Trusts and Estates

Week of 3-30-09

31 March

Problem 3
- A: For classifying the house, title doesn't matter. The downpayment was inheritance (non-marital), and the payoff was income, which is marital. So this is mixed property, but that's not really a classification. § 766.61(1) if an asset is mixed, it's marital unless you can trace it. And you can trace this. So it's titled in A's name, and there's an individual and a marital component. So does § 766.605 apply? Turns out no, because it's not "held" (§ 766.01(9)) between the two spouses. We don't have to address whether this was the homestead.
  The purpose of this statute isn't to further some public policy, but to fix sloppy deed drafting. It's limited to homestead, with both spouses on the title, and no indication that it's survivorship. But note that just having both spouses on the deed (say, to a boat) doesn't make it survivorship, and also just being a homestead doesn't make it survivorship.
- B: Obviously the marital property act doesn't apply here because there's no determination date. Also, note that this is not a homestead. So they are joint tenants (and in WI, that means with right of survivorship). § 700.19(2). So:
  
  WI MPA Common Law
  Homestead Survivorship marital property JTWROS
  Not Homestead Marital Property (unless otherwise designated) JTWROS
Problem 4
- Non-marital: there was no part of the house that wasn't purchased with marital property. Paying taxes doesn't give you an ownership interest-- it's more like a usage fee like rent or something.
- Marital: taxes and maintenance are being paid with marital property
Sort of interesting that despite all this marital property law, there are still ambiguous situations like this. Existing case law generally treats maintenance/taxes as like rent: doesn't create ownership. You could still try to distinguish your particular situation. So (Kobilsky) on these facts, the house would be non-marital.
Problem 5
- Bottlecap: marital because the dividends are income (§ 766.01(1)), which is marital (§ 766.31(4))
- Stock: individual, because § 766.31(7)(c). And appreciation in individual property is individual unless it has been active appreciation (§ 766.63), and on these facts, it has not been.
The difference between "income" and "appreciation" is one of social construction-- it's arbitrary. Handout shows this. Income ("fruits") is a steady stream of periodic payments: it can fluctuate, but it doesn't go negative. So interest, dividends, rent, etc. Appreciation is not income: it's the change in the value of an asset (either active or passive). So appreciation won't change the classification of an asset: an asset is classified without respect to its value.

Problem 6
1. Deposit $2K from grandmother
2. Withdrawal of $250 for medical
3. Deposit $500 bonus
4. Withdrawal $250 for grocery
Oddly, there's no clear answer to this tracing problem. You'd think this would be pretty cut and dried by now. Why aren't there just tracing rules? Because we like to negotiate result, rather than just have them dictated to us. Lawyers prefer to negotiate, lots of the time.
- A: $2000 (100% marital) -- § 766.63(1), if you can't trace in a mixed asset, it becomes marital. And here, we don't know which dollars got spent. This is "supermax:" the maximum marital approach on steroids.
- B: $500 marital -- That's the value of the bonus. But how do we know that none of that $500 has been spent? This is the "maximum marital" approach: where there's a presumption of marital property, and we don't know which dollars got spent, we'll assume they weren't the marital dollars. This is the most likely outcome, by the way.
- C: $400 marital -- OK, so there's a total of $2500 in deposits, and $500 of that is marital. $500/$2500 = 1/5. So we take do it pro rata take the $500 in withdrawals and figure that 20% of the marital property is gone, and 20% of the non-marital. So that leaves $400 in marital property. A possible variation: take the order of operations into account, and do the calculation after each transaction. You could possibly get to $444 this way.
- D: $250 marital -- The first $250 withdrawal came from the individual property, obviously. And the groceries should come out of the marital pot. The "family purpose doctrine" based on COH (Cash on Hand).
- E: $0 (100% individual) -- The reconciliation plan ("family purpose doctrine" again, but based on the aggregate). $500 in marital depositis, $500 in marital-style withdrawals
Problem 7. The document is executed when it's notarized, and that's when it's effective (on the 9th). So there were 4 days of interest (between the 5th and the 9th) when there's marital property interest-- this is probably not enough to worry about, but it is nevertheless true. But the statute says you have to send it after it's signed, not when it was executed (this is a weakness in the statute). Failure to give proper notice is a violation of the good-faith duty (§ 766.15), so there's a claim for damages under § 766.70(1). And so what are the damages? So ordinarily there'd be no damages: a couple of days delay has no tangible effect.
Creditors are entitled to notice that a unilateral statement exists, and that can be big troubles.

