How Right of Survivorship can Affect Your Estate Planning Goals

Wisconsin is one of nine states with community property laws that can have a major impact on how couples conduct their estate planning and pass on property to their heirs. The law holds that any property acquired during the course of a marriage is equally owned between spouses and in the event of a divorce, must be split 50/50. Wisconsin is one of a handful of states that take the law further to apply to probate laws.

Married couples in Wisconsin are allowed to have property as survivorship marital property, also known as community property with right of survivorship, which passes on the deceased spouse’s half of the property upon death. What this means is that when one spouse passes away, the house, cars, furniture, and other real estate automatically become the sole property of the surviving spouse.

Wisconsin Statute 766.60(5)(a) reads: “On the death of a spouse, the ownership rights of that spouse in the property vest solely in the surviving spouse by nontestamentary disposition at death.” This law was promulgated in 1986 as part of Wisconsin’s adoption of the Uniform Marital Property Act (UMPA) which sought to create more consistent spousal property laws across the country.

The law does not allow anyone to pass along community property to any other person, even if he or she attempts to expressly command so in a last will and testament, unless the parties agree otherwise in a marital property agreement. The only other exception applies to individual property acquired by either spouse before the marriage or the real property was an inheritance specifically to one person.

In cases in which real property is deeded to spouses predating their marriage, the asset may be owned in joint tenancy, where ownership passes to the other upon death, or tenancy in common, where each other’s share is transferable. While family members like spouses can inherit property in joint tenancy, only spouses enjoy the protections of community property with sole survivorship.

One of the main advantages of spouses automatically taking ownership of marital property is avoiding capital gains tax if the property is sold by the surviving spouse. Capital gains tax applies to increase in value of a property over the value at the time of purchase. For example, a piece of real estate bought for $50,000 in 1960 and sold for $250,000 today would be subject to additional taxes on the $200,000. Before signing any marital property agreement affecting one party’s rights of survivorship, the effects on capital gains tax should be taken into account.

Madison Trust and Estate Lawyers

The estate lawyers of Krause Donovan Estate Law Partners, LLC practice law in the areas of Probate, Wills, Estate Planning, and Trusts. We assist clients in and around Madison, Wisconsin with all matters related to estate planning, trusts, and probate matters. Our dedicated attorneys will even make house calls if you are unable to come to our office.

Contact our office by calling (608) 268-5751 to schedule a free consultation or use our online contact form.