When Community Property and Equitable Division States Collide

 Posted on September 30, 2025 in Estate Planning

Where divorce and death are concerned, states are either community property states – where all marital assets are divided 50/50 regardless of extenuating circumstances – or equitable division states, where marital assets are divided fairly but not necessarily equally. When neighboring states have different laws, it can make estate planning much more complex if property is owned in each state.

While Wisconsin is the only Midwestern state that follows community property rules, it is also the only state that has a bit of a hybrid situation, with courts directed to divide marital property "equally, but with discretion."(Section 767.61). Illinois, on the other hand, is a true equitable division state.

When it comes to estate planning, Wisconsin follows the Marital Property Act, treating most property acquired during marriage as marital property, with some nuances regarding the classification of individual versus marital property. If you live in Illinois but have vacation property in Wisconsin, estate planning can be a bit more complex than usual. Having a DuPage County, Illinois estate planning lawyer for those who own property in Wisconsin can be an invaluable asset.   

Separate vs. Marital Properties

In Illinois and Wisconsin, there can be separate assets and marital assets. Generally speaking, marital assets include anything acquired from the date of marriage, unless there is a postnuptial agreement specifically excluding it, or the assets were received as a gift or inheritance from one spouse.

However, in the equitable distribution state of Illinois, property purchased by one spouse, using his or her own funds, with only his or her name on the title, may be considered that spouse’s individual property, even though it was purchased during the marriage.   

Properties and assets owned before the marriage in either state usually remain separate. This means these assets are not subject to marital property division unless there has been commingling of those assets or the other spouse has significantly added to the value of the assets during the marriage. The same applies to gifts and inheritances received during the marriage.

Owning Vacation or Other Properties in Wisconsin When You Live in Illinois

The differences between the community property state of Wisconsin and the equitable division state of Illinois can significantly impact how real estate, such as a Wisconsin family vacation home, will be distributed following a spouse’s death or during a divorce. Wisconsin couples do not have the same flexibility as Illinois couples to distribute property unequally; thus, careful planning is required to reclassify or confirm ownership of assets.   

The questions that will determine ownership include whether the vacation home was purchased during the marriage or owned by one spouse before the marriage, whether premarital or postmarital agreements exist, and whether a comprehensive estate plan is in place. Estate planning strategies may include:

• A Cabin Trust can designate use rights, funding for maintenance, and succession plans.
• A legal Buy-Sell Agreement between co-owners establishes clear terms regarding the sale, transfer, or exit of ownership.
• An LLC for cabin ownership can provide a framework for family members to contribute financially to the cabin expenses and manage cabin use.

What Estate Planning Strategies Could Protect Family Properties from Adult Children’s Spouses?

In some instances, there is concern that a family vacation home could fall into the hands of an adult child’s spouse in the event of a divorce. Placing the vacation home in a trust is often the most secure way to prevent the home from ever becoming a part of the adult child’s marital estate.

That way, the trust owns the property, not the child, and the grantor of the trust establishes the rules for how the home can be used and distributed. An irrevocable trust provides the strongest protection from creditors, lawsuits, and divorce claims, but only a knowledgeable Wisconsin estate planning lawyer for families living in Illinois can determine the best way to protect a vacation home.     

Contact a Wheaton, IL Estate Planning Lawyer

If you own a family vacation home in Wisconsin but reside in Illinois, it is essential to consult a knowledgeable DuPage County, IL estate planning lawyer with extensive experience in multi-state estate planning. The McCormick Law Firm, LLC offers personalized legal services that combine estate planning and real estate law to create comprehensive solutions. Attorney McCormick offers discounts to military members, veterans, and first responders. Call 630-517-8570 to schedule your free consultation and begin crafting strategies that protect your family’s cherished retreat.