Ensure Fair Property Division in Wisconsin
The first step in getting fair property division in Wisconsin is understanding your rights
Secure Equal Property Division during a Divorce Proceeding
Enforce a Property Division Agreement after a Divorce
How Courts Determine Property Division
Wisconsin is a marital property state, which essentially means everything owned by the married parties is owned equally by both parties and therefore should be distributed equally at the time of divorce. This may seem unfair and, frankly, in some cases we would agree. But this is the law. This equal ownership law applies to both assets as well as secured and unsecured debts.
One of the main reasons to hire an attorney during a divorce is to protect assets and limit debt liability where possible. Property division is a vast, complex network of laws, but when applied appropriately can limit some significant losses and/or exposure to some debt. But again, the courts start from the presumption that everything will be divided equally between the parties.
There are specific provisions to protect assets and or limit exposure to debts brought into the marriage. We work with clients to apply these protections or negotiate with the other party to protect our client’s interests.
Do you know what property is marital vs separate?
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1. Marital Property Defined
Wisconsin is one of eleven states in the United States where everything in the marital estate is presumed to be marital property or otherwise referred to as community property. This means any property and assets newly acquired during the marriage will be divided between the two parties equally.
This applies to anything obtained either jointly or exclusively by one party. There are a few exclusions, such as an inheritance designated to one spouse, but in nearly all cases the court will order the property be divided equally between the divorcing parties.
A few examples of marital property are income earned during a marriage, the marital home, a vacation home, vehicles, furniture, household appliances and even the expensive golf clubs purchased with marital income.
2. Separate Property Explained
In Wisconsin nonmarital property, also known as separate property, are assets and debts owned prior to the marriage. These assets and debts will remain unchanged with regard to who is the owner or liable in the event of a divorce.
In 39 other states, Wisconsin not included, equitable property division is the rule of law. The difference between equitable property and community property is the goal of the property division orders. In equitable property states, property is divided on the presumption of making the division equitable, or fair, to both parties, not equal. What this means in a real life example is as follows:
(1) The court awards husband and wife half of all assets accumulated during the marriage, and awards both parties his or her separate property brought to the marriage.
(2) The judge orders a sixty forty split of the marital estate, because the husband is a stay at home father who chooses to take care of the couple’s young special needs child during the ten-year marriage, and the wife is an IT executive earning $350,000 annually.
(3) A husband and wife were married for three years, with no children and were both employed. The final divorce decree states they would each would retain all their premarital assets as separate property, and the two parties would each assume half of $10,000 credit card debt accumulated during the marriage.
A brief note: If separate property was paid for with marital assets or improved by using marital assets, a claim could be made that this property should be considered marital property. For example, if you purchased a lake house prior to marriage, but marital funds were used to renovate the property, your spouse will likely have a claim to a portion of the lake house.
Things You Should Know Before You Proceed
Court Considerations when Dividing Property
As discussed in the overview section, to divide property during a Wisconsin divorce, a distinction needs to be made between separate and marital property. In general, Wisconsin is a community property state, meaning Wisconsin courts divide property equally, or as equally as possible, between parties getting a divorce regardless of specifics of ownership.
Since an equal division of property cannot always mean a perfect 50/50 split, courts will aim to decree property distributions leaving both sides with a similar amount of assets and debts. However, at times courts can deviate from a 50/50 distribution of assets after considering other factors:
- the length of the marriage
- the property brought into the marriage
- whether a spouse has substantial separate assets
- the age of the spouses
- the physical and emotional health
- contributions to the marriage, such as an economic value associated with homemaking/child rearing
- earning capacity of each spouse
For example, a court may award the marital home equity to a spouse with a lower future earning capacity because they gave up an education, training, and or a career with the intent of supporting the other spouse’s education and or career advancement.
Prenuptial Agreements & Property Division
Prenuptial agreements, also known as premarital agreements or prenups, will impact property division under certain circumstances.
