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Wisconsin's New Probate Code

Consider the complexity of modern families

With the traditional family becoming increasingly less common, more attention must be paid to the effects on estate plans of divorce, remarriage, and the birth of nonmarital children. One troublesome occurrence is the failure for people to revise their estate plans after divorce. This usually means that both probate and nonprobate assets are designated to be paid to the former spouse, and sometimes to relatives of the former spouse.

Wisconsin, like other states, has long had a probate rule that a divorced spouse will be treated as having predeceased. However, the Wisconsin Supreme Court, like most other courts that have addressed the matter, has declined to extend this rule to nonprobate assets. The new code makes that extension,⁴² and also revokes transfers to relatives of the former spouse who are not also relatives of the decedent. Thus, for example, it would revoke a transfer to a former stepchild, but not to children born or adopted in the former marriage. Of course, a person who wants a different result can provide for it in an estate plan made after the divorce; in addition, extrinsic evidence can be presented to rebut the presumption in the statute.

With respect to remarriage, the new code recognizes that some stepparents become very close to their spouse's children. Thus, it presumes that, subject to contrary evidence, if a person leaves property to a stepchild in the current marriage, and that stepchild predeceases, the property will go to the stepchild's descendants, if any.⁴³ This is the same "antilapse" rule that applies to the decedent's own children.

With respect to nonmarital children, the new code cross references a recent statute that allows post-mortem paternity proceedings⁴⁴ and recognizes paternity determined by courts in other jurisdictions.⁴⁵

Finally, the "homestead protection" for the surviving spouse, which previously applied only in intestacy, has been expanded to allow the surviving spouse a "buy out" right in a home, if the home is part of the intestate estate or if there is a marital property component and the home is not specifically transferred to a third party.⁴⁶

Simplify deferred marital property rights

Under Wisconsin's Marital Property Act, each spouse has a one-half interest in all property that is acquired during the marriage from income through work or investments. All property is presumed to be marital property unless a spouse can prove that it is not. But what of deferred marital property - that is, income earned (and the assets acquired therefrom) while the spouses were married but before the Act applied, either because they lived in a different state or lived in Wisconsin before the Act became effective in 1986? During the marriage, deferred marital property does not have to be shared. At death, the surviving spouse has elective rights to deferred marital property held by the decedent, in a nonreciprocal election; the decedent's estate has no similar rights in the deferred marital property held by the surviving spouse.

The prior code included separate elections for probate and nonprobate deferred marital property, with complex calculations for each. The new code, which is grounded in the UPC's elective share provisions, includes a single deferred marital property election that is simpler to use and that more closely tracks the partnership theory of marriage on which the Marital Property Act is based.

Under the new statute, the calculation of the election will in most cases be straightforward; the surviving spouse will be entitled to half the total value of all deferred marital property in the marriage - including deferred marital property that he or she already owns. To the extent that the surviving spouse already owns deferred marital property, or receives property of any type from the decedent, the elective right will be reduced. For example, if the decedent spouse owned $50,000 of deferred marital property, and the surviving spouse owned $100,000 of deferred marital property, the elective right would be one-half of the total of $150,000, or $75,000. However, the election would be deemed satisfied by the $100,000 of deferred marital property already owned by the surviving spouse.

Applicability to preexisting instruments

The new code applies to revocable estate planning instruments existing on the effective date of the statute (Jan. 1, 1999), and to all instruments executed on or after that date.⁴⁷ The Drafting Committee deferred the effective date in order to allow practitioners to become familiar with the new law.

To the extent that the new code applies to instruments executed before its effective date, an argument can be made that it is inappropriately retroactive. With respect to nonprobate transfers, this argument has been made successfully in at least one federal appellate case under the Contracts Clause of the U.S. Constitution, Whirlpool Corp. v. Ritter,⁴⁸ and at least one state supreme court case under the Contracts Clause of the Ohio Constitution.⁴⁹ Each of these cases involved a life insurance policy that designated a former spouse as beneficiary and that was executed before the law was changed to revoke such designations at divorce. Both courts found the retroactive application of the statute to be unconstitutional.

