically created and used for tax purposes.  

How Does a Trust Work in Wisconsin?

Trusts in Wisconsin are governed by Chapter 701 of the Wisconsin state statutes. The law in Chapter 701 lays out how trusts can be created, changed, enforced, and even contested. Chapter 701 also dictates the trustee's duties and how the trust investments should be properly and legally managed.  

Creating a Trust

In order to create a trust, it is strongly recommended that you seek the assistance of an experienced Wisconsin trust attorney. The attorney will be able to sit down with you and discuss your goals and then create the best type of trust for you. The attorney will also be able to explain the duties and legal requirements of operating the trust.  For even more information on creating trusts in Wisconsin read our article, Setting up a Trust in Wisconsin? Read These 5 Things First!

Funding the Trust

Once you have figured out, with your attorney, what the best kind of trust for you is, the attorney will draft all the required trust documents. Then it will be time to "fund" the trust, where you put whatever assets you want into the actual trust. One example of this would be putting a title to your home in the trust's name, thereby making the trust the holder of title to the real estate. You can also have your bank transfer your bank accounts to the trust if you so desire. These are just a few simple examples of how you can use a trust to hold your assets.  

Managing the Trust

Once the trust is created and funded, it will require management. If you are the trustee, it will be your job to keep the trust healthy and profitable. If you hand over control of the trust to a third-party trustee, they will have what is called a fiduciary duty to maintain the trust properly, which includes many duties and can be a complex undertaking depending on what is held in the trust. If you select a third-party trustee, remember that the trustee does have a duty to inform and report on the status of the trust and its assets so that beneficiaries and reasonable distributes will be reasonably and timely informed as to the status of the trust.  

Modifying the Trust

At this point, regardless of who the trustee is, you or someone else, all you have to do is continue to let the trust do what it was created to do. If you need to modify the trust, you will contact your attorney to prepare the appropriate documents. It is recommended that you modify the trust to update it when you have a significant life event like a marriage, a divorce, or the birth of a child.  

Avoiding Probate

Trusts are an excellent way to avoid probate. If the assets are held in trust, you will ideally have named beneficiaries, and the assets can automatically pass to them in the event of your death without the probate court getting involved.  

Sometimes, trusts also include what is called a pour-over will, where any assets not held in the trust are distributed. If there is a pour-over will, then that will need to go through probate. This is another reason to update your trust regularly in order to avoid probate, which can be time-consuming and take some of the estate's assets to conduct.  

‍

Trust Contests In Wisconsin

Sometimes a beneficiary or someone who thinks that they should have been a named beneficiary can contest the validity of a trust after the trust settlor passes away. In situations like this, the challenger will have to file a petition with the court alleging that the trust itself is invalid. Of course, a trust that is unsigned is invalid from the start, but there are typically three main reasons that someone will claim that a trust is invalid:  

1. that the trust was created through force or intimidation  

2. that fraud or deceptive practices were used to make the settlor create and fund the trust or;  

3. that the creator of the trust, the settlor, was of unsound mind at the time of the creation  

Since these kinds of claims are typically brought after the settlor has passed away, they can be really difficult to prove. A trust contest will likely be an expensive and time-consuming litigation with no guarantee of success. If the trust really is found to be invalid by the court, the beneficiaries will have to return any distributions they received from the trust. A trust can also be found invalid if it is found that the trust document was forged or later revoked by the settlor. Before you consider filing a complaint contesting the validity of a will be very certain that you have a decent amount of solid evidence to support your claims; otherwise, you could be throwing money down the drain.  

Disadvantages Of A Trust In Wisconsin

A trust has very few disadvantages. The only "downside" to a trust is that it needs to be actively monitored and updated. For instance, if using a trust is for the purpose of avoiding probate, you will still have to do work for the trust once it is created and funded. A will, on the other hand, does not need the same amount of attention that a trust does. You can draft the will and sign it in front of a witness, store it with someone you trust, and move on in life. A trust is not a legal document you create and then ignore, especially since it can hold all of your assets if you want. While this level of control appeals to a lot of people, other people want to keep things more straightforward when it comes to estate planning.  

Don't Wait to Plan Your Estate

The bottom line here is that having a trust offers many, many advantages when it comes to protecting, controlling, and distributing your assets with minimal interference once you pass away. You can have multiple trusts, each with its own terms, that control the assets held within it. If you still need to schedule an appointment with a Wisconsin estate planning attorney to create your estate plan, now is the time to do so. Early and thoughtful estate planning can save you and your family a lot of time, stress, and money down the road. A Wisconsin estate planning attorney will be able to discuss what your goals are and, review your asset profile, then develop a strategy to help you have your goals reached. To reiterate, the best time to start your estate plan is now, while you are healthy and not dealing with injury or illness. If you are ready to start or update your estate plan and are looking for help, feel free to give O'Flaherty Law a call, we would be happy to assist you.  

‍