3 Reasons To
Use a Trust for your estate Plan
3 Main Reasons to use a Trust for Your Estate Planning in Wisconsin
1. Bypass Probate Court--Avoid Probate Court Fees & Expenses
Whether you die without a Last Will and Testament (what is called dying “intestate”), or you choose to form a Last Will and Testament, in both situations, your estate will need to go through the probate court system after your death in order to get any probate assets to your heirs. By law your Will must be filed with the probate court by your Personal Representative within 30 days of their knowledge of your death, and it becomes a public document upon filing. Any asset you own in your individual name, that is not otherwise set up to avoid probate court through a beneficiary designation or other means, will become part of your probate estate upon death. For many folks without a trust, most of their property is held in their individual name and often includes their home and other real estate, bank accounts, and all of their “tangible personal property” that fills the inside of their home, garage, and sheds, such as tools, jewelry, furniture, rugs, trailers, collectibles, antiques, etc. This tangible personal property is often one of the most time consuming and difficult assets for your heirs to deal with in the probate court process and is part of the reason why so many of my clients favor passing this property outside of probate court through a private trust administration.
By using a revocable living trust as the main vehicle for your estate plan, instead of a Will, we can transfer all or almost all of your assets to the trust during life (certain tax deferred retirement accounts generally cannot be placed inside the trust while you are alive), thereby bypassing probate court on these assets after your death. The probate court will assess a fee on all assets passing under its administration, therefore the more assets you pass outside of probate, the less fees you pay to the probate court for administration. In Wisconsin this fee is .2% of the probate assets subject to administration, and works out to a fee of $500 on every $250,000 of assets subject to administration. You can see that the more assets you have, the higher the fee, therefore as you accumulate more assets during your life, bypassing probate court on these assets begins to make more and more sense from a cost saving standpoint as well as in terms of efficiency of administration.
A revocable living trust can be set up during your life, and your assets can be transferred from your individual name into the name of your trust. The trust can then outlive you, and have rules inside it about what happens to your assets after you are gone. The trust can handle all of this as a private administration without the public probate court process. For this reason, many clients with a properly set up revocable living trust, that has been funded during life, will have no probate court process at all for their assets after they die.
2. Incapacity Protection--Avoid a Court Ordered Guardianship
A second reason to set up a revocable living trust plan during your life is that it can protect you not only after death, but also while you are alive. This is what we refer to as “incapacity protection.” Many folks are living longer, and throughout your life you may experience periods where you are alive but incapacitated or unable to act due to a serious health condition or illness. Remember, a Last Will and Testament only comes into effect after you die, whereas a Trust is a “living” document that exists as soon as you create it and sign it. Inside of the trust we can lay out special rules about who should act for you if you ever become incapacitated. This person is what we call the “Successor Trustee” and their role is to step into your shoes as primary trustee if you ever become incapacitated or unable to act. If we have all of your assets titled in the name of your trust during your life, then the Successor Trustee can easily continue to manage these assets according to the rules laid out in your trust, for your benefit, during this period of incapacity for you.
The alternative to having a pre-built incapacity protection plan inside of your trust like this is often a court supervised guardianship proceeding. Any legal adult in Wisconsin (age 18+) who does not have a trust plan set up during life to manage their property, or a valid Financial Power of Attorney in place naming an Agent to act for them during a period of incapacity, would be subject to a guardianship proceeding conducted by the Court in the county in which they reside if they become incapacitated and unable to manage their property and financial affairs. This process does not begin on its own however, it requires someone to petition the Court to be appointed Guardian of the Estate on your behalf. This is often a friend or family member, but remember they have no obligation to do so. Since this process involves going to court, and having a hearing before a judge, many folks trying to start the process (the petitioner) choose to hire a lawyer to help with this proceeding. Then once the guardianship petition has been filed the person who is the subject of the guardianship hearing, the incapacitated person sometimes called the proposed “ward”, is also entitled to a lawyer. The Court will appoint a second lawyer known as a “Guardian ad Litem” to represent the interests of the incapacitated person if they are unable to represent themselves.
In Wisconsin, the courts are required to respect the liberty rights of the individual person who is alleged to be incompetent. Some of these rights come from the Wisconsin Constitution, where it states “ All people are born equally free and independent, and have certain inherent rights; among these are life, liberty and the pursuit of happiness …” In addition, the Wisconsin Supreme Court has said there is a common law right to “self determination” and that “no right is held more sacred, or is more carefully guarded…, than the right of every individual to the possession and control of his own person, free from all restraint or interference of others, unless by clear and unquestionable authority of law.” See State v. McGill (2000). What all this means is that the courts are careful and circumspect about taking away someone’s right to liberty or self determination and management of their own property and affairs, therefore there are strict safeguards in place for the court to examine any guardianship proceeding from a neutral and objective standpoint. These safeguards are good so that they protect the rights of vulnerable adults, but they also mean that a guardianship proceeding takes time and careful attention of multiple lawyers and a judge. What this means is that a guardianship proceeding is not something that is conducted quickly, or easily and often requires a significant expenditure of funds. In short, guardianship proceedings for adults are often time consuming and expensive.
