Wisconsin's New Probate Code
The New Probate Code - Effective Jan. 1, 1999 - contains several
provisions that will be important to estate planners, no matter what
size estates they handle. Among its important provisions, the new code
sets out default provisions to answer questions that often result from
inadequate drafting or execution of documents.
Sidebars:
By Howard S. Erlanger
Editor's Note: To view Wisconsin statutory
materials referenced in this article you must have and/or install Adobe
Acrobat Reader 3.0 on your computer.
The new Wisconsin Probate Code - effective Jan. 1, 19991 - is a comprehensive revision of the substantive
law of probate, as contained in former chapters 851, 852, 853, and 861
of the code.2These chapters cover
definitions and general provisions (chapter 851); intestacy (chapter
852); wills (chapter 853); and family rights (chapter 861). As part of
the revision, new chapter 854 was created, which contains general rules
applicable to all transfers at death.
A brief history of the new code
The last comprehensive revision of the substantive provisions of the
probate code occurred in the late 1960s,3during the period that the original Uniform Probate
Code (UPC) was being written and promulgated. The drafters of the 1969
Wisconsin Probate Code were in touch with the UPC drafters, and
Wisconsin adopted many provisions that were similar or identical to
those in the 1969 UPC. Wisconsin is not, however, considered to be a
"UPC state." In the 1980s, a major revision of the UPC was undertaken by
the Joint Editorial Board of the UPC, and a new UPC was promulgated by
the National Conference of Commissioners of Uniform State Laws in
19904 - creating the "1990 UPC."5 Because of the close ties between Wisconsin
probate law and that of the UPC,6 in 1992
the State Bar Real Property, Probate, and Trust Law Section created a
committee to study the UPC revisions, consult with practitioners, and
recommend changes for Wisconsin.
The committee compared extant Wisconsin provisions to each UPC
provision, proceeding from a presumption that the UPC should be
considered to be the better rule of law. In the end, however, the
committee determined that in some cases the Wisconsin provision should
be retained, and in others that the new rule should be a modified
version of the UPC provision. After more than five years of work, the
committee - referred to in this article as the "Drafting Committee" -
completed a proposal that was introduced in the Legislature in January
1998,7 passed in April, and signed into law
in May 1998.
Although the new code is heavily influenced by the 1990 UPC, there
are numerous and substantial differences; hence Wisconsin cannot be said
to have adopted the UPC. The major themes orienting the committee's work
were, however, in concert with those of the UPC:
- The Probate Code should focus on implementing the intent of the
transferor;
- Probate rules should, whenever possible, provide uniformity and
consider current public expectations;
- The rules relating to the distribution and interpretation of probate
and nonprobate transfers should be similar;
- The Probate Code should consider the complexity of modern families;
and
- The deferred marital property election should be simplified.
This article summarizes the major changes embraced in the new Probate
Code, identifies potential problems with respect to retroactivity and
federal preemption, and concludes with a word on how the new code might
affect the everyday practice of trusts and estates in Wisconsin.
Focus on the transferor's intent
The Wisconsin Probate Code, like those of other
states, is based on two important policies: 1) protection against fraud
and coercion; and 2) implementation of the transferor's intent. In large
part, these policies can be pursued together; for example, the
formalities of will execution serve to protect against undue influence,
and by so doing help guarantee that a will truly represents the
testator's desires. Yet they also are in tension - if the law emphasizes
protection through formalities, then some wills that genuinely reflect
the testator's intent will not be admitted to probate, merely because
they do not meet those formalities.
Even though there are strong arguments to be made in favor of the
protective function of will formalities, to a great extent the public
has rejected this function. Each year, more and more property is passed
to survivors through nonprobate means: living trusts, life insurance and
pension beneficiary designations, joint tenancy, survivorship marital
property, joint and payable-on-death bank accounts, and the like. While
all these nonprobate methods have some formalities, in virtually all
cases there are substantially fewer than for wills. In addition,
disputes regarding nonprobate transfers almost always focus on the
substance of the transaction and the transferor's intent, rather than on
whether formalities of transfer have been met.
