Wisconsin Testamentary Trusts: Secure Your Children’s Financial Future
Being a parent calls for an immense amount of responsibility. Raising children requires all your focus to be on making sure your child is well cared for today and in the future. Preparing for your children’s financial future is paramount in ensuring their well-being.
While many young families know to set up a will once having children, as it covers critical components like guardianship for minor children, a testamentary trust is a key tool that should not be overlooked when planning your finances. Testamentary trusts, which are created in your will, provide a robust and flexible way to protect, manage, and distribute assets.
In this article, we’ll cover the advantages of setting up a testamentary trust for minor children so their financial future is secured, no matter what life brings.
What are Wisconsin Testamentary Trusts?
Before we outlined the benefits of testamentary trusts, let’s explain what this is and who it could be right for. A testamentary trust is a legally binding agreement that allows you to manage how your assets will be passed on. This type of trust is specified in your will and goes into effect after your death.
When setting up a testamentary trust for minor children, it can outline when minors will receive these assets whether that be based on age or life circumstances. That makes testamentary trusts good options for parents with minor children or adults looking to pass on wealth to minor grandchildren.
Wisconsin Testamentary Trusts: Protection of Assets
A testamentary trust provides protection for assets and wealth that is being passed on to minor children. It allows the parent, guardian, or relative to choose a trustee who will manage and distribute the assets according to their wishes. This ensures your most valuable assets are being managed properly after death and that the minor child’s best interests are taken into consideration.
Wisconsin Testamentary Trusts: Age Appropriate
A testamentary trust provides more flexibility than other types of trusts since it can be structured to meet your specific needs and wishes for the minor child. One major benefit to this is specifying either an age or life circumstance for the distribution of assets.
For example, instead of minor children receiving an inheritance once they turn 18, you can specify in your testamentary trust for it to be upon graduating college, getting married or turning a different age. There is a great deal of flexibility offered in testamentary trusts to cater to the minor children receiving your most valuable assets.
A testamentary trust is particularly useful in setting aside funds for specific needs like education or healthcare. With this trust, you can earmark assets for your child’s college tuition, school expenses, or even their first car.
Similarly, if your child has ongoing medical needs or encounters a health emergency, the trust can be structured to cover these costs. This way, you’re not just leaving your children an inheritance; you’re giving them a financial safety net that can support them through life’s major milestones and unexpected challenges.
Wisconsin Testamentary Trusts: Potential Tax Benefits
One of the key advantages of setting up a testamentary trust for minor children is the potential for tax benefits. These trusts, like all trusts, can only be taxed once. Because of this and other tax implications, the minors who are listed as beneficiaries could receive a larger inheritance than with other estate planning options.
It’s important to note that tax laws can be complex and change frequently, so it’s always advisable to consult with an estate planning attorney to fully understand the potential tax implications and benefits.
Wisconsin Testamentary Trusts: Peace of Mind
By establishing a testamentary trust, you are taking a proactive step to safeguard their future, knowing that your hard-earned assets will be managed responsibly and distributed according to your wishes. It eliminates the worry of what could happen to your wealth after your passing and provides reassurance that your children will be financially taken care of. This sense of security, knowing your children’s future is well-planned, is truly priceless.
What to Consider When Setting Up Wisconsin Testamentary Trusts
The selection of the trustee is of utmost importance as this person or institution will be responsible for managing your assets until the beneficiaries receive them. Choosing a trustee is an estate planning step that should be taken very seriously.
Another important thing to note is that testamentary trusts do go through probate, the court process that begins after your passing, which means the minor children will not receive assets or inheritance until probate is complete. While this may not be an issue for some families, it is something to keep in mind when considering if a testamentary trust is right for you.
PROS OF WISCONSIN TESTAMENTARY TRUSTS
There are advantages to creating a testamentary trust, including:
WISCONSIN TESTAMENTARY TRUSTS: COSTS
Unlike living trusts, which are created while the trustor is still alive, a testamentary trust can be less costly and more simple to create.
WISCONSIN TESTAMENTARY TRUSTS: EASE OF FUNDING
It is possible to create the testamentary trust in a Will and have it funded by a life insurance policy that pays when the creator of the Will dies. This makes funding the trust a relatively simple matter.
WISCONSIN TESTAMENTARY TRUSTS: CONTROL
A testamentary trust allows its creator to retain control of their assets while they are alive. Until they die, the creator may change the terms or altogether revoke a testamentary trust.
