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You’ve likely heard that trusts can help families avoid probate and protect assets for loved ones. But not all trusts work the same way. In this article, you’ll learn how a Trust created inside your Will differs from a Living Trust created during your lifetime, and why the difference can significantly affect your family under Wisconsin law.
Most people don’t realize: a Trust created inside your Last Will and Testament works very differently from a Living Trust created during your lifetime. And the difference can have a major impact on your loved ones after you’re gone.
Both options use the word “Trust,” which makes them sound similar. In reality, the experience your family Will have under Wisconsin law depends entirely on which type of Trust you choose.
More importantly, the right decision depends on what you are actually trying to accomplish.
In this two-part series, we’ll help you understand how each option works and how to choose the approach that best protects the people you love. In Part 1, we’ll explore what happens when a Trust is created inside your Will and why understanding your true planning goals matters before choosing a strategy.
What Happens When You Create a Trust in Your Will
A Trust created inside a Will is known as a testamentary trust. Unlike a living trust, it does not exist during your lifetime. Instead, it only comes into existence after your death and after the probate court has approved the administration of your estate.
For example, a Will might say that your assets should be placed into a Trust for your children until they reach a certain age, such as 25. This allows you to control when and how your children receive their inheritance.
While that structure can offer some protection, it does not keep your family out of probate court.
In Wisconsin, all Wills must go through the probate process. That means your loved ones must first navigate the court system before the Trust created in your Will can even be established.
This process can take months and sometimes longer, depending on the complexity of the estate. During that time, assets may be tied up in court proceedings, leaving families waiting while financial matters are sorted out.
How Probate Works in Wisconsin
When someone dies with a Will, their family must begin the probate process by filing the Will with the Wisconsin probate court. The court then appoints the executor named in the Will and authorizes that person to manage the estate.
From there, the executor must locate and gather all assets, notify heirs and creditors, settle outstanding debts and taxes, and provide detailed reports to the court. Only after the court approves the administration of the estate can the remaining assets be transferred into the Trust described in the Will.
Probate also involves costs that reduce the value of the estate. These may include court filing fees, legal fees, appraisal expenses, and sometimes accounting costs. In other words, when a Trust is created through a Will, the protections of the Trust do not begin until after probate is completed.
What a Will Cannot Do During Your Lifetime
Another limitation of a Testamentary Trust is that it offers no protection while you are still alive. A Will only becomes effective after death. If you become incapacitated before that time, the Trust written in your Will has no authority to help manage your finances or property.
Most people rely on a power of attorney to allow someone they trust to handle financial matters if they cannot do so themselves. But a power of attorney has its own limitations. Financial institutions sometimes hesitate to accept older documents, and a power of attorney automatically terminates the moment you die.
This creates a potential gap in authority. Once death occurs, the power of attorney immediately ends, but the executor named in the Will has no authority until the probate court officially appoints them.
What Are You Really Trying to Accomplish?
Before deciding between a Testamentary Trust and a living trust, the most important step is identifying what you actually want your estate plan to accomplish.
Many people simply hear that “trusts are good” and assume any Trust will solve the same problems. Trusts can serve very different purposes depending on how they are structured.
Some people want to avoid probate court entirely. Others want to control how and when beneficiaries receive their inheritance. Both testamentary trusts and living trusts can help control distributions to beneficiaries. But they differ significantly when it comes to probate avoidance, incapacity protection, and the timing of when Trust protections begin.
Understanding your priorities makes the decision much clearer.
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Frequently Asked Questions About Trusts and Probate in Wisconsin
Does a Trust avoid Probate in Wisconsin?
A properly created and funded Living Trust can help your family avoid probate in Wisconsin. Because assets held in a Living Trust are owned by the Trust rather than by you personally, they can transfer directly to your beneficiaries without going through the probate court process. However, the Trust must be properly funded during your lifetime for this to work.
Do Wills have to go through Probate in Wisconsin?
Yes. In Wisconsin, a Will must go through probate court before assets can be distributed to heirs. Probate allows the court to validate the Will, appoint an executor, settle debts, and oversee the distribution of the estate.
What is a Testamentary Trust?
A Testamentary Trust is a Trust that is created inside a Will and only becomes effective after the person dies. Because it is written into a Will, it still requires the probate process before the Trust can be established and funded.
This article is a service of Attorney John F. Koenig, Anchor Law, Life and Legacy Planning, LLC, a Personal Family Lawyer® Firm. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a comprehensive Life & Legacy Planning Session™, during which you will get more financially organized than you’ve ever been before and make all the best choices for the people you love. You can begin by calling our office today to schedule a Life & Legacy Planning Session™.
The content is sourced from Personal Family Lawyer® for use by Personal Family Lawyer® Firms, a source believed to provide accurate information. This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal, or investment advice. If you are seeking legal advice specific to your needs, such advice services must be obtained on your own separate from this educational material.