Here at Schmidt & Schmidt, S.C., we receive many telephone calls from our clients regarding pre-marital or pre-nuptial agreements. Under Wisconsin's Marital Property Law, a husband and wife are given great tools if they desire to opt out of Wisconsin's marital property laws.

Under Marital Property Law, a couple (before they are married) or a husband and wife (after they are married) can contract as to who actually owns the property and how it is to be shared or distributed upon a death or a divorce.

To help illustrate this point, let us try this little scenario. Imagine two individuals get together. Bob has a whole bunch of land on Main Street, and his new partner, Sally, has a whole lot of construction supplies. Bob and Sally get together and form a corporation, contribute their assets, and build a really cool car wash that soon makes lots of money.

Question: Under Wisconsin law, who owns the car wash?

Answer: The corporation.

Neither Bob nor Sally owns the car wash; the corporation does. What each owns is a share or shares of the corporation. Bob and Sally wisely would have created an operating agreement and a buy-sell agreement in the event that they were to sell the car wash, had to distribute the assets, and/or needed to work around debts or other liabilities. That is very much what a marriage is like in Wisconsin.

In Wisconsin, a husband and wife, upon their marriage, do not "own" property. Their marriage "owns" the property. The title to the truck or their house, even if it is in one person's name, is not relevant under Wisconsin law. The marriage owns the property, not each individual.

We have over-simplified what marital property is like in Wisconsin, but it is useful for the illustrations here. So, in Wisconsin there are several different kinds of property. Before you get married, your property is just separate property. Separate property is that property you own and it doesn't matter who owns it with you. It is just separate property, which we call "non-marital property" because you are not yet married. The moment you get married while a resident of Wisconsin, or you are already married and you move into Wisconsin and become a resident of Wisconsin, the property that you and your spouse possess quickly becomes "community property" or "marital property." Community property is a term used in some other states. So, from here on out, we will use the term "marital property."

Under Wisconsin law, it is presumed that everything that you acquire during your marriage is marital property, and if either you or your spouse thinks that an item of marital property should remain separate property or your own individual property, the burden of proof will be clearly on the person who makes that claim.

For example, your spouse takes funds from her checking account that she had before you were married, and she places those funds into your joint checking account. That is called "commingling." Commingled property becomes marital property unless the two of you clearly agree to separate the property and keep that property separate so that it can be traced for whatever purpose you two desire. The key to maintaining the identity of separate property and keeping it from becoming marital property is 1) not to commingle it, as well as 2) to keep meticulous records. You can do those records through good quality ledgers or journals as you transfer property from one to the other. But most people are not that meticulous and such planning frequently fails due to poor records and no written agreement.

To remedy the failures mentioned, before the parties are married in Wisconsin, they can contract for a pre-marital property agreement, often called a "pre-nuptial agreement." This is a contract between a man and a woman who before marriage, contract as to how they are going to deal with their property. Sometimes before couples come to Schmidt & Schmidt, S.C., they have already decided that they desire to have the benefits of a pre-nuptial agreement. A pre-nuptial agreement is not a very complex document, generally, but it can be made complex depending on the nature of the assets you wish to protect.

Let's start with the most basic idea of a pre-nuptial property agreement and that is, everything that is mine, I retain, and everything that is yours, you retain. That is in essence creating a solid "wall" between your assets and your spouse's assets. All property will have to be titled in your name and all property that is your spouse's will remain titled in her name.

If you wish to have a checking account, you will have yours, your spouse will have hers. That is a complete division of all property.

Sometimes, however, couples wish to only have certain items of their property as marital property. This means that all of the property they bring into the marriage remains individual property, and any property they acquire after they are married becomes marital property. That is acceptable. Those are the kinds of details that we at Schmidt & Schmidt review with our clients before they go into the marital property agreement.

Finally, sometimes people bring into a marriage certain items of individual property, such as a vacation home, a retirement account or a pension plan or annuity, and they wish to keep it their own property. If we itemize and describe it specifically in the pre-marital property agreement, that would work well to keep it Individual Property.

