Vol. 71, No. 10,
October 1998
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
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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 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 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
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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