A Revocable Trust (also known as a “Living” trust) is a trust created during your lifetime to manage your property during your lifetime (the trust holds title to your assets) and to distribute your property to designated beneficiaries upon your death.

Why do I need a Will and a Revocable Trust?

You still must have a Will when you have a Revocable Trust because certain matters may only be handled in your Will or through a probate proceeding, such as: (a) designating the guardian of your children, (b) designating the personal representative of your estate and (c) wrongful death actions may only be brought by the personal representative of your estate.

The Will functions differently when you have a Revocable Trust: your Will if it is used at all takes the assets not owned by your Trust at the time of your death and places them in your Trust for distribution. So essentially, a Revocable Trust replaces your Will for distribution of your assets upon your death.

However, if a Revocable Trust is not funded, i.e. does not own your assets at your death, then it is the same as having a Will because all of your assets will have to go through probate to be distributed pursuant to your Revocable Trust.

Information for Wisconsin Residents
As you are most likely aware, Wisconsin is a marital property state and you each have ownership rights in the property owned by your spouse just because you are married (unless those rights are modified by a Marital Property Agreement). If you are married and both you and your spouse are Wisconsin residents, you typically would have a Joint Revocable Trust which handles all of your property, whether individual property or marital property. The joint revocable trust essentially consolidates all of your property for administration in one place. A Revocable Trust does not, in and of itself, save taxes, but it can be drafted in a manner that minimizes taxes (as can a Will).
Information for Illinois Residents
As you are most likely aware, Illinois is a separate property state and you each own your property separately without any rights of your spouse to ownership of your property just because you are married. If you are married or a single individual who is a resident of Illinois, you will have your own revocable trust to manage your assets during your lifetime and distribute them upon your death. If you own all of your property as tenants with the rights of entirety or as joint tenants and are married, it is possible to have a joint tenancy revocable trust agreement drafted.

Advantages of a Revocable Trust Estate Plan Structure:

  • Ownership/Control. You, as trustee, continue to own and control your assets for as long as you are living and are competent to do so. However, the successor trustee may also act during your lifetime for your convenience when you do not want to handle your own affairs. Then upon your disability, the trustee takes over management of the trust assets without any court involvement.
  • Classification of Assets. A Revocable Trust can hold each spouse’s individual property as well as marital property under the same management structure to reduce costs of administration. Even if you have separate revocable trusts, costs of administration will be possible because a revocable and all other trusts created under the trust agreement are not subject to court supervision.
  • Increased Privacy. A revocable trust does not require any supervision by the court upon your death. Therefore, a trust agreement does not have to be filed with the probate court and so the value of your property, who receives your property and what property you owned at the time of your death remains secret.
  • Revocable. A Revocable Trust is easily amended or terminated: because it is a contract between you and the trustee there are less requirements to sign an amendment to your trust as opposed to amending a Will (called a “Codicil”).
  • Smooth Transition. Your successor trustee steps in upon your death or incapacity without the need for court intervention, court appointment, or potential publicity.
  • Less Contestable. A revocable trust may reduce the likelihood of a Will contest because revocable trust is a contract and it requires a lower level of competency to enter into a contract than it does to sign a Will.
  • Out of State Real Estate. Any out of state real estate owned by your revocable trust will avoid a probate proceeding it either state and pass directly to your heirs without probate.
  • Avoids Court Supervision and Expenses. A revocable trust estate plan structure will reduce legal fees, personal representative fees, and other court filing fees by avoiding probate.
  • Trust Not Treated as a Separate Taxpayer. A revocable trust is ignored for tax purposes until the grantor’s death and so all of the income and expenses of the trust are reported on the grantor’s personal income tax returns during the grantor’s lifetime as if the trust had not been created (and the trust doesn’t have to file a tax return either so long as you are acting as the trustee of your trust).

Disadvantages of a Revocable Trust Estate Plan Structure:

  • Legal fees to create the trust and fund the trust are higher than for a Will only structure.
  • On-going administration of the trust may be more complex for asset purchases and sales.
  • A “pour-over” Will is still required.
  • Less court supervision of your estate may be a disadvantage.
  • Assets must be re-titled in the name of the trust to get the benefits of having a revocable trust structure.