In addition, because this involves going to court, there are court mandated filing fees, and filing all of this paperwork takes a lawyer quite a bit of time, add to that the fact that you need two lawyers, one to represent the petitioner and another to represent the proposed ward and you can quickly see how the costs for this type of guardianship proceeding quickly add up. An uncontested court ordered guardianship proceeding can easily cost several thousand dollars. If the guardianship proceeding is contested, such as a situation where two children petition the court to be appointed guardian of the estate, the costs can quickly escalate and exceed $10,000 or more just like any other type of litigation where there is a dispute. For this reason, many of my clients choose to avoid this type of uncertainty by naming a child, friend, relative, or trust company they would like to act for them if they are ever incapacitated. In this way your wishes are reflected in writing and must be followed if you are ever alive but incapacitated. Since many people are living longer, this incapacity protection during life becomes a very real factor for many people and a critical benefit that is included as part of using a revocable living trust plan as the bedrock of your estate plan.
3. Private Trust Administration Instead of Public Probate Court Process
If you go through the probate court process there is a significant amount of paperwork that must be filed simple to open the Estate. If you die with a Will, you can name someone to administer your Estate and this person is called the Personal Representative in Wisconsin. If you die without a Will, someone must petition the court to be appointed as Personal Representative. By law, anyone in possession of your original Will after your death must file it with the probate court in the county where you resided at death within 30 days of their knowledge of your death. While your Will, if you have one, is private during your life, it then becomes a public document after your death.
The Personal Representative must provide the court with an inventory of all items in the estate and in addition must give notice to heirs, beneficiaries named in the will and potential creditors of the estate. In addition, depending on your family situation and who survives you upon your death, your Personal Representative may be required to give notice to people you have not even named as beneficiaries in your Will. These people are known as “interested persons” and depending on who survives you at your death, can include remote relatives, even if you have a Will and even if they are not named in this Last Will and Testament. Your Personal Representative will be required to send a notice to them in order to open the probate estate. In certain situations this can cause an “interested person” who receives this notice to wonder why they are receiving a notice regarding the estate if they are not named in the Will, and perhaps might lead them to consider if they should be entitled to a portion of your estate. In a situation where you pass away without a Will, under the Wisconsin intestate succession statutes (the laws that dictate what happens when someone dies) put in place by the Wisconsin Legislature these heirs would be entitled to receive a portion of your estate. However, in a situation where you write your own Will these intestate heirs would not be entitled to receive a portion of your estate under the Will, but they are still required to be sent notice under the probate statutes. What this means is that you may be sending notices of your death and the existence and filing of your Will with the probate court to remote relatives who you may or may not wish to have this information.
In order to begin the probate process, there is not one single form your Personal Representative will file with the probate court, instead there are multiple forms that need to be filed just to open the estate and give notice to interested persons as discussed above. This paperwork is required by the probate court whether you have a very simple estate or a complex estate. Any probate estate with more than $50,000 in probate assets in Wisconsin must go through the probate court process. For this reason, if you have probate assets above this amount, we often suggest looking at ways to avoid probate on your assets, and opt for a private administration of your estate instead.
Privacy is another major reason many folks choose to avoid the probate court process completely by using a revocable living trust as the main vehicle to pass their assets upon death. As mentioned above when we use a trust as the primary probate avoidance tool for your estate, we can keep your affairs private both during life and after death. There is no statutory requirement to file a trust with the probate court after your death. For this reason many public figures and celebrities who plan ahead use trusts to avoid the public administration of their estates after death. While most everyday individuals do not have the newspapers rushing down to the courthouse to read their Will after they die, the right to privacy is important to everyone, regardless of whether you are a public figure or not. Most of my clients lead a private life during their life, in regards to their assets and financial affairs and for this reason many of them choose to keep things private after death as well. This makes great sense for a multiple variety of reasons as laid out above and also leads to a more simplified and efficient private trust administration after your death.
These are just three of the major reasons to consider using a revocable living trust as the main vehicle for your estate plan. There are many many additional reasons other than those listed above, this is just a start of the many benefits of using a revocable living trust as the main vehicle for your estate plan. The trust is just the bedrock in the planning at my office, we still use other documents to complement the trust plan and ensure all of your assets pass to your beneficiaries as chosen upon your death. You can watch my video above that discusses the Key Components of a Living Trust Plan to understand more about how all of these documents work together to ensure the benefits of probate avoidance, privacy, and efficiency of administration. I encourage you to watch this video before you meet with my office, or another attorney, in order to be better educated about the process and how each document works together inside of your plan. Our goal at my office is to educate and inform our clients in order to empower them to take charge of their own estate planning. Videos and educational articles like this are a key part of that mission.
If you are interested in learning more about ways to avoid probate on your estate, we suggest you take a look at our automated estate planning video guide below. This guide is free and can be accessed by you no matter what time of day you are reading this article. If you are ready to start your estate planning process with our office, you can easily schedule and book your Flat Fee Estate Planning Consultation to discuss your estate planning situation in detail with our office at this page.
Estate Planning Video Guide:
If you would like more information about planning for your estate, check out our automated video tool which can help guide you through the process. This fun interactive video guide tool lets you view a series of videos and answer short questions to help you get to the next step with your estate planning.