A common mis-perception about Wisconsin divorce law is the belief that the property, cash, and debts you owned before your marriage remain your separate property when you divorce, or are automatically awarded to you in the divorce. In fact, the property division section of the Wisconsin divorce laws, Wisconsin Statutes Section 767.61, states that all property acquired by either spouse before or during the marriage goes into the pot to be divided between the parties, either by the judge or by the parties’ agreement, at their divorce.
The statute does provide for two exceptions to this rule. (1) Any gifts of property or money you received either before or during your marriage remain your separate property, not subject to division in the divorce. This gift exception does not apply, however, to gifts you received from your spouse, which are included as property to be divided at divorce. (2) Any funds or property you received “by reason of the death of another” person remains your separate property, not subject to division in the divorce. This exception includes life insurance proceeds, inheritances, retirement benefits, etc. Under a “hardship” provision of the Wisconsin divorce laws, if the court finds that allowing you to keep your gifts and inheritances will create a hardship for your spouse or your children, the court will include your gifts and inheritances as property subject to division.
While these provisions are relatively straightforward, complications can arise. What if you inherited property, but then converted it to stocks held in your name alone? What if you received a gift of cash, and then used it as a down-payment on a home jointly titled with your spouse? What if your spouse inherited a cottage, and then you contributed materials and labor to fix it up? What constitutes a “hardship?” These sorts of issues have few clear-cut answers and often lead to litigation.