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Marital property law – It’s not just for divorce

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October 19, 2022

Many Wisconsin residents are aware that Wisconsin is a “marital property” state.

Their understanding of what this means, however, is often limited to its effect on property division in the event of divorce.
The Wisconsin Marital Property Act was passed on April 4, 1984, with an effective date of January 1, 1986.

The act implements a comprehensive property classification scheme that governs the rights and duties of married persons during their marriage, the disposition of assets upon the death of either spouse or in the event of divorce, the rights of creditors and even the application of federal tax law.

It applies to all married persons who are domiciled in the State of Wisconsin.

Spouses may, however, alter the classification of assets by entering into a marital property agreement, often referred to as a prenuptial agreement when entered into in anticipation of marriage.

Shared assets
The basic presumption under the act is that all assets and income acquired or earned by either spouse during the marriage is marital property, including the proceeds from the sale of marital property.

Each spouse owns an undivided one-half interest in each asset that is classified as marital property, regardless of how an asset is titled.

This has both benefits and downsides.

If debts are incurred by either spouse during the marriage, the creditor can typically recover against the couple’s aggregate marital property assets, in addition to the obligated spouse’s individual property.

Spouses are prohibited from unilaterally disposing of marital property assets during their lifetime, and in most cases a spouse’s ability to direct the disposition of marital property assets upon his or her death remains subject to the surviving spouse’s interest in the assets.

For example, if a spouse provides for the non-probate disposition of an individually titled bank account to a third party by way of a “payable on death” designation, the surviving spouse will have a claim against the third party upon the title-holding spouse’s death for the surviving spouse’s one-half interest in the bank account, assuming it is classified as marital property.

This is often an issue in the case of second marriages, where both parties may wish to direct their assets to their respective children, rather than the other spouse.

It is important to note, however, that the classification of an asset as marital property does not affect the management and control of the asset, which remains vested in the holder of record.

Take, for example, a spouse who holds shares of voting stock in a corporation.

The shares are titled in the spouse’s individual name but are classified as marital property.

The title-holding spouse has the sole right to vote said shares but his or her spouse also has an undivided one-half ownership interest in the shares.

Individual property
In addition to marital property, assets may also be classified as the individual property of either spouse.

Individual property primarily consists of assets owned by either spouse prior to the marriage or assets received by a spouse as a gift or inheritance.

As with marital property, the classification extends also to any income earned from individual property and proceeds from the sale of individual property.
Unlike marital property, spouses are generally free to dispose of their individual property as they see fit, both during their lifetimes and upon their deaths.

The classification of assets can, however, become “mixed” if marital property and individual property are commingled; for example, if income that is classified as marital property is deposited into a bank account that is classified as one a spouse’s individual property.

Though it may be possible to trace the marital and individual property components of the bank account, the starting presumption is that mixed property is marital property.

In sum, Wisconsin’s marital property law has broad-ranging implications upon the rights and responsibilities of married persons domiciled in the State of Wisconsin, and in the case of marital property assets, what you don’t know can sometimes hurt you.  

Emily Ames is an attorney with Hager, Dewick & Zuengler, S.C. in Green Bay.

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