Classifications of Property Division
The basic classification of property falls into six general categories each with their own 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.
1.The first category, is marital property.
All property and acquired income in a marriage is classified as martial property, unless proven otherwise. According to state law, all property acquired by an individual who is legally married is considered a split ownership between the individual and their spouse. This includes any income that either spouse is receiving.
2. The second category, is Terminable-interest Marital Property.
The interest one party has in the marital property, as far as a deferred-employment-benefit plan, might be terminated. If the nonemployee spouse predeceases the employed spouse, then the non-employee spouse will no longer receive a deferred-employment-benefit plan.
3. The third category, is Individual Property.
Individual property is property that is not attributed to joint marital assets. Individual property is generally classified in instances when property owned by one party was owned before the marriage, in certain instances of the inheritance of property or money which is then used to purchase items or property which is not comingled, or any property that is acquired that a court deems non-marital property.
4. The fourth category is Predetermination Date Property.
Sometimes also called unclassified property, predetermination date property is property or assets owned by a spouse starting from the time that both spouses are living in the state. However, if the marriage date precedes the determination date, then the assets which are owned by a married individual at the time of the determination date is considered unclassified property.
5. The fifth category is Mixed Property.
Mixed property can exist when, for example, joint funds are used in conjunction with individual funds to purchase an asset. This is considered mixed property. This is sometimes hard to decide in some cases, because the individual component would have to be traced back to its source. If this cannot be done, the property will then be deemed joint marital property.
6. The sixth, and final category, is Deferred Marital Property.
Property that is considered to be Predetermination date property is also considered to be deferred marital property, if the property would have been marital property under chapter 766.
References: Chapter 766
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