June 21, 2018
Wisconsin marital property law, or more formally Wisconsin Marital Property Code, sets out who owns what in marriage. The law can automatically classify property owned by married couples living in Wisconsin as the “marital property” of both of them. It defines “individual property” as only owned by one of the spouses. It also defines “mixed property” as a combination thereof.
As estate planning lawyers, we know that Chapter 766 of the Wisconsin Code is extremely detailed and complex. In this article, we highlight some of the important provisions in this Wisconsin code section. We also explore why it may be relevant to you before or after marriage, or even at death.
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Who is Affected by Wisconsin Martial Property Law?
Generally, the marital property code applies to married persons who are domiciled in Wisconsin – who are married and live in Wisconsin.
The law became effective on January 1, 1986. The “determination date” is the date at which the Wisconsin martial property code applies to a couple. For example, a couple that is living in Wisconsin and was married after January 1, 1986 would have a determination date upon marriage.
A couple that is married and living outside of Wisconsin would have a determination date as of their moving to and becoming domiciled in Wisconsin.
The Wisconsin Marital Property Code Applies Automatically
The Wisconsin marital property law applies to married couples living in Wisconsin, even if they do not want it to apply, unless the couple enters into an agreement to opt-out of the law. Depending upon a variety of factors, Wisconsin law determines who owns property based upon whether the property was acquired before or after the determination date.
Property acquired before the determination date may generally be in the individual property of the person who acquired it, while property acquired after the determination date will generally be considered the marital property of both spouses. These laws are very complex; too complex to fully discuss all property classification and ownership rules in this article.
Moving to Wisconsin? Review Your Estate Plan
Spouses moving to Wisconsin from another state should have their estate plan and property ownership reviewed to make sure that they are taking advantage of certain tax aspects of the Wisconsin marital property law. That review will also make sure that their estate plan will properly function in Wisconsin given the complex marital property laws.
Wisconsin Marital Property Law Applies During Lifetime and at Death
The Wisconsin marital property law applies during lifetime and at death. This is crucial to the lifetime management of property, property ownership rights, and property rights in the event of divorce and upon death.
Wisconsin marital property law can have unintended inheritance consequences at the time of death. The law can cause these issues unless property distribution and ownership issues have been properly dealt with through estate planning documents during life time. For example, if a married couple with children born outside of the marriage owns property, the non-marital child may be included as an heir automatically by law, on individual property owned by a deceased spouse. If a spouse does not want to include non-marital children at death, this must be addressed through proper estate planning during lifetime.
This during lifetime estate planning could include correct property titling, wills, trusts, and even a marital property agreement in many circumstances. Even property titled in both spouses’ names may not go to the surviving spouse if the beneficiary or titling is not properly completed during lifetime. For example, non-homestead property owned in both spouses’ name, without proper titling to make the property joint or survivorship, may require probate and may unintentionally include the non-marital child as an heir.
Prenuptial and Postnuptial Marital Property Agreements
Attorneys in Wisconsin generally refer to prenuptial and postnuptial agreements as Marital Property Agreements. A prenuptial agreement is completed before marriage. The postnuptial agreement is completed after marriage.
In a contemplated marriage where one or both spouses have non-marital children or where one spouse has accumulated substantial assets, it is generally advisable to enter into a marital property agreement before the wedding. That prenuptial agreement will specify what happens to property in the event of divorce or death.
This prenuptial agreement should be completed well in advance – months – of the wedding date. A last-minute marital property agreement can be problematic if one of the spouses later wants to overturn the agreement.
Martial Property Agreements to Reclassify Property Ownership
A martial property agreement can be used before or after marriage to classify property as owned by one spouse alone or to make it clear that it is marital property if the property was acquired before the determination date.
Often, if a party wants to keep certain property as individual property in the event of death or divorce, a marital property agreement will override the default Wisconsin marital property code, if both parties agree that certain property is owned as the individual property of only one of the spouses. This can then help the owning party to keep certain assets in the event of divorce. It can also help a spouse to pass his or her individual property to his or her children upon death.
Marital Property Agreements: Avoiding Probate
The Wisconsin Marital Property Code can be very helpful to avoid probate. As estate planning attorneys, we can use certain parts of the Wisconsin marital property law to create a prenuptial or postnuptial non-probate agreement. For example, a non-probate funding marital property agreement for married couples can help insure that the trust will avoid probate. Through the marital property code, we can direct that any assets that would normally be probate assets, shall instead pass to a Wisconsin revocable trust without probate. This can be especially effective for transferring Wisconsin real estate to a revocable trust without the need for probate or to place the real property into the trust name.
The use of a non-probate funding marital property agreement should also be reviewed with a Wisconsin attorney for couples moving to Wisconsin from another state. Trust estate plans created outside of Wisconsin may not have the ability to transfer certain assets non-probate, helping to avoid an unnecessary probate.
Marital Property Agreements in Second Marriages
The marital property agreement can be used to set out that certain assets will be the individual property of one spouse.
In conjunction with a last will and testament, trust or non-beneficiary designation, a marital property agreement can also direct that certain assets will not go to the spouse at death. This can be especially important where one of the spouses has children outside of marriage and wants to make sure that non-marital children are taken care of upon death.
For example, a husband might specify that a certain life insurance policy is his individual property, and that it will be distributed to his children upon his death and not to his spouse. Perhaps the husband might want to make it clear that some other assets, such as the house or certain bank accounts, will be distributed to his surviving spouse and not to his children. Or the husband may want his non-marital children not to be included as beneficiaries of his property and that all of his property will be distributed to his surviving spouse. To avoid costly litigation, it is important to clarify intentions in the agreement.
By clearly and legally crafting a marital property agreement with an estate plan with a will or trust, spouses with children outside of marriage can help eliminate confusion or disagreement over the intentions of a deceased spouse or parent. An estate plan can provide a road map to be followed at death. That road map can give a surviving spouse and children the knowledge that the deceased’s desires are followed.
Failure to Plan Can Result in Unintended Consequences
Every year we meet with a child or surviving spouse where an adequate estate plan was not put in place prior to death.
A common example is a husband who owned real estate in his name alone or improperly titled with his spouse, resulting in probate property even though his spouse is a co-owner. The husband may have intended that this real property be distributed to his spouse upon his death. However, since the husband has a child outside of the marriage, his share of the property does not automatically go to his spouse upon death. Unless he has address this through proper non-probate titling, a trust, a will, and/or a marital property agreement, the property will not only be distributed to his spouse. The husband’s child or children will also be included in the distribution of property.
Advanced Planning and Marital Property Agreements with Wisconsin Marital Property Law
Given its complicated nature, Wisconsin marital law requires knowledgable, experienced estate planning attorneys to ensure your plan is correctly prepared. At Wokwicz Law Offices, we have decades of experience working with couples to successfully create hundreds of marital property agreements. We welcome the opportunity to work with you. Contact us today to get started on your estate plan.