Section 854.12. Debt to transferor.

 

(1)   Heir under intestacy.

(a) If an heir owes a debt to the decedent, the amount of the indebtedness shall be offset against the intestate share of the debtor heir.

(b) In contesting an offset under par. (a) , the debtor heir shall have the benefit of any defense that would be available to the debtor heir in a direct proceeding by the personal representative for the recovery of the debt, except that the debtor heir may not defend on the basis that the debt was discharged in bankruptcy or on the basis that the relevant statute of limitations has expired. If the debtor fails to survive the decedent, the court may not include the debt in computing any intestate shares of the debtor's issue.

(2)   Transferee under revocable governing instrument.

(a) Subject to par. (c) , if a transferee under a revocable governing instrument survives the transferor and is indebted to the transferor, the amount of the indebtedness shall be treated as an offset against the property to which the debtor transferee is entitled. If multiple revocable governing instruments transfer property to the debtor, the debt shall be equitably allocated against the various instruments.

(b) Subject to par. (c) , in contesting an offset under par. (a) , the debtor shall have the benefit of any defense that would be available to the transferee in a direct proceeding for the recovery of the debt, except that the transferee may not defend on the basis that the debt was discharged in bankruptcy, unless that discharge occurred before the execution of the governing instrument, or on the basis that the relevant statute of limitations has expired. If the transferee fails to survive the decedent, the debt may not be included in computing the entitlement of alternate beneficiaries.

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

(3)   Property not distributed because of offset. The property not distributed to the debtor becomes part of the residue of the entity that holds the debt. If the debt is not held by an entity, then the property not distributed to the debtor becomes part of the residue of the decedent's probate estate.

2005 a. 216 .