Trust Litigation

In Wisconsin, the management and creation of trusts is governed by the provisions of WI Stat § 701.0101 et seq. The trustee is responsible for managing and distributing assets held in a trust for beneficiaries in accordance with the terms of a trust. A trust can have one trustee or co-trustees. WI Stat § 701.0103(28). A beneficiary is a person who has a present or future beneficial interest in a trust. WI Stat § 701.0103(3). In other words, a beneficiary is anyone who currently or in the future is entitled to receive property that is held in the trust. While trusts are often funded by cash or securities, that can be funded using practically any type of property including real estate or jewelry. Under Wisconsin law, trustees owe a legal fiduciary duty to the beneficiaries of a trust. This means that trustees are required to perform their duties with the utmost care and loyalty. Failure to do so can result in the trustees being removed and being held personally liable to the beneficiaries for any losses the trust suffered as a result of the actions of the trustee.

Reasons for Trust Disputes in Wisconsin

Common reasons for trust disputes include:

• Questions about the formation of the trust, such as whether grantor had been subjected to undue influence or whether they had the mental capacity to make a trust
• Allegations of misappropriate of trust funds or other concerns related to the management of trust assets
• Conflicting interpretations of the terms of the trust

Depending on the allegations in the litigation, as a result of trust litigation, the court may order the trustee to follow the terms of trust, require the trustee to step down, order an accounting, or clarify the terms of the trust.

Types of Trusts in Wisconsin

Trusts are set up for a variety of reasons and there are many different types of trusts. The reason could be based on financial and tax considerations, the needs of the beneficiaries, or the overall estate planning goals of the grantor.

Trust for individual with a disability. A trust for individual with a disability is designed to provide for the future of someone with special needs. WI Stat § 701.0103(29). This type of trust is also called a special need trust or a supplemental needs trust. It is designed to help preserve the beneficiary’s assets while ensuring that they remain eligible for public benefits such as Supplemental Security Income and Medicaid. Commonly a trust for individual with a disability is set up by parents for their child to make sure the child is provided for throughout their life, but can be set up for a person of any age.

Spendthrift trust. A spendthrift trust is designed to protect the assets of someone who is financially irresponsible. The trust is structured to prevent the beneficiary from having direct access to their assets and to protect the assets from creditors. WI Stat § 701.0103(25).

Charitable trust. A trust that is set up for a charitable purpose, such as supporting a nonprofit organization. WI Stat § 701.0103(4).

In addition, a person can create a trust during their lifetime or can arrange for it to be created after their death. A trust that is created during a person’s lifetime is called an inter vivos trust, while a trust that is created after a person’s death by their will is a called a testamentary trust. The way it is works is that in their will, a testator would direct that their executor set up a trust. The terms of the trust would be stated in the will. After the decedent’s estate is probated, the trust can be set up and funded as described in the will.

Regardless of the type of the trust and whether it is inter vivos of testamentary, any trust can be the subject of trust litigation.