The new Wisconsin Trust code has gone into effect on July 1, 2014. It has updated many of the rules and regulations for Trusts. For example:
Revocable Trusts. Contrary to prior law, the new Code provides that a trust is revocable by the trustmaker (the person who created the trust) unless the trust instrument provides otherwise. Not only may a trust be revoked by the Trustmaker, but also by a properly authorized agent, such as a guardian, if a Trustmaker is incapacitated.
Modification and Termination of Irrevocable Trusts. The Code makes it easier to modify or terminate an irrevocable trust.
Decanting Trust Assets. Subject to certain restrictions that are designed to protect the interests of beneficiaries, the trustee of an irrevocable trust (the “first trust”) may transfer trust assets to the trustee of another trust (the “second trust”), a procedure commonly referred to as “decanting.” Trustees or beneficiaries might wish to decant the assets of an irrevocable trust to a second trust to (i) change the state law that governs the trust, (ii) change how and when beneficiaries receive distributions, or (iii) modernize an outdated trust document.
Directing Parties/Splitting up the Duties. The Code introduces a new concept to Wisconsin trust law by authorizing a trustmaker or a court to appoint “directing parties” who are granted powers to direct the trustee to make investment or distribution decisions. This allows a trustmaker to divide the traditional duties of a trustee and assign them to other parties.
Trust Protectors. The Code introduces another concept to Wisconsin trust law, (which has been around for may years in Irrevocable Trusts) by authorizing the appointment of one or more trust protectors. A “trust protector” is a person who is granted certain powers over the trust, the trustee, or trust property. Trust protectors are often used to modify terms of the trust for various reasons such as a change in tax laws or changes in circumstances.
Nonjudicial Settlement Agreements. The Code permits parties interested in a trust to enter into agreements concerning any matter involving the trust without having to take court action. Such an agreement, called a nonjudicial settlement agreement, becomes part of the terms of the trust.
Creditors’ Claims. In general, the Code preserves current law related to spendthrift provisions in a trust document and the rights of creditors to make claims against a trustmaker’s or beneficiary’s interest in a trust. The Code also preserves current law that allows a trustee to limit the claims of a creditor of a trustmaker upon the trustmaker’s death by providing or publishing notice to the creditors. Those looking for Wisconsin to join the ranks of states with strong asset protection trust laws will not be disappointed when using Castle Trusts. The Code makes clear, however, that a beneficiary’s use of real or tangible property owned by a trust does not subject the property to the claims of the beneficiary’s creditors. A Major change is that the beneficiary can be a sole Trustee and retain creditor Protection.
Certification of Trust. A third party may rely upon a certification of trust that sets out certain required information including a statement that the trust has not been revoked, modified, or amended. The certification of trust protects the privacy of the trust instrument because it does not need to contain the private distribution provisions of the trust.
Uneconomic Trust. The WTC increases the value of what qualifies as an uneconomic trust from $50,000 to $100,000 or less as indexed for inflation.