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Wisconsin's New Deferred Marital Property
Election
Examples
Example 1. Facts: Assume that A and B were
married in 1983, and that they were domiciled in Illinois until
1993, when they moved to Wisconsin. They remained domiciled in
Wisconsin until A's death this year. At A's death, A's share
of the couple's marital property was worth $40,000, and A held
$60,000 of individual property, $100,000 of probate deferred
marital property, and $50,000 of nonprobate deferred marital
property. B's share of the marital property of course also was
$40,000, and B held $20,000 of individual property and $30,000
of deferred marital property, $20,000 of which would pass under
B's will and $10,000 of which would pass nonprobate if B were
to die. A's will left $50,000 of individual property to B.
Analysis: The augmented deferred marital property estate
would consist of both A's and B's deferred marital property,
totaling $180,000. (Some is probate property and some is nonprobate,
but that is irrelevant.) B's elective share amount would be one
half of that total, or $90,000. B's elective share amount is
then satisfied out of the $30,000 of deferred marital property
that B already holds, and the $50,000 transfer under A's will.
(The source of the transfer is individual property, but that
is irrelevant.) This leaves $10,000 that B can elect from A's
deferred marital property; B can enforce this right pro rata
against A's estate and the recipients of A's nonprobate deferred
marital property.23Had the order
of deaths been reversed, A would have had no elective right.
The amount subject to election would have been $90,000, calculated
the same way as in the example. However, this amount would be
satisfied by the $150,000 of deferred marital property that A
already held. (See Chart)
The analysis just described would be identical for a couple
who were married and domiciled in Wisconsin prior to Jan. 1,
1986, and continued to live here after that date until one spouse
died.
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Howard S. Erlanger is Voss-Bascom Professor
of Law at the U.W. Law School. He teaches in the areas of wills,
trusts, probate, marital property, and estate planning, and is
an Academic Fellow of the American College of Trust and Estate
Counsel. Prof. Erlanger was reporter for the State Bar of Wisconsin
committee that drafted the new Probate Code, and is the author
of Wisconsin's New Probate Code: A Handbook for Practitioners,
published by the U.W. Law School - Continuing Legal Education
Wisconsin; this article is based on Chapter 5 of that volume.
He is also coauthor, with Linda Roberson and Richard Langer,
of a recent State Bar CLE Books publication, Guide to Marital
Property Classification in Wisconsin.
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Example 2. Facts: Spouses A and B had the
following property upon A's death in 1999. To simplify the example,
assume that all of the assets are deferred marital property.
A's will leaves "all my property" to Child:
- car worth $20,000, titled in A's name alone. B selected the
car under Wis.
Stat. section 861.33(1)(a)2;
- stock worth $100,000, titled in A's name alone; purchased
for $50,000;
- IRA worth $100,000, titled in A's name, payable to B; and
- term life insurance on B's life, $100,000 face amount, payable
to A
Analysis: Since the car was selected by B in satisfaction
of other rights, the statutes provide that it be dropped from
the analysis.24 The term life insurance
on B's life is included in the augmented deferred marital property
estate, but its valuation is to take into account the fact that
A died first,25 and may for our
purposes be assumed to be valued at zero. Thus, the augmented
deferred marital property estate is $200,000 - the value
of the stocks and the IRA. The maximum deferred marital property
elective share is half that total, or $100,000. B has received
$100,000 from the IRA, and therefore the elective share is satisfied.26On these facts, the IRA was deferred marital
property, but as far as satisfaction is concerned, the
result would have been the same if the IRA had been marital,
individual, or deferred individual property. (See
Chart)
Conclusion
Many spouses leave all or substantially all of their property
to the surviving spouse. Most of the rest leave a significant
amount of property to the survivor, either outright or in trust.
Thus, the deferred marital property election applies to only
a minority of marriages. But when it does apply, it is important
that it operate in an equitable manner and be relatively easy
to administer. The deferred marital property election in the
new probate code makes significant strides toward achieving those
goals.