WISCONSIN TESTAMENTARY TRUSTS: ASSET PROTECTION
A testamentary trust must be administered according to its terms. This means that it can last for as long as the creator wishes, and it allows for the protection of assets that are passed from one generation to the next.
CONS OF WISCONSIN TESTAMENTARY TRUSTS
There are disadvantages to testamentary trusts that you should consider. Some of these disadvantages are described below.
WISCONSIN TESTAMENTARY TRUSTS: TRUSTEE MATTERS
When the trust is created, a trustee is named. The trustee is responsible for administering the trust according to its terms and on behalf of the beneficiaries. There is a lot of responsibility placed on a trustee, and it can be for an extended period of time. It is important that the person chosen is trustworthy, dependable, and willing to perform the duties required of them. Also, should they fail to properly carry out their responsibilities, it can be difficult to have a trustee removed or replaced.
WISCONSIN TESTAMENTARY TRUSTS: PROBATE PROCESS
Unlike some other types of trusts, a testamentary trust must pass through probate. Probate is the process of going through the courts to administer a deceased person’s estate. It is often tedious and time-consuming.
WISCONSIN TESTAMENTARY TRUSTS: PUBLIC KNOWLEDGE
Testamentary trusts are public, unlike some trusts that are administered privately. If it is important to you that the terms of your estate be kept private, a testamentary trust may not be for you.
TESTAMENTARY TRUST REVOCATION IN WISCONSIN
While alive, the trustor is able to change the terms of the testamentary trust whenever they choose to do so. However, because a testamentary trust is not actually established until its creator dies, once it is established, it is typically irrevocable, and the trust must be administered by the trustee in the way the trust requires.
FREQUENTLY ASKED QUESTIONS (FAQS) ABOUT WISCONSIN TESTAMENTARY TRUSTS
1. WHAT ARE WISCONSIN TESTAMENTARY TRUSTS?
A testamentary trust is a legal entity created by the stipulations included in a person’s Will. It does not come into existence until after the person who created the Will has passed away. This type of trust can serve as a valuable tool in estate planning, especially when aiming to provide for minor children, special needs individuals, or any other inheritors of a substantial sum of money.
2. WHAT ARE THE ADVANTAGES OF A WISCONSIN TESTAMENTARY TRUSTS?
Testamentary trusts offer several benefits. For one, they are generally less expensive and easier to create than living trusts. They allow the trust’s creator to maintain control over their assets during their lifetime and can be altered or revoked at any time before their death. Testamentary trusts can be funded easily, often through a life insurance policy that pays out upon the creator’s death. Lastly, they enable long-term asset protection and can ensure the safe transfer of wealth between generations.
3. WHAT ARE THE DISADVANTAGES OF WISCONSIN TESTAMENTARY TRUSTS?
While testamentary trusts have many benefits, they also have a few downsides. The responsibility of managing the trust falls upon a trustee, whose role can be demanding and long-term. If the trustee fails to execute their duties correctly, replacing them can be a complicated process. Furthermore, testamentary trusts are subject to the probate process, which can be time-consuming and tedious. Lastly, unlike some private trusts, the details of a testamentary trust become public record, which may not be desirable for those seeking privacy.
4. CAN A TESTAMENTARY TRUST BE REVOKED IN WISCONSIN?
While the creator of the trust is alive, they can change the terms of the testamentary trust at any time. However, since a testamentary trust is only established upon the creator’s death, it is typically irrevocable once activated. From that point forward, the trust must be administered by the trustee according to the stipulations within the trust.
5. HOW CAN I SET UP WISCONSIN TESTAMENTARY TRUSTS?
Creating a testamentary trust requires careful legal guidance to ensure it’s set up correctly and in alignment with your wishes. Reach out to an experienced estate planning attorney to discuss your specific needs and circumstances. At Heritage Law Office, our attorneys can help you navigate this process. You can contact us online or at 414-253-8500 for a free consultation and professional advice on crafting a robust estate plan that safeguards your assets and protects your family’s future.
By now, you should have a comprehensive understanding of testamentary trusts in Wisconsin, their advantages and disadvantages, and how they can serve as a vital component of your estate planning. To secure your children’s financial future, consider the many benefits a testamentary trust can offer. If you’re in Wisconsin and need expert guidance in setting up a testamentary trust, don’t hesitate to reach out to experienced estate planning attorneys for personalized assistance.
Get Started Today
Secure your loved ones’ well-being with a comprehensive estate plan, including a testamentary trust. Consult an estate planning attorney to understand your options fully. Contact Attorney Steve Eichstaedt at Dahlberg Law Group for expert guidance.