(414) 276-4366
Milwaukee, WI
Trusts & Estates, Elder Law, Tax and Closely Held Businesses | Attorneys Licensed in Wisconsin and Illinois
(414) 276-4366
Milwaukee, WI
Trusts & Estates, Elder Law, Tax and Closely Held Businesses | Attorneys Licensed in Wisconsin and Illinois
All trusts are written agreements that provide for property management. You as the owner (sometimes referred to as the donor, trustor, settlor, or grantor) place property in trust for the benefit of one or more individuals (the beneficiaries). The management of the property is provided by someone (the trustee) with a special position of responsibility and duty for the benefit of others. A revocable living trust (sometimes called a “living trust” or “revocable trust“) is a particular kind of agreement that you make that says how you want the property that you put into the trust to be managed and distributed during your life and after your death. This trust agreement can be changed or revoked. A revocable living trust is unique because you will often serve in all three positions – donor, beneficiary and trustee.
Usually, you will name yourself – or you and your spouse – as the trustee because you want full control of the property. However, people do name trusted friends or relatives, attorneys or a corporate trust department (bank or brokerage company) as trustee. A revocable living trust should always name a second person or corporate trust department to act if the first trustee dies, resigns or is otherwise unable to continue to manage the property. This second person is called a “successor trustee“.
You can name two or more people to act together as trustees. They are called “co-trustees”. Spouses may choose to establish a joint trust, in which case both spouses are donors and trustees. Establishing a joint trust is more common among married persons in Wisconsin and other community property type states where a significant portion of assets may be owned as marital (or community) property.
Living trusts can be either funded or unfunded. A living trust is funded if the donor actually transfers all or a portion of his or her assets into the trust during the donor’s lifetime. This is done by changing the title document to the asset from the name of the donor to the name of the trust. Alternatively, the donor may choose to leave the trust largely unfunded until after the donor’s death. An unfunded trust is typically the receptacle of assets which “pour over” into the trust under the donor’s will. An unfunded trust does not protect assets from probate and its costs. To avoid probate, all of the donor’s assets which are not subject to a beneficiary designation or automatically transferable on death should be transferred into the trust during the donor’s lifetime.
Some people put all or most of their property into the trust at the beginning. Others put some in at the beginning and add more from time to time (for example, when a certificate of deposit matures). Others may wait and transfer much of their property only when they die. To do this, you would use a simple will – called a pourover will. A pourover will funds the trust with property that you did not put into the trust during your lifetime. When you set up a revocable living trust, you are usually the first beneficiary. If you are married, you may decide to make both you and your spouse the first beneficiaries. If not the first beneficiary, you usually make your spouse the second beneficiary if you die first. In any event, you will want to choose the people whom you want to get your property after you die, so that the trustee will know what to do then.
No. Since you can change the trust at any time and take the property back, the property in the living trust is still yours, and will be included when your eligibility for Title 19 (Medical Assistance) is calculated.
You do not save any estate tax just because the trust is a revocable living trust. However, with the proper provisions in a living trust, a couple’s estate tax exemption may be preserved and any asset carryover basis allocated. For deaths occurring in 2011 and 2012, total assets may be up to $5,000,000 (or $10,000,000 for a couple) to avoid federal estate tax.
Yes. Because you can terminate the trust at any time, all of the property that is in the trust at the time of your death will be included in your taxable estate.
No. The state and federal tax authorities treat the income that the trust earns as your income. Usually the trustee pays you all of the income and pays you any amount of principal necessary to provide for your needs and requirements. If you become incapacitated, the trustee pays necessary amounts of income and principal for your benefit.
No. In most cases, your assets continue to use your social security number and there are no additional income tax filings during your lifetime.
Yes, as long as you are mentally competent. You can change the trust or take the property back at any time for any reason without having to get permission from anyone else. In Wisconsin, a trust is revocable only if it says so in the trust agreement. The trust will be irrevocable when you die and no further changes are allowed.
No. Joint tenancy may allow the surviving spouse to avoid probate. However, it often creates unnecessary estate taxes at the death of the second spouse.
Yes. You can make the same provisions for young children in a revocable living trust that you can in a will.
It can do the following things:
If you own land in another state, a special probate (ancillary probate) may be necessary in that state in order to transfer that land to your heirs. By putting that land in a revocable living trust, this ancillary probate may be avoided.
It cannot do the following things:
No. The two documents usually work best together. The trust provides more flexible property management and distributes your property after you die. The power of attorney can help with final funding of your trust, but it is better for dealing with special services, Medicare and Medicaid, personal income taxes and daily living expenses.
An experienced attorney can give you valuable help and make sure that legal documents are prepared properly and fit your situation. Just as one size coat does not fit all, do-it-yourself kits and form books cannot deal with your unique needs and can be very dangerous.
It would be more expensive than the do-it-yourself kits or form books. However, making sure that the documents are prepared properly and fit your situation is very important and can save money in the end. Just as you would run a risk in flying in a plane built by someone without the proper engineering training and experience, it can be dangerous to have someone prepare living trusts who does not have training or experience.
To assist you, we have provided this brochure on revocable living trusts. This is not intended to be a complete explanation of the laws, rules and regulations affecting this brochure. The laws and rules often change and each individual’s situation is unique. This brochure will provide an initial understanding of the basic concepts. You should carefully evaluate your particular situation and consult the appropriate professional or legal advisor prior to taking any action.