Wisconsin is one of 27 states to adopt the Uniform Premarital Agreement Act, which means when a valid prenuptial agreement is present and signed by both parties, certain property will be awarded solely to one spouse and is no longer marital property.
The Marriage Property Act
In Wisconsin, the Marital Property Act was signed into law in 1984 and took effect in 1986. The purpose of the law was to change how marital property is viewed during the division of property stage of a divorce proceeding.
The law recognizes both parties contribute to a marriage – this is true even if only one earns a salary. This recognition says, with limited exceptions, whatever the couple acquires during the course of the marriage should be considered owned equally.
Individual Property in Wisconsin
Even with the introduction of the Marriage Property Act, Wisconsin still recognizes individual property rights during a marriage. Specifically, a personal gift or inheritance – no matter when they are received, should be considered individual property during the time of divorce. The catch here is the court demands clear record of proof the item or property belongs solely to one party.
Warning! – Individual Property can become Marital Property
Where the law becomes gray and convoluted is how individual property, or separate property, can become marital property.
Say for instance before marriage you have a 401k account with $30,000. During the course of a 15-year marriage, you grow the 401k account to $250,000. During the fifteenth year of marriage, your spouse decides it is time to split. This 401k account would be determined partial marital property, but the exact amount of the account to be considered individual property is far from exact.
Hidden Assets during a Divorce
Something anyone going through a divorce should be aware of is the possibility of assets being hidden from them. This is especially true in high asset divorces or when one spouse was responsible for the financials during the marriage. The concept of hiding assets is not uncommon, especially if the divorce has been looming for a long while.
There are numerous ways to identify hidden assets, but normally assets are placed in the hands of third parties or hidden with false documents.
The Process of Hiding Assets
When a spouse decides to conceal assets from their partner often times their relatives or acquaintances cooperate in the deception. In instances when others are involved we typically discover the placement of possessions or investments in safety deposit boxes.
In Plain Sight
Another method of hiding assets is a method we call “in plain sight”. This is when one spouse pays down mortgages and or lines of credit. This may seem like something that will affect each party equally, but if assets are not liquid, such as cash, it is more difficult for the parties to separate the property equally.
Also, the process for selling assets can be lengthy. One party may use the process of a lengthy sale to their advantage especially if they are higher earning spouse. The process for proving one party is purposely avoiding the sale of an asset or property can be expensive in a post-divorce action.
Some individuals will use another method called “repaying debts.” The use of marital assets to pay off old debts is a legitimate use of marital assets, so proving that it was done to hide assets can be difficult. There are two ways this method is used. First, one spouse may pay off an “old debt” to a friend, but the intent is clear. The friend is a way to hide assets.
The second way spouses use the “repay debt” method is by paying off old student loan debt. The unfortunate part of this scenario is that student loans are generally in only one person’s name. So while using marital assets to pay off the loan is a legitimate use of them, it only benefits one party in the long run.
Children’s Bank Accounts
The most sinister method of hiding assets is establishing a joint bank account using a child’s social security number. This can be hard to find and is a method some individuals use to their own advantage in an unethical way during a marriage.
The final method of hiding assets is when one spouse works with an employer to delay bonuses and or raises until the conclusion of the divorce. This makes their income and assets appear smaller than they actually are. Unfortunately, this delay of payment from an employer can be somewhat difficult for individuals to prove in court.
How can Hidden Assets be Uncovered?
If there is a likelihood of assets being hidden an investigator must have accurate personal information to find hidden assets, including the full legal name and variations (nicknames, abbreviations, common misspellings, aliases).
Since many times assets are hidden with the help of others a list of names and addresses of close relatives and friends will also prove very useful in the investigation of finding hidden assets.
A private investigator will look in several places first. Below is a list of locations where assets are typically hidden.
- Income Tax returns – Tax returns provide a roadmap and a great place to begin looking for clues of hidden assets.
