Inheritance and Divorce in Wisconsin?
In Wisconsin, inheritances and gifts are individual property if given solely to one spouse. Wisconsin marital property laws consider inherited assets and gifts as separate property. But, separate property can become community property if it is commingled.
Inheritances can be financially life-changing. They affirm generational wealth and help their families prosper.
Nonetheless, the court may divide an inheritance in the property division stage of a divorce. It all comes down to what the inheritance is and how it’s used.
Inheritance and Marital Property
During property division in divorce, the court determines whether inheritance is an individual or community property.
Anything that is community property, also known as marital property, is split 50/50, down the middle. Wisconsin is a community property state, so almost everything is community property. But, there are a few exceptions where specific types of property are not split. Property that is not split is called individual property.
One of these exceptions is property gifted through inheritance. According to Wisconsin law, inheritance is individual property as long as it was left to only one spouse.
However, property that starts as individual property can become commingled. If a spouse commingles an inheritance by sharing it with the other party, it becomes community property. The court makes the final decision on whether inheritances remain individual property.
Factors the Court Considers
The court considers two factors when deciding whether inheritance is a separate or shared property:
- Evidence proving the property was gained through inheritance or gift
- Proof establishing whether the property still has its gifted status
The second factor has the potential for a lot of extra work. The burden of proof lies on the person who is trying to prove that the inheritance is non-divisible. This means the person who thinks the property is still individual property has to put in the work to prove that.
There are a variety of ways something could become community property. It depends on what the inheritance was. If an inheritance is no longer individual property, it's either mixed property or community property.
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How Individual Property Gets Mixed
When something is mixed property, it is on its way to becoming community property. In property division, mixed property is either split partially or evenly.
There are two ways individual property becomes mixed:
- The spouse who owns the property shares the property with the other spouse.
- The other spouse provides “substantial labor, effort, inventiveness, physical or intellectual skill, creativity or managerial activity” to the property.
How this actually looks in practice depends on the type of property it is. Below are some common forms an inheritance can take and case law examples of how they can get commingled.
Cash or Savings
Say one party inherits a lump sum of money. That money becomes commingled when it is used for or by both parties. For example, if the inheritance is deposited into a joint account, it is now shared property.
In Weiss v. Weiss, a party used gifted money to buy a home that both parties lived in. Because both parties lived there, the property was considered marital property.
A Trust Or Investments
If a party is left with an invested sum of money, the original amount is the individual property. One way the original amount could become commingled is if the money is combined with other shared retirement accounts. But, even if it's not combined, the money the account earns may not be individual property.
Generally, the income a gifted property earns is community property. However, the court decided in the case of Wright v. Wright, that a trust’s income should not always be split. In this case, the inheritance was income from a trust which the receiving party then put into their personal retirement account. So, even though it was income from a trust, it remained as a gift because it was kept separate.
When a house or property is left to a spouse, it is only separate property when it is not used by the other party. For example, if the inherited house is the marital home, it is no longer individual property. Similarly, if inherited land is used every summer for family camping trips, it also becomes community property.
Another way real estate can become mixed is if one party puts significant work into the property. For example, in the case of Haldemann v. Haldemann, one party had to separate the farm she previously inherited. The court split the farm because the husband performed regular repairs and maintenance on the property.
Other Physical Properties
It’s often easier to know when items are individual property. For example, if one party received a ring as inheritance and it has always been just theirs, it’s still individual property. But, if one party inherited a car and both parties used that car, it’s community property.
In the property division process, parties are often willing to let the other party keep things that are obviously theirs. But, they can argue they need something else of equal value in exchange.
This is when the classification of individual property is important. If a party keeps something that is individual property, the other party does not need to be equally compensated.
Without knowing the exact statutes and case law that affect individual property, it’s difficult to argue your case in court. To get an experienced family law attorney on your side, contact Sterling Law Offices.
Are you ready to move forward? Call (262) 221-8123 to schedule a strategy session with one of our attorneys.
Is Inherited Property Divisible Due to Hardship?
The court can decide to split up property due to hardship.
In the case Hughes v. Hughes the husband had to split the inherited property. The husband’s health was in decline, and he was unable to work. The wife was working at the time, but her doctor told her she would soon need to stop working. Because both parties needed the money due to hardship, the court decided to split the inheritance.
What If I Inherited Before Marriage?
Property gained before the determination date is individual property. The determination date is the day the couple married or moved to Wisconsin. So, if a party inherited before the determination date, it is individual property. But, if the property is mixed or shared with the other spouse, it still becomes community property.
Frequently Asked Questions
Can your spouse take your inheritance in a divorce?
The other party cannot take your inheritance, but they may be entitled to some of it. The court will split inheritance 50/50 like everything else if it is commingled. Property is commingled when it is shared or when the other party significantly impacts the property.
What happens to an inheritance in a divorce?
Inheritances can remain as individual property or they can be divided evenly. It all depends on what the inheritance is and how it has been used. If the inheritance is kept completely separate from the other spouse, it will likely remain individual property.
How do you protect inherited assets from divorce?
The best way to protect inherited assets is by keeping them separate from the other spouse. If an inheritance is already commingled, the party that received it could still keep it. They would have to give up something of equal value in exchange.
Is my ex-wife entitled to my inheritance?
If an inheritance is received after a divorce and the other party is not named as a beneficiary, they should not be able to take it.
Does a spouse inherit everything?
In Wisconsin, both parties equally own property, including when property is divided due to survivorship. If they choose to, a spouse can leave their half of the marital estate to their spouse. But, they don’t have to. A spouse can leave their half to someone else, but anything in both parties' names cannot be left to someone else.