Rethinking: “That’s the way we’ve always done it” and a Surviving Spouse’s Elective-Share [Estate Planning]

The provisions in this Will for my husband are in lieu of any statutory share, including, but not limited to, any forced share, minor’s allowance, surviving spouse allowance, year’s support, or otherwise.

The above provision for 40+ years has been included in most Last Wills and Testament. It centers on the law in most states that generally does not allow a spouse to cut the other spouse out as an estate beneficiary. Even if a spouse is purposely left out of a Will, the surviving spouse under most state laws has a right to a portion or all of the deceased spouse’s estate. This surviving spouse right is called, for example, an “elective share” or “widow’s allowance”. Georgia law refers to this surviving spouse right as “year’s support”.  A court generally has to approve the surviving spouse’s request for an elective share, and the request allows the court to consider objections from other estate beneficiaries and creditors.

The above in-lieu-of provision has the effect of forcing a surviving spouse to decide and choose (i) whether to take whatever is provided for him under the deceased spouse’s Will or (ii) to seek a state-law elective share. My point is that this forcing-of-a-choice is no longer a preference in many cases. For reasons I do not cover in this blog post, this forced-choice approach has been used most often to protect against an inadvertent loss of the marital deduction for estate tax purposes. An elective share typically does not qualify for an estate marital deduction.

Practitioners need to rethink whether to include this longstanding forced-choice provision in a Will. Here are the four points to consider:

·       One. For most clients the marital deduction is not a material concern due to the inflation-adjusted $5.43 million estate exemption. And, with good tax counsel a surviving spouse can avoid chilling the marital deduction even without this in-lieu-of provision, if the marital deduction is essential.

·       Two. The elective  share in many cases is an award of property to the surviving spouse that is superior to unsecured creditor estate claims, such as if the first spouse dies with a substantial amount of unpaid bills and credit card debt (including unpaid property taxes in some cases). In other words, the elective share property can pass to the surviving spouse without the property being otherwise used to pay the deceased spouse’s unsecured debts.

·       Three.  This is important.  If for some reason the court does not allow the full amount of the elective share sought by the surviving spouse, without this in-lieu of provision the surviving spouse still retains the fallback of getting property under the provisions of the deceased spouse’s Will. By contrast, the in-lieu-of provision can have the adverse result of a surviving spouse failing to obtain the elective share and, having made the choice, losing his benefits under the Will.   Remember, the in-lieu-of provision mandates a choice.

·       Four. In some situations this elective share approach can help protect against Medicaid estate recovery, again, as property passing to the surviving spouse is generally superior to debts.

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