Living trusts are a flexible estate planning device that you can amend, modify, or revoke at any point during your lifetime. Of course, once you pass away, the terms of the trust become irrevocable. In other words, your successor trustee is bound by its terms and must administer the trust assets as you direct.
This also means that your choice of a successor trustee is critical in ensuring the successful administration of the trust. Many people create a trust because they fear certain family members gaining control of their estate. Having a strong trustee in place, which in some scenarios may even mean appointing a non-relative or corporate trustee, can help ensure that the trust ultimately fulfills your wishes.
Father, Sons Fight Over Fate of Trust Assets
Unfortunately, there will always be scenarios in which intra-family squabbling leads to trust litigation. Keep in mind that Wisconsin courts are not interested in resolving long-simmering emotional conflicts. The role of the judiciary is to interpret and enforce the trust instrument in accordance with the wishes of the settlor, i.e. the person who made the trust in the first place.
Consider this recent case from the Wisconsin Court of Appeals. This lawsuit involves a trust created about 11 years ago. The settlor was a widower with no children. She subsequently created a living trust that named her sister as sole beneficiary. The secondary beneficiaries were her sister’s two sons and their children.
Under the terms of the trust, the sister could elect to receive her distribution from the trust at any time following the settlor’s death. If the sister chose to keep any assets in the trust, they would be distributed to the secondary beneficiaries upon her death. The settlor named one of her sister’s sons as successor trustee.
According to the trustee and his brother, the settlor did not want her sister’s husband to benefit in any way from the trust. She apparently did not like or trust her brother-in-law. Indeed, she believed the trustee was the only one who could “stand up” to the husband and prevent her from gaining “control of trust assets.”
The settlor died in 2010. At this point the trust became irrevocable. The sister and her children then allegedly entered into an oral agreement regarding the trust. Basically, the sister agreed not to ask for a final distribution of trust assets, leaving them to her children and grandchildren upon her death. In exchange, the trustee agreed to use trust assets as necessary for his mother’s medical care.
Shortly before the sister’s death in 2015, the trustee received a letter purportedly signed by his parents “requesting complete distribution of trust assets.” The trustee believed this letter was the product of undue influence by his father. He therefore declined to make the distribution.
After the mother died, the father, acting as executor of her estate, sued his son over the distribution from the trust. The case remains unresolved. Although a lower court ruled in favor of the husband, the Wisconsin First District Court of Appeals said the lower court failed to conduct a proper evidentiary hearing first.
Speak With a Madison Trust and Estate Lawyer Today
As you can see, even the best intended trust can lead to unforeseen problems. This is why you should always work with a qualified attorney before making or revising a trust. The estate lawyers of Krause Donovan Estate Law Partners, LLC practice law in the areas of Probate, Wills, Estate Planning, and Trusts. We assist clients in and around Madison, Wisconsin with all matters related to estate planning, trusts, and probate matters. Our dedicated attorneys will even make house calls if you are unable to come to our office.
Contact our office by calling (608) 268-5751 to schedule a consultation or use our online contact form.