- W2s – W2 forms detail salary information received as well as any the deferred compensation packages or executive benefit plans.
- Overpayment – Another way to uncover hidden assets is looking or overpayment of state and or federal taxes.
- Alternative Minimum Tax Line – Entries found on the alternative minimum tax (ATM) line may indicate a spouse is hiding assets. A trained investigator knows what to look for here as using this line item is very technical tax law.
- Form 6521 – This tax form contains the ATM calculation. Line items on this form can help identify accelerated depreciation on real estate and incentive stock options.
- Form 4797 – Tax form 4797 will indicate the sale and amount of business items.
- Schedule A – Schedule A will reflect deductions of interest, thus indicating the existence of loans. Finding the existence of loans on Schedule A can lead to the discovery of loans used to purchase of undisclosed assets.
- Schedule B – Schedule B will show interest and dividend income on lines11 and 12. These are typically used to hide assets in off shore accounts and or trusts. Entries on Schedule B could be the only indication of an off-shore foreign trust account.
- Schedule C – Schedule C will indicate profits or losses from a business. Using Schedule C may help find evidence of the business used to fund a Keogh plan, increasing retirement deductions.
- Savings Accounts or Money Markets – Reviewing large deposits and or withdrawals could point to a hidden stock paying a dividend or interest.
- Checking Accounts and Cancelled Checks – Checking account statements and the backs of checks are a good place to find dirt. The backs of checks will show the account number and financial institution checks were deposited either finding a hidden account or an accomplice.
- Lifestyle Analysis – Looking and analyzing a lifestyle can then be matched the income being reported. Digging into the types of clothes purchased, car being driven, or a significant difference in lifestyle between parties can help evaluate income.
- Cash Flow in a Business – Analyzing how money flows through a business may indicate one of two things: 1) good internal controls when the person receiving and recording deposits is different from the person who deposits the funds, or 2) poor internal controls where the spouse receives, records and deposits the funds. Poor internal cash flow controls could show one spouse hiding assets/cash or conducting business for future favors or payment.
How to Divide Different Assets & Debts during a Divorce
Dealing with the Marital Home
Often, the family home is the largest asset to be divided in a divorce. If you and your spouse are able to find common ground on what to do with the family home, it will simplify property negotiations significantly. In the following paragraphs, we will discuss the three most common ways to deal with the family house: selling, buyouts, joint ownership.
Sell the House
When one spouse can afford the home on his or her own or neither wants to stay in the house putting the house on the market is always an option. Things to remember:
- the mortgage needs to be paid off
- home equity lines of credit need to be paid
- capital gains tax will need to be paid
One of the main disadvantages of this method is the expenses you’ll incur in the upkeep and the sale of the house. This is especially true if market conditions are not good for selling a house. Other than the expenses related to selling a home there are other disadvantages, including the following:
- hiring a real estate agent
- agreeing on an asking price
- paying for repairs and upgrades
Selling a home is never easy and it does not get easier during a divorce. This does not mean it is not the right decision based on your circumstances, but be aware of the decisions required before going down this path.
Agree to a Buyout
Another option available to deal with the family home during a divorce is to agree to a buyout or trade. This means the equity of the house will be paid to the spouse moving out of the marital home with other marital assets. A buyout is a great option when there are other assets to divide from the marital estate. Some things to consider before entering a buyout scenario:
- the buyer may end up paying too much if the house depreciates
- the seller may end up losing out on future appreciation of the property
Give up other Assets
The most common way to execute a buyout is by one spouse giving up other marital assets, such as retirement funds or investments. To execute a trade that is fair, a third party must assess the value of the home and property. Once the home value is calculated, the spouse keeping the marital home will give up other assets equivalent to half the home value.
Buyout Payments Over Time
A second way to accomplish a buyout is making payments over time. After a third-party assesses the value of the marital home, buyout terms would be included in the divorce and division of property agreement. Under these circumstances, co-ownership would exist until the final buyout payment is made.
