Attorney Thomas B. Burton discusses how to hold title to your home when married in Wisconsin. Attorney Burton covers the options married couples have in Wisconsin for holding title to their home, and discusses a unique form of ownership available under Wisconsin Marital Property Law called Survivorship Marital Property. Attorney Burton explains the estate planning and tax benefits married couples in Wisconsin can obtain by holding title to their home as survivorship marital property.
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Welcome back, I'm Attorney Thomas Burton.
I'm an estate planning and asset protection attorney here in Wisconsin and today's topic is 'How to hold title to home, when married in Wisconsin?'
So many people may know, there's multiple ways you can hold title to real estate in Wisconsin and Wisconsin is a community property state or what we call, marital property in Wisconsin, so there are additional ways for married couples to hold title to a home in Wisconsin, other than the traditional ways that may be available in all 50 states.
So we're going to start off with an overview of the three ways you can hold title and then get into the specifics of how Wisconsin is different and a tip on how married couples may want to hold title especially for estate planning purposes in Wisconsin.
So, the first way you can hold title and this generally applies in other states as well, these first two, tenants in common and the next one. But marital property again, is what we call marital property is community property, they call it in other states like California, slightly different but the general concept is the same with community property, but tenants in common is the first way to hold property. If you're a tenant in common, it should say on the deed, tenants in common can sell their individual interests in the property without the other person selling. They can be unequal shares. For example, you can have one person with 50%, another with 30% and another with 20%. So often, if people inherit property jointly, they often end up as tenants in common because if there's three children, they might each have a third or then one of those children passes away and their two kids inherit the interest, it can become another, that third splits among two and they're all tenants in common with a piece of property. But one of the reasons I warn about the dangers of owning property jointly is with tenancy in common, anyone can sell their interests and you can end up having someone not a member of the family as part of the property.
So that's the first way you can hold property in Wisconsin and if you inherit property with relatives from someone, it's likely, it's going to be tenants in common. Now, it doesn't have to be but that could be how you inherited it.
The second way is joint tenant. To have a joint tenancy, you must take title simultaneously meaning at the same time. So up here you see two people can inherit the property, then one dies and two more become tenants in common and then they sell, one sells in interest, they can all be tenants in common but here you got to take it simultaneously. So if mom died, she could leave it to the three children as joint tenants. They would all take title simultaneously, all joint tenants and they would have, they have to have an equal interest in the property. So if it's two children, 50-50 or three children, one-third, one-third, one-third, that could work as an inheritance because they all took titles simultaneously. Similarly, a married couple can take title as joint tenants if they buy the property together and the deed says as joint tenants.
Now joint tenancy is generally the way married couples would hold property in many states. If they want to hold it, for example, the marital home where they're living but you can also say joint tenants with survivors. So part of the joint tenancy is that the survivors inherit upon the death. So when I mentioned the previous example with three children inheriting from mom, if she set it up as joint tenants, she would be saying, if one of the children out survives the others, they become the owner of the property.
So here's an example, if two people own it 50-50 and one dies, the other becomes the 100% owner. If three inherit like three children, A, B, C - A dies, the one third gets split between B and C, resulting in them each becoming a 50% owner. So with joint tenants, you can think of it as a last man standing type of provision where the person who survives, receives the entire interest. That's why sometimes you don't want to do joint tenants, if you want for example, a family cabin, if you set it up for joint owners and you want each person to be able to leave their interest to who they choose. Now I recommend using a trust to do this instead, because of the dangers of having tenants in common where one person can sell and you can end up having a third party as an owner in your cabin.
So now we get to spouses, those are the general forms spouses can hold property this way as well. But in Wisconsin, if you're married, joint tenancy, we presume joint tenancy unless tenancy in common is expressed in the document of transfer the deed, when you bought the property. Then we go to Wisconsin statute 766.60 - for an extra way, under marital property law, spouses can hold property which spouse A and spouse B as marital property or survivorship marital property.
So this is what many spouses hold the family home in Wisconsin and it's often a good idea, if your intent is that the surviving spouse would inherit the entire home upon the death of the first spouse. You can hold your home, husband and wife as survivorship marital property or spouse A and spouse B as survivorship marital property but you need to examine the deed to your home carefully, to make sure it says that on the deed.
Now for anyone who bought a home after 1986, that's the year the marital property law went into effect. This verbiage can be used on the deed for home spot before that, you may have bought it as joint tenants and you need to check the statutes and with your lawyer to make sure, it's titled. So that the survivor would receive it as marital property without joint tenants with rights of survivorship or a survivorship marital property.
So if you're in a situation where you want this, the house to go entirely to their surviving spouse, this is a good way to hold title in Wisconsin. If you're in a blended family or something and you don't want half of it to go to the spouse, then you're going to want to look at not holding title this way, retitling and I recommend, a marital property agreement that says you want to opt out of marital property classification on the home because you want to leave your half to, let's say, your children and they want to leave their half to their children but then you need to work out what happens when the first spouse dies. So I would recommend holding it inside of a trust, in that scenario, so that maybe the surviving spouse could have the right to live there but that the equity in the home wouldn't go all to their children or however you want to set it up but that can get more tricky with a blended family. So work with your attorney there but for a situation where you want to leave the home entirely to the surviving spouse, survivorship marital property is the way to go in Wisconsin because at the death of the first spouse, it all goes to the survivor as a non-probate transfer upon death, a non-testamentary disposition, no probate required. So the great thing about this method is you do not have to go through a probate, on the one, the undivided one-half interest in the home owned by the first spouse to die. Therefore it's a very powerful way to hold real property in Wisconsin and as a bonus, the IRS for community property states, they allow you a double step up in basis at the death of the first spouse. So if you buy a house in 1980, for a $100,000 and then the first spouse dies in 2020 and the house is worth $200,000, instead of just their half getting new basis at death, you get new basis on the whole house, that means if the surviving spouse later wants to sell the home and move to another home or rental or something, they can sell the entire home at that new basis and if there was any taxable gain, they get to go off that 2020 basis instead of the 1980 basis, So this is very powerful, the bonus, the double step up in basis on entire property at death of first spouse and it can be used for other property held as marital property as well. So not just the home, you know, it can be the firm connecting real estate other assets, assets held in accounts, this way. So it's a very powerful bonus reason, tax reason for holding property as survivorship marital property in Wisconsin.
So today's key takeaway is if you're married in Wisconsin, to check the deed to your home and if you're recently married or you bought a piece of property before you got married, it's always good to make sure you know how title is held on the property because we're going to go look at the title first, generally, when determining what happened.
So if you have no estate plan in place, it's especially important because title is going to dictate. If you have a trust in place and assets held in the trust, that's the best in my opinion because then the trust will dictate what happens to the property. But if you have no estate plan and you just own property in your individual name, this is a great way you can avoid probate upon death of the first spouse and still allow the surviving spouse to remain living in the home with additional tax benefits.
So I know these ways of holding property can get confusing and I wanted to make a video today, specifically on Wisconsin law and how this works. I hope it's been helpful to you. If it has, consider giving this video a like and subscribing to the channel, so that more people can find and benefit from this information as well.
Thanks for watching and we'll see you next time.
© 2021 Burton Law LLC. All Rights Reserved. Transcript and captions provided for ease of access for the hearing impaired. For questions about this topic, or to suggest a topic for a future blog post, please contact the office.
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