Yes, Wisconsin is one of just a few community property states. Most states divide property in a divorce under the theory of “equitable distribution,” where the courts distribute property based on what a judge thinks is fair under the circumstances of each case. Community property states, on the other hand, work on the presumption that all marital property should be divided equally.
You might find it interesting to learn more about the differences between equitable distribution states and community property states.
No. Under Wisconsin divorce laws, property division applies to “marital” property, but not “individual” property. (Wis. Stats. § 766.31.) The term “property” encompasses pretty much everything the couple own, such as a house, cars, bank accounts, stocks, furniture, art, and so on. Income earned during the marriage is also considered marital property.
The law presumes that all property the couple acquire after the “determination date” is marital property. In most cases the determination date is the date of the marriage. (Wis. Stats. § 766.01.) And under Wisconsin marital property law, each spouse has a one-half interest in each marital asset, no matter whose name is on the title.
Individual property (sometimes referred to as “separate” property) consists of assets a spouse owned before the marriage. It also includes whatever a spouse received as an inheritance or a gift (from someone other than the other spouse) at any time, including during the marriage. Separate property isn’t subject to distribution in the divorce.
If you want to keep your individual property for yourself, make sure you don’t commingle (mix) it with marital assets. Commingling it could convert it to marital property. You may see this where a spouse takes money from an inheritance and deposits it in a bank account that’s in both spouses’ names. (However, you may be able circumvent that in the divorce if you can trace back to the specific source of the individual property. (Wis. Stats. § 766.01.)
There’s another way in which individual property can become marital property. It could happen when non-owner spouses contribute substantial labor, or physical or intellectual skills, to the individual property. A non-owner spouse’s efforts in growing the other spouse’s business might fall into this category. But that alone won’t automatically result in the property’s designation changing.
That will only happen if non-owner spouses weren’t reasonably compensated for their contributions, and if their efforts resulted in a substantial appreciation of the property's value. (Wis. Stats. § 766.63.)
Note also that Wisconsin marriage property laws require the couple to complete standardized forms that provide the court with a complete disclosure of all their property, as well as their debts and liabilities. (Wis. Stats. § 767.127.)
Yes. Retirement accounts are considered marital property. Depending on the type of retirement plan, calculating the account’s value can be tricky. Defined contribution plans, such as 401(k)s, are relatively easy to value. But the value of defined benefit pension plans aren’t as clear-cut, and will probably require hiring an actuary to determine the dollar amount subject to distribution.
There’s also a twist when a spouse’s participation in a plan began prior to the marriage and continues during the marriage. That gives rise to a hybrid property designation known as “mixed” property. In order to divide the retirement account in this scenario, the court will use a mathematical formula to determine the marital portion of the plan’s value. (Wis. Stats. § 766.62.)
Because most divorces occur before retirement plans are in payout status, the typical means of providing non-owner spouses with their share of the account is to award those spouses a greater portion of other marital assets to balance the scales.
However, if a non-owner spouse is willing to wait until the plan starts paying out benefits down the road, that can be accomplished by spouses agreeing to a Qualified Domestic Relations Order (“QDRO”).
The retirement plan administrator receives a copy of the QDRO, and when the owner spouse retires, the plan will divide the benefits payments between the spouses according to the order’s terms. Be advised that the QDRO isn't the same as the divorce judgment, but rather is a separate document that an actuary or attorney usually prepares.
Absolutely. In fact, in cases where there’s not much property, dividing debts is often the main issue. Wisconsin law presumes that an obligation (debt) a spouse acquires during the marriage is incurred in the interest of the marriage or the family.
As such, it’s a marital debt which both spouses are responsible for. Ordinarily, debts will be paid out of marital property, but the court can order that individual property be used as well, depending on the circumstances. (Wis. Stats. § 766.55.)
Also, be aware that, as a general rule, creditors aren’t bound by your divorce judgment. For example, if the judgment states that your spouse is supposed to pay off a credit card after the divorce, but that spouse then defaults on the payments, the creditor can come after you. So it’s a good idea to try to get as much debt as possible paid off during the divorce, to avoid post-divorce headaches.
As mentioned above, Wisconsin is a community property state, and its divorce laws contain a presumption that all marital property should be equally divided between the divorcing spouses. To that end, Wisconsin courts normally try to order property distributions that leave the spouses with the same amount of assets and debts.
Before the court can do that, however, it needs to know the value of the property. With some assets, valuation is easy, as in the case of a bank account. But with others, like a house, business, or a retirement account (as seen above), you’ll likely need to hire experts, such as appraisers, forensic accountants, or actuaries.
Although a 50-50 split of assets and debts is the standard target, the law allows a court to deviate from the equal distribution norm if it believes that’s warranted. In determining whether to take that route, a judge can consider several factors, including:
An example of the court deviating from equal distribution would be where a judge decides to award all the equity in the marital home to a spouse, because that spouse gave up education, training, or a career to support the other spouse’s pursuit of higher education and/or career advancement.
Regarding the marital home, this is often the biggest asset for most couples, and dividing it can be a contentious issue. Ideally, the house can be sold and the proceeds divided. But it’s not unusual for one spouse to buy out the other’s interest, either by giving up other assets, or refinancing the house and using the proceeds to pay off the other spouse. It’s also common for the spouses to wait to sell the house until a certain date, usually pegged to an event, like the youngest child’s entry into, or graduation from, college. Whichever spouse resides in the house during that time is ordinarily responsible for paying the costs associated with living there.
Be advised that in making a final determination on property distribution, Wisconsin courts don’t take marital misconduct into consideration.
With the help of their attorneys or a qualified mediator, most spouses are able to negotiate and settle the issues in their divorce. Amicably resolving your issues almost invariably reduces the stress, uncertainty, and expense of a trial.
The terms of your settlement are memorialized in a divorce settlement agreement (sometimes referred to as a “property settlement agreement” or a “marital settlement agreement”). This is a written contract between the spouses, and addresses the issues in their divorce, such as alimony, custody and parenting time (visitation), child support, and property distribution.
Also, if you’ve opted to change some of the terms of any prenuptial or postnuptial agreement, the divorce settlement agreement will reflect those changes. When you finalize your divorce, the terms of the agreement become part of the final judgment of divorce.