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Wisconsin's New Deferred Marital Property Election

Examples

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.

• 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

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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.