Endnotes
1 1997
Wis. Act 188. Many of the changes in the Code are reviewed
in Howard S. Erlanger, "The
New Wisconsin Probate Code," 71 Wisconsin Lawyer
6 (Oct. 1998).
2See Wis.
Stat. § 861.01(1) and (2). For probate property, the
successor in interest will be the decedent's estate, and eventually
the takers of the estate under a will or intestacy. For nonprobate
property, the successor in interest will usually be a designated
beneficiary.
3 "Interitance" is used
here in the colloquial sense to refer to any property received
as a consequence of someone's death. As a technical matter, the
term refers only to property received under the laws of intestacy,
and not by any other means.
4See Wis.
Stat. § 766.31(4).
5In Louisiana and Wisconsin, the
spouse who owns the nonmarital property may execute a unilateral
statement that reclassifies the income on that property as separate
or individual property. See, e.g., Wis.
Stat. § 766.59.
6See Wis.
Stat. § 766.01(5) (defining determination date) and
§
766.03(1) (applicability of Chapter 766).
7See Wis.
Stat. §§ 766.31(8) and (9).
8 Wis.
Stat. § 766.31(2). In addition, section 861.02(2)(a)
provides a presumption that any property not classified as marital
property is considered deferred marital property. This latter
section is relocated from prior Wis. Stat. § 858.01(2)
(1995-96).
9 For a detailed explanation of
the prior deferred marital property elections in Wisconsin, see
Howard S. Erlanger and June Miller Weisberger, New Probate
and Nonprobate Property Elections Under Wisconsin's Marital
Property Act (pts. 1 & 2), Wis. B. Bull. 25 (Oct. 1986),
13 (Nov. 1986).
10 For a detailed analysis of
the relationship between the new Wisconsin elective share in
deferred marital property and the UPC elective share in common
law property jurisdictions, see Erlanger and Monday, The Surviving
Spouse's Right to Quasi-Community Property: A Proposal Based
on the Uniform Probate Code, 30 Idaho L. Rev. 671-95 (1994).
11 The basics of the deferred
marital property election are covered in Wis. Stat. section 861.02.
12 Surviving spouse is defined
in new Wis. Stat. section 851.30. The surviving spouse must be
living for the election to be filed, but other parties are authorized
to file on behalf of the spouse. Wis.
Stat. § 861.09. The rights of the surviving spouse can
be waived under Wis.
Stat. section 861.10.
13 Wis.
Stat. § 861.02(7).
14 Wis.
Stat. § 861.20.
15 Wis.
Stat. § 861.02(8).
16 Valuation of the property is
determined under Wis.
Stat. section 861.05(2).
17 Wis.
Stat. § 861.02(2)(b). While Wisconsin cannot on its
own control the disposition of real property located in another
jurisdiction, many states will defer to this provision under
their own conflict of laws rules.
18 Wis.
Stat. § 861.02(1).
19The surviving spouse already
owns a half interest in each item of marital property, and the
decedent has no obligation to share individual or deferred individual
property. Of course, the surviving spouse also has selection,
exemption, and allowance rights under sections
861.31-.41, and a limited homestead protection under section
861.21.
20 Wis.
Stat. § 861.06(2)(b).
21 Wis.
Stat. §§ 861.06(3), (4) and (5). Proceedings for
implementing the election are detailed in sections
861.08 and 861.09.
22 Wis.
Stat. § 861.07(2)(b). It is possible that federal law
will preempt the enforcement of the deferred marital property
election against some assets. Wis.
Stat. section 861.07(4) attempts to offset these effects,
by treating the recipient dictated by federal law as an "unentitled"
recipient. If the attempt to overcome federal preemption is unsuccessful,
the shares of other recipients may, under limited circumstances,
be adjusted.
23 Wis.
Stat. § 861.06(3).
24 See Wis.
Stat. §§ 861.05(1), 861.06(2)(b)1.
25 See Wis.
Stat. § 861.04(2).
26 Arguably, B is at a disadvantage
because distributions from the IRA are likely to be fully taxable
at ordinary-income rates while the stock received new basis.
However, the satisfaction statute has no adjustment for this
factor.
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