Milwaukee, WI asked in Estate Planning for Wisconsin

Q: My Aunt does not have any children and wants to leave money to me. I have a trust for my children.

She wants to leave the money she has to my trust and not spend more money on one of her own. Can she do this? Can someone leave assets to a trust where they are not the grantor?

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1 Lawyer Answer
Thomas B. Burton
Thomas B. Burton
  • Estate Planning Lawyer
  • Eau Claire, WI
  • Licensed in Wisconsin

A: This is a very interesting question. While it might be possible for her to leave a bequest to your trust, for tax reasons, it might not be desirable. I think you should examine carefully what type of assets she wants to leave to the trust, and the language of your own trust with an experienced estate planning attorney before proceeding. Generally, when folks set up their own revocable living trust, they are set up as grantor trusts during their lifetime, so that any assets inside the trust are viewed the same as if the grantor owned them individually for tax purposes (and this allows you to set up your own trust without having the trust file a separate tax return while you the grantor are alive). The issue I see is that if your Aunt just leaves the money to your Trust, she loses control of the bequest, meaning you are the only one who can change your trust at that point. So if your Aunt literally re-titled her assets into your Trust, she would be effectively making the gift on that date. This could cause unintended gift tax consequences to her. Generally, it is best to leave property at death, so that appreciated property can get new tax basis at your Aunt's death. I think it would be better for her to have her own trust, but if you cannot convince her of this, I suggest at the very least you sit down with the attorney who drafted your trust and discuss these questions with him or her before proceeding. Best of luck to you!

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