Recently Attorney Andrew Schmidt created a marital property agreement for a dairy farmer here in Marathon County. That farmer brought into the marriage her dairy farm and her herd of cattle. The husband brought in a small trucking business. Each of the parties described their property that they wish to keep individual. He described his vehicles and the business, and she described her farm and the nature of her herd and her operation. Those were kept as individual property. The parties agreed that from then on, all property that they acquired that was not related to the trucking business or the dairy farm business would then be marital property.

There are several legal issues and requirements in drafting a solid marital property agreement, but before you talk to an attorney, please understand these two major requirements: 1) that a marital property agreement must be fair and 2) it must have full disclosure.

Let us start off with "fair." A fair marital property agreement means that each party (i) has had an opportunity to review the other party's financial disclosure, (ii) that the agreement is inherently fair to both people (not lopsided or vindictive), and (iii) each party has the right to have their own attorney review the documents. What is not fair is that one individual comes into a marriage with several hundreds of thousands of dollars and the other party brings very little, and if there is a divorce or a death, the other party walks away without any benefit whatsoever. That is not quite what the legislature had in mind when it created these laws. It would be best if the parties had agreed to something fair. To this end, the law strongly suggests (but does not require) that each party have their own attorney review the proposed marital property agreement. No attorney in Wisconsin is ethically allowed to represent both parties in a pre-marital agreement. It just isn't right.

Here at Schmidt & Schmidt, S.C., Attorney Andrew Schmidt would inform the parties that he can only represent one of them, and he would strongly suggest that the other party seek other counsel to represent and review the documents with the unrepresented party.

"Full Disclosure." Full disclosure means that each party has revealed to the other party all of their assets, all the property they own, all of their liabilities, long term and short term debts, their sources of income and their monthly expenses. This is often done through income statements and balance sheets. Each party discloses to the other that which they own. Most of the clients who come to Schmidt & Schmidt, S.C. do not write up every stapler or every sock that they own. They will list mostly the large ticket items such as specific furniture; they might list computer supplies, they might list kitchen or household goods at the most. But they will definitely itemize all bank accounts, brokerage accounts, retirement accounts, life insurance policies, (plus attach copies of the most recent statements as schedules) and all the real estate and all their major collections, substantial assets or tools that they may have, electronics, jewelry, collectibles, and artwork, and have it specifically listed on a financial disclosure.

Failure to fully disclose your assets, hiding any assets, under-reporting or misrepresenting any assets or income or debt could be grounds for a court to later overturn the pre-nuptial or marital property agreement. If your intention is to keep your property separate from the other person, you must have full disclosure. If you do not have an attorney represent you, and you should have had one, the court at the request of one of the parties may also overturn the pre-nuptial or marital property agreement.

Here at Schmidt & Schmidt, S.C., we desire to follow all state ethics rules and procedures when it comes to creating marital property agreements.

We attempt to be efficient and we try to expedite these requests.

However, it is not fair to the attorneys for you to call and request a pre-nuptial agreement the week before you get married. It is wise to allocate approximately six to eight weeks before your marriage to contact an attorney and get started on acquiring your financial information necessary to prepare the marital property agreement.

Attorney's Fees. The party who initially contacts Schmidt & Schmidt, S.C. or as the parties otherwise agree, typically pays for Attorney Schmidt. Marital property agreements are on a time-and-material basis. The time that it takes the attorney to draft the document, review with the client, and make any corrections are all tracked. It is difficult for an attorney to give a flat rate fee on a marital property agreement as every single couple has a very unique scenario concerning their assets and their debts.

"Post-marital agreements" or "ante-nuptial agreements" are those agreed to by a couple already married. Perhaps these contracts are desired due to a large inheritance, second marriage issues, issues relating to post-elderly guardianship planning or other purposes. A husband and wife can contract for a marital property agreement at any time. The two major requirements are still necessary - full disclosure and fairness to each party.

Now that you have read this simple background behind marital property agreements and pre-nuptial agreements, please feel free to give us a call at the numbers below or write to Schmidt & Schmidt, S.C. in Wausau, Wisconsin to get the information necessary to start your pre-marital agreement. We look forward to hearing from you in the very near future. Please contact Schmidt & Schmidt now to schedule time to talk to one of our staff.