	WI MPA	Common Law
Homestead	Survivorship marital property	JTWROS
Not Homestead	Marital Property (unless otherwise designated)	JTWROS

2 April

T & E is a gateway course: there's lots more to learn about estate planning
Watch out for ERISA:
1. Does it pre-empt?
2. What does it do (insurance vs. pension)?
3. Law-in-action: will there be any practical effect?
Problem 8
- A: §755(3)(a)1: Iit's marital property, regardless of how it gets paid for.
- B: For 15/25 years, it was not marital property. § 766.61(3)(b). This is a "straddle policy." A portion of the policy was paid for out of marital property. So that's 10/25 marital. (and B owns 5/25 -- her share of the marital property). This is only an issue if B is not the beneficiary, of course.
- C: The fact that it's a company, and not, like, the UW, means that ERISA is implicated (private sector employer).
Problem 9
- A: No. This doesn't change the classification; it's just an agreement not to exercise rights. Why is this important? If B owns half the policy, and lets it go to the child, that's a gift, and there could be tax implications. All the same, this might be a good idea, if the goal is to force the benefits to go to C (if they agreed to reclassify the property, A could change the beneficiary to whomever). This is an incomplete gift-- it's not complete until A dies and C complies with the agreement, so that there's delivery.
- B: It goes to B. Saying who owns the policy doesn't say who the beneficiary is. B might disclaim it, but typically intestacy wouldn't pass it to the mother, so that might not be practical.
Problem 10
- So this is a shift from life insurance to retirement here, and it's important to keep them straight. So here we have a straddle pension plan-- it's mized property. § 766.62(2): we pro-rate it. So 15/25 is marital property, so 7.5/25 belongs to B. But ERISA pre-empts, so really the state statute is irrelevant; but here, thanks to REA, the spouse does have strong spousal protection-- they get a share even if there's only one year of marriage.
Problem 11
- None: this is Boggs.
Problem 12 : under the marital property act, you can't have joint tenancy. Joint tenancy simply converts over to survivorship marital property. But so what? What is the difference? Why does a tenancy in common automatically convert to marital property (§ 766.60(4)(b)1.b)?
- A: § 766.60(4)(b)1.a says it's survivorship marital property.
- B: § 766.60(4)(a): existing joint tenancies and tenancies in common are preserved.
- The bigger question (unwritten): Who cares? We have four
  1. Survivorship marital property
  2. Marital property
  3. JTWROS
  4. Tenancy in common
  Obviously, the differences between 1 and 2 or 3 and 4 are only interesting when one spouse dies. While both spouses live, those pairs have no difference. Now, at death, #1 and #1 are awfully similar. And #2 and #4 are similar as well (each spouse has a vested 1/2 interest in the property), at death. There are some differences in general about management and control, during life. Can you give or sell your half, for example, without the other partner's permission (not with marital property)? A creditor can come after all marital property, but not an entire tenancy in common. At death, there can be some differences in taxes between 2 and 4. See the chart on p. 9 of Chapter 11. There's an FAQ on the course web site as well.
Handout on the hierarchy of protection for assets at divorce time.
Problem 1
- Non-marital § 766.31(7)(a)
- Not divided: § 767.61(2)(a)(1)
Problem 2
- Non-marital: § 766.31(6)
- Divisible, although § 766.61(3)(b) might alter the distribution.
Problem 3
- Non-Marita: that's what the unilateral statement is all about
- Subject to division, unless the policy considerations in §767.61(3)(L). Note that WI uses a caputal L to avoid confusion with between l-1. Anyway, agreements will be binding. But "unilateral" is not an agreement: it is unilateral.
Problem 4
- Non-marital
- Subject to division
Problem 5
- Marital
- Subject to division
Problem 6
- Marital
- Not divided