The 1990 UPC dramatically reduces the formalities of will making,
allowing, for example, any document to be admitted as the
decedent's will - irrespective of compliance with any formalities - as
long as there is clear and convincing evidence that the document was
intended to be that person's will.8 The
Drafting Committee concluded that the effect of so substantial a
relaxation in will formalities was too uncertain, and opted instead to
wait and see how those changes work out in other jurisdictions that have
recently adopted them. The committee did, however, reduce some of the
formality surrounding will execution:
- While under prior law two witnesses had to sign the will in the
presence of the testator and in the presence of each other, the new code
allows the witnesses to sign individually, within a reasonable time
after witnessing either the testator's signing or his or her
acknowledgment of the signature.9 Note that
the purpose of the new provision is not to encourage sloppiness in the
execution of wills; rather, it is assumed that careful practitioners
will use the same formalities as before. However, the new rules will
serve to make it somewhat easier to admit a will when the person
executing the will was not aware of the formalities or was unable to
comply with the strict witnessing requirement of the prior law.
- Under prior law, a witness (or his or her spouse) who also was a
beneficiary under the will was absolutely barred from receiving an
amount greater than that which would be received under intestacy - even
if the witness's participation was innocent and there was no evidence of
wrongdoing. Under the new code, this limit on the rights of "interested
witnesses" is presumed to apply, but it is subject to rebuttal
with evidence that the testator intended the witness to receive the full
transfer.10
The new code also facilitates admission of wills by adopting an
optional procedure to preclude a challenge based upon failure
to comply with execution formalities. At the time of - or subsequent to
- execution of the will, the testator and witnesses may execute an
affidavit attesting that the formalities were complied with. This
procedure, which is recognized in a majority of states, is determinative
on questions of compliance with the formalities.11
The Drafting Committee also decided that there was at least one type
of transfer - that of individual items of tangible personal property -
for which the formalities should be greatly reduced. Under the new code,
a testator can indicate in the will that he or she might leave a
separate written statement directing that various items of tangible
personal property - for example, jewelry or heirlooms - be distributed
to specified beneficiaries. This statement must be signed and dated, but
it need not be witnessed, and it can be created or revised after the
execution of the will.12This procedure
"legalizes" what has been a common informal practice. However, drafters
should remember that one advantage of the informal practice was that is
was likely to be used only in situations where conflict regarding the
items transferred was unlikely. Legalization of the procedure does not
substantially change the risks associated with it.
Finally, the new code decreases the formality surrounding some
aspects of will construction. Under the traditional law of wills, a will
can be interpreted only using information contained "within the four
corners of the document." The new code abrogates this rule as it applies
to many issues of will construction, and generally allows admission of
extrinsic evidence to prove intent in those instances. The code does
not, however, adopt a general rule allowing reformation of errors in
wills.
Provide uniformity and consider current public expectations
Over the past several decades, there have been successful innovations
in the law of trusts and estates in other jurisdictions, and many
worthwhile suggestions from commentators in scholarly journals. The UPC
attempts to embody the best of these, and the Drafting Committee in turn
adopted most of them. In considering whether to adopt a change, the
committee was sensitive to the principle that, whenever possible, it is
desirable that probate law be uniform across states. Uniformity will
become more important as people become even more mobile; already it is
not unusual for a person to have lived in several states, or to own real
estate in more than one state. Changes that only affect wills or
intestacy are discussed in the present section; changes that speak more
to the unification of the law of probate and nonprobate transfers will
be taken up in the following section.
With respect to intestacy, three noteworthy changes are made
primarily for updating and uniformity:
- If there are no takers among the parents or the descendants of the
parents, then more remote relatives (that is, the descendants of the
grandparents - aunts, uncles, cousins) are split into maternal and
paternal groups, with the takers in each determined separately.13 This contrasts with the "next-of-kin" approach
taken in the former code.
- In a second departure from the next-of-kin approach, the rights of
relatives to take under intestacy are now limited to the descendants of
the grandparents; if there are none, then the intestate estate escheats
to the state.14
- Finally, in unusual situations, a testator might want to provide
that if the will should be inadequate and part or all of the estate
should pass by intestacy, certain persons should be disinherited. The
new code codifies this rule.15
The new code also makes a change that is "out of synch" with the UPC;
it reverts to a rule of strict per stirpes for determining the
rights of issue under intestacy.16
With respect to wills, changes primarily directed towards updating
and uniformity include:17
- Clarification of the rights of the surviving spouse in situations
where the decedent's will predates the marriage. Under the former code,
marriage either had no effect on the will (if, for example, there was
any provision for issue), or revoked the will in its entirety.