In Lieu of Spousal Support
The third most common scenario happens when spousal support is also involved in the divorce agreement. In this scenario, a spouse who is likely to pay spousal support (alimony) will significantly lower the price or “give” the house to the other spouse in exchange for not paying spousal support.
Remember you are in control and if you can agree upon an equitable scenario a judge will approve the property division.
Co-Own the House
Another option is to co-own the marital home. This scenario is unusual unless one spouse is buying out the other spouse over time. There are some long-term disadvantages to co-owning the house:
When both parties own the property, even though only one party lives there, the mortgage will still be an open expense on both credit reports. Such a large debt on your credit report can make it more difficult to obtain financing for other purchases.
Just like the mortgage, the upkeep for the property is still the responsibility of both spouses. Tracking who will pay for what when will be a continued hassle into the future.
Then there is the issue in regards to the interest deduction. When it comes time for taxes even though both parties will be paying for the mortgage only one party will be able to claim the interest deduction when filing taxes.
Other Notable Risks
Two other risks include what happens if you co-own the property and the other spouse dies? Now you need to create a living will, which adds more cost. Finally, what happens if one spouse gets sued or files for bankruptcy? In reality, there is little way to protect yourself in this scenario.
Co-ownership is always an option, but as you can see, there are several serious risks involved. Be sure you make a decision with careful consideration of the potential risks and disadvantages.
When dividing family cars the first step is identifying fair market value for each car using resources like Kelly Blue Book.
For instance, if two cars, like a 2010 Ford Focus 4D Sedan and a 2011 Toyota Highlander SE Sport Utility are owned, both with about 50,000 miles, one spouse will get one and the other spouse will get the other. However, the spouse that gets the Highlander will owe the other spouse about $14,000 in other assets due to the difference in value between the two vehicles.
Household items are objects such as clothing, jewelry, and other personal effects. In most cases the owner of the items keeps them. If you’re already living separately it is likely you have already separated these items. Other items included in this category include furniture, appliances, kitchen items, tools, electronics, etc.
The easiest way to save money when going through a divorce is to do this part without an attorney. It does not make sense, economically, to have two lawyers argue over a nightstand.
The best way to divide household items is to sit down with a completed inventory list and take turns picking items. This can be fairly simple, but when couples have trouble communicating, the same can be done via email using a completed list.
Dealing with Marital Debt
Joint debt or marital debt can take many forms but are most commonly things such as auto loans, mortgage(s) and credit cards. Both parties jointly own the use of and responsibility for the debt, because both parties, from a legal standpoint, benefited from the asset or resource acquired from the loan during the marriage.
The best and quickest way to deal with joint or marital debt during a divorce is to pay off the obligations. This is typically accomplished with the proceeds from the sale of the family home or with other available assets. Not only is this strategy the easiest, but there are several other advantages: certainty, protection/improvement of your credit record, and a fresh start.
Other Options for Dealing with Marital Debt
Two more options for dealing with marital debt include continuing to share the debt or divide the debts and each party takes sole responsibility for their debts.
Continued Sharing of Debt
The main advantage to this method is no money is required to pay off the debts now. However, there are some significant risks such as risking credit rating if the other party does not pay their share.
Divide the Debt Equally
This method typically requires more work, but the advantage is complete control. There is no opportunity to be beholden to decisions of the other party in the future, for the most part. We say for the most part because creditors may have precedence to go after both parties if one party defaults on payments in the future. This is especially true of credit cards.
Overall the most common, and significantly more advantageous, route is to pay off the debt. This may not be easy, but this path leaves both parties with a clean slate.
Dividing Retirement Accounts during a Divorce
Another item, which is often initially overlooked, is retirement accounts and benefits. When couples separate in Wisconsin, the accumulated value of the retirement assets is considered marital property to be divided. Other than the house, this is likely the largest or second largest asset to divide.
