Wisconsin law imposes a significant set of rules collectively called the Wisconsin Marital Property Act which will apply, by default, to a married couple. Marital property law has far-ranging implications. It affects not only the obligations of the spouses to each other and their relationships with others including family members and creditors, but also serves to define the fundamental rules which determine what assets each spouse is considered to own, and the extent of and limitations on each spouse’s rights to gift or otherwise dispose of those assets.
However, a couple who is married (or contemplating marriage) also has the ability to change nearly all of these default rules to better reflect their wishes and more appropriately define how their marriage will affect their legal rights. This is accomplished by creating what is generally known as a Marital Property Agreement. The law favors such agreements, since a couple can much better define how they want to relate to each other than the legislature or any court could. In order to be valid, however, such agreements must meet tests of both substantive and procedural fairness.
One of the possible purposes for a Marital Property Agreement can be to change the financial rights and responsibilities of the spouses which would otherwise apply in the event of dissolution of the marriage due to divorce or legal separation. Marital Property Agreements entered into for this purpose would typically be “pre-nuptial” (i.e., executed before the marriage), and should generally be finalized and executed only after each spouse has retained and had an opportunity to consult with separate legal counsel with plenty of lead time allowed in which to complete the process prior to the desired effective date.
However, another important purpose for a Marital Property Agreement would involve estate planning. The Wisconsin Marital Property Act has broad and far reaching effects concerning such fundamental matters as what a married person owns and does not own, and what rights a surviving spouse has in the event of the passing of the other spouse. These rules can be very hard for people to understand and keep clear. Additionally, they are in some cases fact dependent. As such, the rules cannot necessarily be relied upon from a planning perspective, and may complicate the process of both creating and implementing an estate plan as intended. Sometimes, the rules simply conflict with what a married couple wants or believes is appropriate, or what is most advantageous for them in maximizing the value of their property or minimizing related financial obligations such as tax liabilities. For these and other reasons, a Marital Property Agreement is often used as part of the estate planning process in order to provide clarity, avoid confusion or complication, minimize taxes or other costs, or otherwise conform to the spouses’ specific wishes or expectations.
Attention should still be paid to ensuring that Marital Property Agreements are both substantively and procedurally fair, and that they are consistent with the parties’ intent, but in the absence of any concerns in that regard it is not uncommon for an attorney providing joint representation to the married couple for estate planning to draft the agreement and be the only attorney involved.
For questions about the impact of the marital property laws, or how including a Marital Property Agreement in your estate plan might be beneficial, please feel free to schedule an initial consultation.