Following the UPC, unless there is sufficient evidence that the omission
from the will was intentional, the surviving spouse receives an
intestate share in that portion of the estate not willed to
issue.18
- Modification of the rights of children who were mistakenly omitted
from the will.19 The new rules are partly
based upon the UPC, but retain several features of prior law, including
an expanded discretionary power in the court to determine the most
likely intent of the testator and to modify the will accordingly.20
- Clarification of what happens when a subsequent will or codicil does
not obviously revoke the previous instrument, by creating rebuttable
presumptions about the status of the previous will.21
- Clarification of the circumstances under which a previously revoked
will can be "revived," by creating rebuttable presumptions about the
testator's intent.22 The thrust of these
provisions is to allow a prior will to be revived if that is the
testator's intent.
- Codification of the doctrine of "incorporation by reference," which
applies when a will seeks to include a separate document that does not
itself meet the will execution requirements.23
Integrate rules of probate and nonprobate transfers
The execution of wills is one area in which the UPC moved
dramatically to integrate the rules relating to probate and nonprobate
transfers. Nonetheless, as noted earlier, the Drafting Committee kept
many of the formalities surrounding wills, in spite of the fact that
most nonprobate transfers can be arranged much more informally.24 But in other areas, the Drafting Committee
thought it best to try to merge the law of probate transfers and
nonprobate transfers.25To a great extent
this meant applying well-established probate "rules of construction" to
the nonprobate arena, and in some cases resolving differences that
existed in prior law between the law of intestacy and the law of wills.
The new code includes an entirely new chapter, Chapter 854, that
collects the new general rules applying to all transfers at
death.26 These include:
- Creation of a 120-hour (five day) survivorship requirement for all
transfers that require the recipient to survive in order to take.27Under prior law, there was a 72-hour survivorship
requirement for intestacy, but survival by an instant sufficed for other
transfers that required a person to survive.28 In addition, beneficiaries under a revocable
trust are now explicitly required to survive in order to take.29
- Creation of definitions for three different modes of representation
- [strict] per stirpes, modified per stirpes, and per
capita at each generation - which apply when there is a provision
for a person's issue, and two or more of the person's issue have
predeceased.30
- Extension of the "anti-lapse" rules, which apply when a named
beneficiary has predeceased and no contingent beneficiary is named, from
probate to nonprobate transfers.31
- Integration of the rules on the status of adopted persons.32 Under the prior law, there were differences
between rules regarding transfers under intestacy and other
transfers.
- Consolidation of the rules regarding the recipients of class gifts,
and where necessary, extension to nonprobate transfers.33
- Creation of a single disclaimer statute, replacing the two that
existed under prior law, and reconciling variations between them.34
- Creation of a single "slayer statute," reconciling six scattered
statutes.35
- Modification of the rules regarding the effect of divorce on the
decedent's estate plan, and extension of these rules to nonprobate
instruments.36
- Extension of other probate rules to cover all nonprobate transfers,
which primarily will be trusts. These include rules relating to:
ademption - regarding what happens if a specific item is left someone,
but the item is not owned at death;37advancement - regarding the effect of lifetime
gifts on transfers at death;38 abatement -
regarding the reduction of transfers when assets are insufficient to
cover them;39nonexoneration of liens on
specific transfers;40 and no-contest
clauses.41
All these rules essentially serve as presumptions; they
yield to evidence - including extrinsic evidence - of contrary intent.
Some of the statutes require that this evidence relate to interpretation
of words in the document, but other times the evidence can be completely
extrinsic.
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 proceedings 44 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 ofall 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 propertyof 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
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 has received several awards for his work in these areas. He is an
Academic Fellow of the American College of Trust and Estate Counsel.
Prof. Erlanger was reporter for the State Bar committee that drafted the
new Probate Code, and is the author of the forthcoming volume,
Wisconsin's New Probate Code: A Handbook for Practitioners, to
be published this fall by the U.W. Law School - Continuing Legal
Education Wisconsin. This article is based on the handbook.
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 outdefault
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
1 1997
Wis. Act. 188, § 233.
2 Theprocedural 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.
3See 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.
10Wis. Stat.
§ 853.07(2).
11Wis. 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.
18Wis. 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).
21Wis. Stat.
§ 853.11(1).
22Wis. 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).
27Wis. 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.
29Wis. Stat.
§ 701.115.
30Wis. Stat.
§ 854.04.
31 Wis. Stat.
§ 854.06.
32 Wis. Stat.
§§ 854.20 and 854.21(1).
33 Wis. Stat.
§§ 854.21 and854.22
.
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.
Wisconsin
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