Creditor’s claim against settlor
Wis. Stat. § 701.0505
in effect(1)
(a) Whether or not the terms of a trust include a spendthrift provision and except as provided in par. (b), the following rules apply to claims of a settlor’s creditors:
1. During the lifetime of the settlor, the property of a revocable trust is subject to claims of the settlor’s creditors.
2. With respect to an irrevocable trust that is not a trust for an individual with a disability, upon application of a judgment creditor of the settlor, the court may, if the trust instrument requires or authorizes the trustee to make payments of income or principal to or for the settlor, order the trustee to satisfy part or all of the judgment out of part or all of the payments of income or principal as they are due, presently or in the future, or which are payable in the trustee’s discretion. A settlor’s right to receive reimbursement for income taxation arising from grantor trust treatment of the trust pursuant to sections 671 to 679 of the Internal Revenue Code is not considered a right to income or principal for purposes of this section. If a trust has more than one settlor, the amount the judgment creditor of a particular settlor may reach may not exceed the settlor’s interest in the trust.
3. After the death of a settlor, and subject to the settlor’s right to direct the source from which liabilities will be paid, the property of a trust that was revocable at the settlor’s death is subject to claims of the settlor’s creditors, costs of administration of the settlor’s estate, the expenses of the settlor’s funeral and disposal of remains, and statutory allowances to a surviving spouse and children to the extent the settlor’s probate estate is inadequate to satisfy those claims, costs, expenses, and allowances.
(b) Assets of a trust that are exempt from claims of creditors under other statutes are not subject to par. (a).
(2) For purposes of this subchapter, all of the following apply:
(a) During the period the power may be exercised, the holder of a power of withdrawal is treated in the same manner as the settlor of a revocable trust to the extent of the property subject to the power.
(b) A beneficiary of a trust may not be considered a settlor solely because of a lapse, waiver, or release of any of the following:
1. A power described under par. (c).
2. The beneficiary’s right to withdraw part of the trust property, to the extent that the value of the property affected by the lapse, waiver, or release in any year does not exceed the greater of the following:
a. The amount referenced in section 2041 (b) (2) or 2514 (e) of the Internal Revenue Code.
b. The amount referenced in section 2503 (b) of the Internal Revenue Code for each individual other than the beneficiary who makes a transfer to the trust or who is deemed to make a transfer to the trust pursuant to an election to split gifts under section 2513 (a) of the Internal Revenue Code.
(c) A beneficiary of a trust is not a settlor, has not made a voluntary or involuntary transfer of the beneficiary’s interest in the trust, and does not have the power to make a voluntary or involuntary transfer of the beneficiary’s interest in the trust solely because the beneficiary holds, exercises, or allows in any capacity, any of the following:
1. A presently exercisable power to consume, invade, appropriate, or distribute property to or for the benefit of the beneficiary if the power is any of the following:
a. Exercisable only with the consent of another person holding an interest adverse to the beneficiary’s interest.
b. Limited by an ascertainable standard of the beneficiary.
2. A presently exercisable power to appoint any property of the trust to or for the benefit of a person other than the beneficiary, a creditor of the beneficiary, the beneficiary’s estate, or a creditor of the beneficiary’s estate.
3. A testamentary power of appointment.
4. A presently exercisable right described in sub. (2) (b).
(d) A beneficiary of a trust is not a settlor solely because the beneficiary is entitled to nondiscretionary distributions from the trust.
(e)
1. Contributions to the following trusts are not considered to have been contributed by the settlor:
a. An irrevocable marital trust that is treated as qualified terminable interest property under section 2523 (f) of the Internal Revenue Code if after the death of the settlor’s spouse the settlor is a beneficiary of the trust or an irrevocable trust that receives property from the trust.
b. An irrevocable marital trust that is treated as a general power of appointment trust under section 2523 (e) of the Internal Revenue Code if after the death of the settlor’s spouse the settlor is a beneficiary of the trust or an irrevocable trust that receives property from the trust.
c. An irrevocable trust for the settlor’s spouse if after the death of the settlor’s spouse the settlor is a beneficiary of the trust or an irrevocable trust that receives property from the trust.
d. An irrevocable trust for the benefit of a person, the settlor of which is the person’s spouse, regardless of whether or when the person was the settlor of an irrevocable trust for the benefit of that spouse.
e. An irrevocable trust for the benefit of a person to the extent that the property of the trust was subject to a general power of appointment in another person.
2. A person who would otherwise be treated as a settlor of a trust described in subd. 1. a. to e. is not treated as a settlor of the trust.
3. For purposes of this paragraph, notwithstanding s. 701.0103 (3), “beneficiary” means a person who satisfies s. 701.0103 (3) (a) or (b) and who is designated in a trust instrument or through the exercise of a nongeneral or general power of appointment.
(3) Any order entered by a court under this section is subject to modification upon application of an interested person.
Source: WI Statutes (Official Site)URL: https://docs.legis.wisconsin.gov/document/statutes/701.0505Fetched: 10/7/2026