When creating your estate plan, you run into numerous new terms, such as will, trust, power of attorney. Each serves a specific purpose for your estate plan, but unless you’re an estate planning attorney, you may not know which does what.
Let’s specifically look at trusts.
A trust is a legal arrangement between the person who creates the trust (the grantor), the person who is appointed to manage the trust (the trustee), and the person who benefits from the trust (the beneficiary).
A trust goes into effect while you’re still alive while a will goes into effect after your death. Additionally, a properly set up trust may help you avoid probate, serving as an integral part of your estate plan.
Here, we’ll walk through the five types of Wisconsin trusts, giving you insight into these legal arrangements and which you may want to consider when creating your estate plan.
1. Revocable Trusts
A revocable trust (or a “living trust”) is one of the more flexible trust options in Wisconsin. These trusts are created while you’re alive (hence the name – living trust). Additionally, it’s revocable in that it may be amended or altered at any time during your lifetime, as long as you’re mentally competent.
Typically, a revocable trust becomes irrevocable at the time of death.
Taxes do attach to this trust, so you’ll want to discuss using a revocable trust in your estate plan with a qualified estate planning attorney.
2. Irrevocable Trusts
Wisconsin irrevocable trusts are not as flexible as their revocable cousins, as once these trusts are created, they cannot be changed.
Irrevocable trusts become “active” once funded and typically avoid taxes and probate after the grantor passes away. If the grantor is still alive, then the trust’s assets are passed to a trustee to manage, and the grantor loses the ownership of the asset, according to Wisconsin law.
3. Testamentary Trusts
The third type of Wisconsin trust is a testamentary trust. This type of trust is created by terms of your will, and its terms will be carried out after death. Testamentary trusts are subject to both taxes and the probate process, which often slows down the distribution process.
4. Marital Trusts
Another Wisconsin trust is a marital trust, which is a revocable trust used to pass your estate to your surviving spouse upon death. However, this trust will be included in your spouse’s estate for tax purposes.
5. Bypass Trusts
A final type of Wisconsin trust is a bypass trust, which “bypasses” federal estate taxes. This type of trust is usually used for married couples with substantial assets.
A bypass trust is typically a combination of a revocable marital trust and an irrevocable family trust. The marital trust will pass directly to the surviving spouse. After that, the family trust passes to other family members, such as adult children.
Setting Up a Trust in Southeastern WI
If you need a trust in Southeastern Wisconsin, then you can count on the estate planning experts at Collins Law Firm LLC. We have years of experience planning estates, and we can help you navigate your options, including setting up a trust. Contact us for a free consultation today!