854.05 No exoneration of encumbered property.

(1) Definitions. In this section:

(a) “Debt" includes accrued interest on the debt.

(b) “Encumbrance" includes mortgages, liens, pledges and other security agreements that are encumbrances on property.

(2) Generally.

(a) Except as provided in sub. (5), all property that is specifically transferred by a governing instrument shall be assigned to the transferee without exoneration of a debt that is secured by an encumbrance on the property.

(b) If the debt that is secured by the encumbrance on the property is paid in whole or in part out of other assets, the specifically transferred property shall be assigned to the transferee only if any of the following applies:

1. The transferee contributes to the person or entity that held the assets that were used to pay the debt an amount equal to the amount that was paid.

2. The person or entity secures the amount described in subd. 1. through a new encumbrance on the property.

(3) Joint tenancy; survivorship marital property. Except as provided in sub. (5), if all or part of a debt that is secured by an encumbrance on property in which the decedent at the time of death had an interest as a joint tenant or as a holder of survivorship marital property is paid out of other assets as the result of a claim being allowed, the person or entity that makes the payment is subrogated to all rights that the claimant had against the property.

(4) Insurance. Except as provided in sub. (5), if all or part of a debt that is secured by an encumbrance on the proceeds payable under a life insurance policy in which the decedent was the named insured is paid out of other assets as the result of a claim being allowed, the person or entity that makes the payment is subrogated to all rights that the claimant had against the proceeds.

(5) Contrary intent.

(a) If the person who executed the governing instrument had an intent contrary to any provision in this section, then that provision is not applicable to the transfer. Extrinsic evidence may be used to construe the intent.

(b) A general directive to pay debts does not give rise to a presumption of exoneration.

History: 1997 a. 188; 2005 a. 216.