Irrevocable trusts can be an important component of estate plans. Much of it depends on the purpose of the trust. There are many considerations, however, that must be taken into account before creating one.
At Heritage Law Office, our estate planning attorney in Wisconsin will thoroughly review your needs and wants when planning your estate and provide an outline of your best options, including the creation of an irrevocable trust. Contact us either online or at 414-253-8500 to schedule a free consultation today.
Understanding Irrevocable Trusts in Wisconsin
An irrevocable trust is a trust that cannot be changed, amended, or terminated after it is created (with some limited exceptions). By creating an irrevocable trust, the grantor is relinquishing their control over the assets placed in the trust. Irrevocable trusts are administered by a trustee for the benefit of the trust beneficiaries.
Pros of an Irrevocable Trust in Wisconsin
There are various reasons a grantor may choose to place assets in an irrevocable trust, including:
Tax Avoidance
It is possible to reduce your tax liability by moving taxable assets from your estate to an irrevocable trust. This is typically a more beneficial move for owners of large estates.
Asset Protection
Irrevocable trusts provide protection to the assets that they contain. This includes protection from creditors, judgments, and divorce. People employed in highly litigious professions are most likely to use irrevocable trusts for this purpose.
Beneficiary Protection
Irrevocable trusts are a useful estate planning tool when you are providing for a family member with special needs. These trusts are often referred to as irrevocable special needs trusts, and they allow a beneficiary with a disability to receive funds for their living expenses without that income being used to disqualify them from receiving government benefits.
Cons of an Irrevocable Trust in Wisconsin
There are various reasons a grantor may choose against placing assets in an irrevocable trust, including:
Loss of Control
If you desire to maintain control over your assets, an irrevocable trust may not be the best choice for you. Changing the terms of an irrevocable trust is something that is not easily accomplished after it has been formed unless all parties (trustee and beneficiaries) are on board.
Unforeseen Circumstances
While the formation of an irrevocable trust may seem like a good idea when it is established, circumstances change, and it may not be the best choice down the road. Even so, you will not be able to easily change the terms to fit your new situation.
Terminating an Irrevocable Trust in Wisconsin
In limited circumstances and jurisdictions, it may be possible to terminate an irrevocable trust by agreement when all parties, including the trustee and the qualified beneficiaries, agree to do so. Modification or termination of an irrevocable trust may also occur pursuant to a judge's order. Judges are more inclined to make these changes or terminate an irrevocable trust when it is obvious that the purpose of the trust has been fulfilled, has become illegal, or is defeated by compliance with the terms of the trust.
Otherwise, irrevocable trusts will end naturally pursuant to the terms that were established when the trust was created. It is typically dependent upon an event, such as the death of the person that created the trust, or it will end on a certain date.
Contact an Irrevocable Trust Lawyer in Wisconsin Today
We at Heritage Law Office want to help you make the best choices for yourself and your family. To get started on your estate plan, contact our estate planning lawyer today by either using our online form or calling us directly at 414-253-8500. We will help you with trusts, wills, powers of attorney, and other estate planning documents that suit your specific needs.
Frequently Asked Questions (FAQs)
1. What is an irrevocable trust in Wisconsin?
An irrevocable trust is a type of trust that once established, generally cannot be amended, altered, or revoked by the grantor. It involves a transfer of assets from the grantor's estate into the trust, and these assets are then managed by a trustee on behalf of the trust beneficiaries.
2. How does an irrevocable trust in Wisconsin help with tax avoidance?
An irrevocable trust can potentially reduce the grantor's tax liability by shifting taxable assets from their estate to the trust. This is often more advantageous for individuals with larger estates, as assets within the irrevocable trust are usually not subject to estate taxes upon the grantor's death.
3. Can an irrevocable trust in Wisconsin provide protection from creditors?
Yes, an irrevocable trust in Wisconsin can offer significant asset protection. Once assets are placed in an irrevocable trust, they are generally protected from the grantor's creditors, potential legal judgments, and in some cases, divorce settlements.
4. What is an irrevocable special needs trust in Wisconsin?
An irrevocable special needs trust is a specific type of irrevocable trust designed to provide for a beneficiary with special needs. The trust allows the beneficiary to receive funds for living expenses without affecting their eligibility for certain government benefits, such as Medicaid and Supplemental Security Income.
5. How can one terminate an irrevocable trust in Wisconsin?
Terminating an irrevocable trust in Wisconsin can be complicated and typically requires the agreement of all parties involved, including the trustee and the beneficiaries. In some cases, a judge's order may also be necessary for the termination or modification of an irrevocable trust. The trust may naturally end based on the terms set when it was created, such as upon the death of the grantor or after a certain date.
