With a living trust, you can manage and distribute your assets after your passing. While this valuable estate tool can help expedite the probate process and protect your privacy, it may not be the right option for everyone. Some assets are not suitable to be placed in a living trust. Here is what you need to know about what not to put in a Wisconsin living trust.
If you have a retirement account, such as Individual Retirement Accounts (IRAs) and 401(k)s, these assets have specific beneficiary designations. With that, you can designate who will inherit the account funds. However, placing these accounts in a living trust could cause adverse tax consequences.
Along with that, it could negate any benefits for your beneficiaries. Instead, consider updating your beneficiary designations so that those plans align with your estate goals.
Life Insurance Policies
Along with those retirement accounts, life insurance policies also have designated beneficiaries. In most cases, the proceeds from the policy will pass directly to any named beneficiaries. This process bypasses probate.
Once again, if this policy is placed into a living trust, it could cause issues. There could be unnecessary complications in distributing the funds to your loved ones. It is recommended that you keep these policies separate from the trust.
Wisconsin allows for a Transfer on Death (TOD) beneficiary designation for motor vehicles. With this certificate, you can designate who should inherit your vehicle without involving the living trust.
Adding motor vehicles to a trust can lead to unnecessary complexities and delays when transferring ownership. Alternatively, you can use the TOD beneficiary designation form to specify the vehicle’s intended recipient.
Real Estate Outside of Wisconsin
If you own real estate outside of Wisconsin, you may not want to include these properties in your Wisconsin living trust. Real estate is subject to the laws and regulations of the state where it resides.
Those out-of-state properties in a Wisconsin living trust can create legal complications. In these instances, you might want to establish a separate trust where the property is situated.
Assets with Joint Ownership and Rights of Survivorship
Assets owned jointly with someone else and with rights of survivorship pass automatically to the surviving owner upon your death. These assets bypass the probate process and the living trust. However, adding these assets to your living trust can lead to unnecessary redundancy and complexity.
Personal Property with Low Value
While a living trust can hold various types of assets, it may not be practical to include personal items of low value, such as furniture, clothing, and household goods. The administrative effort required to list and manage these items in a trust may outweigh the benefits.
You might want to consider addressing the distribution of personal property with a separate, less formal document or by specifying your wishes in a will.
Certain assets have unique transfer mechanisms that may not align with the purpose of a living trust. For example, intellectual property rights, digital assets, and cryptocurrencies often have specific procedures for transferring ownership or accessing them in case of incapacity or death.
If you have any intangible assets, you will want to consult an attorney to determine the best approach for addressing these assets in your estate plan.
Schedule an Appointment to Discuss Your Trust Needs
Now you know what not to put in a Wisconsin living trust. Some assets may be better managed through other means, such as beneficiary designations, joint ownership, or specific state-specific procedures.
To ensure your estate plan aligns with your goals and complies with Wisconsin law, consult with the experienced legal team at Collins Law Firm. We serve Southeastern Wisconsin and the Milwaukee region. Contact us to book your free consultation by calling (414)-207-6292.