The Joint Editorial Board for the Uniform Probate Code has issued a statement rebutting the Ritter court on the grounds that:

• Such statutes affect the donative transfer component, rather than the contractual component, of life insurance;
  
  
• The default rules contained in these statutes seek to implement, rather than defeat, the insured's expectations regarding the distribution of the policy proceeds; and
  
  
• There is no U.S. Supreme Court authority for applying the Contracts Clause to default rules.
  
  
• The Drafting Committee concluded that the UPC position is valid and should prevail in the courts.

Possible preemption by federal law

The Employee Retirement Income Security Act (ERISA) is a comprehensive act that essentially federalizes the law relating to pensions and employee benefits provided by most private employers. ERISA's preemption language is unusually broad; rather than being limited to state laws that conflict with specific ERISA provisions, the Act preempts any state laws that "relate to" employee benefit plans governed by ERISA.⁵⁰ This broad language creates a risk that the courts will interpret ERISA as preempting state probate law, such as Chapters 854 and 861, insofar as it affects the beneficiaries of pensions and benefits, even though ERISA supplies no substantive regulation in this area.

Conclusion

The new code contains several provisions that will be important to estate planners, no matter what size estates they handle. Primary among these are the new definitions of the modes of representation,⁵¹ the "separate statement" for transferring personal property, the affidavit of proper execution, and the new deferred marital property election.

Nonetheless, the primary purpose of the substantive part of the Probate Code is to be a stop gap; the code sets out default provisions to answer questions that primarily result from inadequate drafting or execution of documents. All estate planners agree that the intestacy rules have this character; we often tell clients that "you always have the estate plan the Legislature wrote for you." But virtually all the rules in Chapters 853 and 854 also are part of the Legislature's estate plan: They tell what happens if someone gets divorced and doesn't change their plan; if a beneficiary predeceases and no contingent beneficiary is named; if the drafter fails to specify the status of adopted or nonmarital issue; if no period of required survivorship is specified; and so on. The new code has more - and hopefully better - answers to these questions. But in spite of the tremendous effort that the Drafting Committee put into the creation of these chapters, it is everyone's fondest hope that they will seldom need to be used.

Endnotes

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¹ 1997 Wis. Act. 188, § 233.

² The procedural law of probate is contained in chapters 856-860, 862-868, and 878-879. Chapters 880-882, which deal with guardianship, trust funds, and adult adoption, also are considered part of the Probate Code. Wis. Stat. § 851.002.

³ See 1969 Wis. Act 339. The provisions of that act were generally effective on April 1, 1971. See former Wis. Stat. § 851.001 (1995-96).

⁴ The National Conference of Commissioners on Uniform State Laws (originally the Uniform Law Conference) was created in 1882. Wisconsin was an early participant, joining in 1893, and all states have participated since 1911. The most successful product of the Conference is the Uniform Commercial Code, but probate legislation has been a concern of the Conference from its earliest days. In 1970, after the first UPC was promulgated, a Joint Editorial Board for the UPC was established to monitor the states' experiences with the code and to develop proposals for its revision.

⁵ Fifteen states adopted enough of the 1969 UPC to be considered "UPC states." As of the NCCUSL annual meeting in August 1997, eight of these states and one new state had adopted enough of the 1990 UPC to be considered "1990 UPC states," while the remainder had not. ___ U.L.A. ___ (19xx).

⁶ In addition to the close connection in terms of legislative history, during the period in which the 1990 UPC was debated and adopted, two Wisconsin lawyers were deeply involved in the process: Lawrence Bugge of Madison was president of NCCUSL, and Jackson Bruce of Milwaukee was chair of the JEB.

⁷ 1997 AB 645.

⁸ UPC § 2-503. This provision is sometimes known as a "dispensing power" or a rule of "harmless error."

⁹ Wis. Stat. § 853.03(2). The new code retains the prohibition on holographic wills. In addition, a technical amendment may be necessary to fully implement the committee's intent with respect to this statute.

¹⁰ Wis. Stat. § 853.07(2).

¹¹ Wis. Stat. § 853.04. As noted, the procedure is optional. If there is no concern about a contest, a traditional attestation clause will do. However, the procedure may facilitate admission of the will in another jurisdiction.

