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Annunity trumps marital property agreement, court says

Where an annuity and a marital property agreement conflict on the disposition of the annuity’s proceeds, the terms of the annuity control, the Wisconsin Court of Appeals held on June 14.On April 14, 1997, Ronald and Dianne Jung entered into a marital property agreement. Dianne was Ronald’s second wife, and Ronald had children from a previous marriage. The agreement classified as Ronald’s individual property an annuity with Prudential Insurance Co.However, the annuity listed Ronald as the first annuitant, Dianne as the co-annuitant, and Ronald’s children as the beneficiaries. The annuity provided that, upon Ronald’s death, the co-annuitant would become the owner. On the same date as the marital agreement’s execution, Ronald executed his will, leaving all individual property to his children.Ronald died on April 29, 1997, and the Jung children brought suit, asking the court to transfer Dianne’s interest in the annuity to them. The Racine County Circuit Court, Gerald P. Ptacek presiding, granted summary judgment to Dianne, determining that the terms of the annuity control its disposition. The children appealed, and the Court of Appeals affirmed in a decision by Judge Harry Snyder.The court held that an annuity is included in Sec. 705.20, entitled, “Nonprobate transfers on death.” Although an annuity is not specifically listed in the statute as an instrument creating a nontestamentary transfer of property, the court concluded that it falls within the category of “other written instrument of a similar nature.” The court found annuities to be sufficiently similar to pension plans to be considered a similar investment tool.The court acknowledged that Sec. 705.20(1) specifically mentions marital property agreements as a proper instrument with which to effect a nonprobate transfer of property. Nevertheless, the court concluded that the Jungs’ agreement did not transfer property, but merely classified it.The court further held that the annuity, by listing Dianne as a co-annuitant, created a “joint account” within the meaning of Sec. 705.04(1), and transferred the property to Dianne upon Ronald’s death pursuant to that statute as well. Accordingly, the court affirmed the grant of summary judgment in favor of Dianne.As a result of the decision, attorneys drafting marital property agreements must be particularly careful to make sure that they are knowledgeable of the terms of contractual arrangements included within those agreements. The same is true of wills. In this case, it appears that the intent of the agreement and will was frustrated.It should be noted that the court extensively cited California case law with approval in its opinion. Like Wisconsin, California’s nonprobate transfer statute is identical to Sec. 101 of the Uniform Nonprobate Transfer on Death Act. In a similar case, California held that annuity contracts

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