In previous articles, we have discussed constitutionality, and basic rights and duties. Now we will get a bit more specific, as we discuss property classification. This portion of the series will explain general presumption, classification rules, and transitional rules. We will explore various classification sections and review associated rules. We will define and analyze basic classifications of property which have been established by the Act. We will also examine the definitions and presumptions that classifications are based upon. Right now we will discuss significance.
Under the Wisconsin Act, the classification of property holds significance under numerous contexts. This includes the fact that classification ultimately determines the rights of ownership. According to Wisconsin Statute § 766.15, classification determines if the Act’s good-faith duty is valid, and/or applicable. The good-faith duty applies to a spouse’s management and control of assets that are considered to be marital property. It also applies to a spouse’s management and control of the other’s property that is considered to be non-marital property.
There is one exception to this rule. According to Wisconsin Statute § 766.31(6), assets that are determined to be predetermination date property, is property that has typically been obtained before the Act applies to it.
Classification may also establish which assets, if any, may be available to creditors under Wisconsin Statute § 766.55(2). It determines the quantum of a given asset that can be disposed of freely by either gift or at the time of death. For example, only 50% of a spouse’s interest in joint marital property may be disposed of freely by the spouse at the time of death. However, they may freely dispose of any individually owned property as they see fit.
Classification may also bear tax consequences. Under I.R.C. § 1014(b)(6), all property that is determined to be marital property, even the interest held by the surviving spouse, as community property, will carry a basis adjustment at death. Although, a change in basis is not given to property that has been classified as non-marital property of the surviving spouse.
With the significance of classification being defined, we understand the vital role classification holds when it comes to disposable property, property available to creditors, the quantum of an asset, and tax liability, etc. Understanding the contextual circumstances revolving around classification offers the initial definition as to how classification occurs, and for what reasons.
Please call me if you have any more questions about property classification.
Family Law Attorney