Wisconsin’s Marital Property Act classifies property held by married couples as marital, individual or mixed. Generally, marital property consists of all property of spouses, including income generated by spouses. Each spouse owns an undivided one-half interest in all items of marital property.
Individual property, in general, consists primarily of assets a spouse brings into a marriage or assets a spouse acquires by gift or inheritance. Marital property mixed with individual property, in turn, produces a mixed asset. For example, if a $20,000 asset is purchased with $10,000 of income produced by a husband (marital property), combined with $10,000 the wife inherited from her mother (individual property), that purchased asset is mixed.
If spouses wish to deviate from the property classifications of the Act, they can do so by entering into a marital property agreement. Marital property agreements can be entered into prior to a couple’s marriage (which is commonly referred to as a prenuptial agreement) or at any time after a couple has been married. With such agreement, the spouses can identify their property as either marital or individual property.
An “opt out” agreement is one type of marital property agreement which allows parties to classify most or all of their assets as individual property. A number of reasons might exist for the spouses to enter into such an agreement. One reason would be that a party can retain his or her individual rights to a piece of property, even after marriage, with such agreement. For example, a wife who classifies a piece of real estate as her sole individual property would be able to pass such property to her heirs at death without any portion of the property going to her husband. An obvious disadvantage to this example is that the husband has retained no rights relating to the real estate and would have no claim to it in the event his wife dies or the parties divorce.
In “opt in” agreements, couples may classify all or substantially all of their assets as marital property in order to bring them fully within the provisions of the Act. Although the marital property act assumes that all assets owned by married persons are marital property, this assumption could be challenged. Therefore, an opt in agreement provides certainty.
One reason couples may choose this route is simply so they both have peace of mind knowing that everything that belongs to one spouse equally belongs to the other.
There are also estate-planning advantages as well. For example, assets classified as marital property achieve a new cost basis on the death of either spouse. For example, let’s say marital property worth $10,000 in 2000 appreciates to $50,000 in 2010. If one spouse dies in 2015, the entire basis of the property is “stepped up” to $50,000 (subject to caps in basis increases for the year 2015) if the parties entered into a marital property agreement. Therefore, if the property is sold by the surviving spouse for the date of death value, such spouse does not incur any capital gains tax from the sale.
This article is intended to explain some of the issues pertaining to marital property agreements and marital property law in plain language. Because the law is ever-changing, complex and there are exceptions to the general statements given above, this information should not be relied upon for any statement or conclusion of law.
If you have any questions or would like more information regarding marital
property you may write or call Attorney Alex P. Seifert, 700 Fifth Avenue, Second Floor, Antigo, Wisconsin 54409; telephone number (715) 623-3743. Alex is an associate in the law firm of Sommer, Olk, & Payant, SC. The law firm concentrates its practice in criminal defense, personal injury cases, estate planning and family law.