There are three major types of retirement benefits that need to be considered when a divorce occurs; defined benefit (pension) plans, contribution (401K) plans, and social security benefits.
Dividing Pension Plans
A defined benefit plan or pension plan is something an employer offers an employee without the input of the employee. It is something an employee will get without any contribution. For the most part, defined benefit plans have disappeared unless you work for the government or you are an executive of a larger corporation.
The first step in dealing with this type of asset in a divorce is valuing the pension plan. This is not an easy task and typically requires the hire of an actuary. The actuary will then define three items:
- the value of the monthly pension payments
- the percentage of the benefit to be considered a marital asset
(for instance, if your spouse receives a pension, has been employed for 30 years and married for 10 of the thirty years, 33% of the payout should be considered a marital asset)
- define the amount of the pension the nonemployee spouse is entitled
Decide How to Split the Retirement
After the value of the pension is determined a decision will need to be made on how to split the asset. There are two options:
Buyout the Non-Employee Spouse
The most common approach is buying out the nonemployee spouse. What this means is forgoing other assets giving them to the other spouse. Some advantages to this approach are keeping your entire pension benefit. However, the risk here is if the value of your pension changes there is no way to recoup the lost amount.
Split the Asset at Retirement
Splitting the asset at retirement is the other primary option. This option is less common due to the added complexity. In cases where couples determine they want to divide the pension at retirement additional paperwork and court orders are required. When couples go down this path they need to get a Qualified Domestic Relations Order or QDRO. This is a court order that will direct the retirement distribution to be split in the future based on an agreed upon percentage or judge order.
Splitting Contribution & 401k Plans
The majority of married couples will need to split a 401k, either one joint 401k plan or multiple 401k plans. Splitting a 401k is much easier as a present day value clearly exists. Determining the value may still require an actuary, but it is not required as heavily as it is required for pension plans.
After the value of the contribution plan is determined, the divorcing party deciding on the method of splitting the asset is the next step. The same options for splitting pension plan exist when splitting contribution plans. The preferred method is splitting the asset now, into separate 401k accounts.
In some cases separating the asset will require a QDRO, as described above before the 401k will roll over, other times a copy of the divorce paperwork is all that is required. This is situational based on the 401k plans.
Dealing with Social Security Benefits
Yes, social security benefits are considered marital property in some instances. In Wisconsin, if a marriage lasts longer than 10 years both spouses are entitled to social security. Collection on a spouses social security benefit can begin at age 62. This will remain true until either party gets remarried.
Securities & Investments
Stocks, bonds, mutual funds, and commodity accounts are another set of assets that need to be divided. This can be difficult as the value of these assets can significantly fluctuate.
There are two ways to efficiently divide securities and investments. First, each asset is assigned a value on the date of the separation. This can be risky. Agreeing to this ‘assigned value’ may help, but it may hurt. There is a high likelihood the value of these assets will be changed when the time comes to actually distribute the asset in the final divorce decree. The method of ‘assigned value’ is typically used when the securities and investments are traded for something else of equal value.
Another method of distributing securities and investments is actually dividing the accounts. For example, a stock trading account would be divided into equal portions. This is more straightforward but can involve more work as well as trading costs.
Contrary to popular belief stock options are not the only form of deferred compensation. Other such examples include performance-based compensation, bonuses, as well as paid time off and vacation. These forms of compensation should be considered a marital asset when it comes to dividing property.
With regard to paid time off and vacation time, courts will only see these types of deferred compensation as marital property if the employee is likely to receive cash in lieu of using the time off. If the company will not pay the employee cash in exchange for the unused time off it should not be considered a marital asset.
Cash & Cash Deposit Accounts
Just like deferred compensation cash and cash deposit accounts (checking and saving accounts) should be split. This includes cash accounts that are only in one spouse’s name.
Pick an Action to Ensure Fair Property Division
Secure Equal Property Division during a Divorce Proceeding
Enforce a Property Division Agreement after a Divorce
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