¹² Wis. Stat. § 853.32(2). This provision was enacted separately in May 1996, but was substantially revised in the new code. The provision applies to wills executed on or after May 3, 1996.

¹³ Wis. Stat. § 852.01(1)(f).

¹⁴ Wis. Stat. §§ 852.01(1)(f) and (3). One consequence of this change is to reduce procedural problems when a person has a valid will but is survived by very distant relatives who are entitled to notice.

¹⁵ Wis. Stat. § 852.10.

¹⁶ Wis. Stat. § 852.01(1)(b), (d), (f). The former code used the rule of "modified per stirpes"; the UPC uses the rule of "per capita at each generation." These terms are defined at section 854.04.

¹⁷ Two other provisions that were motivated in part by a concern with uniformity and with conformity with the publics' expectations are (a) the affidavit for self-proving a will and (b) the separate statement for passing personal property. Both of these are discussed in the previous section.

¹⁸ Wis. Stat. § 853.11(2). Note that this right is for a "pretermitted," that is, accidentally omitted, spouse. This situation is different from one where a spouse has been intentionally omitted; in that case the surviving spouse may qualify for the deferred marital property elective share.

¹⁹ Wis. Stat. § 853.25.

²⁰ Wis. Stat. § 853.25(5).

²¹ Wis. Stat. § 853.11(1).

²² Wis. Stat. § 853.11(6)

²³ Wis. Stat. § 853.32(1).

²⁴ A simple example drives home the contrast. If a person's property is in a revocable trust, she can make changes in at-death dispositions by just writing out an amendment on a scrap of paper, with no formalities (other than any required by the trust instrument). However, if her property is owned outright, then will formalities are required.

²⁵ As trusts and other nonprobate transfers become increasingly common, the fact that there is nothing parallel to the "subsidiary law of wills" - a highly developed set of rules for dealing with common problems of construction and interpretation - is now recognized as a serious problem.

²⁶ One issue that arises when probate rules are extended to nonprobate transfers is the liability of third party stakeholders who may distribute property to the "wrong" beneficiary, and of the beneficiaries who receive property for which they are not eligible. In general, third parties acting in good faith are protected (Wis. Stat. §§ 854.23 and 854.24), and ineligible recipients are liable to the person entitled to the property under the statute (Wis. Stat. § 854.25).

²⁷ Wis. Stat. § 854.03. This codifies a common drafting practice, although drafters usually use a longer period.

²⁸ These transfers were governed by the Uniform Simultaneous Death Act, which has been repealed as unnecessary.

²⁹ Wis. Stat. § 701.115.

³⁰ Wis. Stat. § 854.04.

³¹ Wis. Stat. § 854.06.

³² Wis. Stat. §§ 854.20 and 854.21(1).

³³ Wis. Stat. §§ 854.21 and 854.22.

³⁴ Wis. Stat. § 854.13. Note that under a statute enacted in 1996, joint tenancies may now be disclaimed under state law.

³⁵ Wis. Stat. § 854.14.

³⁶ Wis. Stat. § 854.15. These changes are discussed in the following section.

³⁷ Wis. Stat. § 854.08.

³⁸ Wis. Stat. § 854.09.

³⁹ Wis. Stat. § 854.18.

⁴⁰ Wis. Stat. § 854.05.

⁴¹ Wis. Stat. § 854.19.

⁴² Wis. Stat. § 854.15.

⁴³ Wis. Stat. § 854.06(2)(b).

⁴⁴ Wis. Stat. § 852.05(4).

⁴⁵ Wis. Stat. §§ 852.05(1) and (2).

⁴⁶ Wis. Stat. § 861.21.

⁴⁷ 1997 Wis. Act. 188 § 233.

⁴⁸ Whirlpool Corp. v. Ritter, 929 F.2d 1318 (8th Cir. 1991).

⁴⁹ Aetna Life Ins. Co., v. Schilling, 616 N.E.2d 893 (Ohio 1993).

⁵⁰ Section 514(a) of ERISA provides that ERISA "shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan" that ERISA governs. See 29 U.S.C. § 1144(a).

⁵¹ For example, under prior law, there was no definition of the term "by representation" except for intestacy and for the Basic Wills - and those definitions were contradictory.

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