Surviving Spouse's Elective Share

Protects Spouse against Disinheritance

The elective share protects a spouse from disinheritance.

Example(s): Hal dies and leaves his wife, Jane, $500 in his will. Hal's total estate is worth $100,000. The state in which Hal and Jane lived provides that a spouse is entitled to one-half of the decedent's estate. Jane elects to take against the will and receives $50,000.

Tip: The elective share is only one of a variety of rights protecting a surviving spouse. Other rights include community property laws, federal laws relating to certain retirement plans and benefits, and, for those without an estate plan, laws relating to descent and distribution (intestacy laws).

Reduces Taxes

An elective share is a post-mortem election that allows your surviving spouse to redistribute your estate after your death (other than as you have indicated by will) and possibly reduce estate or income taxes. It gives a surviving spouse a second look at the deceased spouse's estate plan, and allows him or her the opportunity to evaluate the suitability of the plan under current circumstances.

Tip: A marital agreement can be used to limit the surviving spouse's ability to elect against the decedent's will or to limit the time during which the surviving spouse may make such an election. However, in some states, a marital agreement waiving the surviving spouse's right to elect against the will may not be enforceable. All states limit the amount of time that the surviving spouse has to make an election against the will regardless of the presence or absence of marital agreement.

Caution: The receipt or waiver of the elective share may make an institutionalized spouse ineligible for Medicaid.

How Much of The Estate Does The Elective Share Comprise?

Determined By State Law

The elective share is determined under state law and varies from state to state, but some general rules apply.

Separate Property States

Separate property states generally treat marital property (property acquired during the marriage or as defined by state statute) which is owned jointly (or purchased with joint funds) as owned one-half by each spouse. Thus, only one-half of the value of such property is includable in the deceased spouse's estate. Property purchased with one spouse's separate funds is generally treated as owned wholly by that spouse and its entire value would therefore be includable in the purchasing spouse's estate. Property acquired before marriage may be treated as marital property in some states absent a specific agreement to the contrary. Most separate property states provide the surviving spouse with an elective share since the deceased spouse could otherwise effectively disinherit the surviving spouse.

Many separate property states grant the surviving spouse the right to one-third of the deceased spouse's estate, while some allow the surviving spouse to claim as much as one-half of the estate (the term estate is defined differently in different states). In some states, the elective share is limited to a life estate or to a lifetime right to income from a specified portion of the estate. In other states, the elective share applies only to the portion of the estate that is subject to probate.

Additionally, some states have adopted a scaled right of election in which the percentage the spouse is allowed to claim depends on the length of the marriage. Many states have adopted the scale as presented in Uniform Probate Code (UPC). Under the UPC, the spousal elective share increases with each year of marriage up to a maximum of 50 percent. Other states provide a fixed percentage share--usually one-third or one-half of the estate.

Community Property States

The elective share means something quite different in community property states because those states treat marital property as owned one-half by each spouse. In community property states, neither spouse has the right to dispose of the entire community interest (only his or her share of it) so a spouse cannot disinherit a surviving spouse by will. When a decedent wills community property, he or she is willing only his or her interest in the property, not the surviving spouse's interest in such property.

In community property states, the terms "widow's election" or "forced election" may refer to a plan under which the surviving spouse is forced to make a choice between receiving an interest in the decedent's share of community property on the condition that the surviving spouse disposes of his or her share of the community property in a specified way or keeping his or her share of the community property and receiving no part or interest of the deceased spouse's share or the income it produces (hence the term "forced election").

Example(s): A husband leaves his share of community property in trust for the benefit of his wife for the rest of her life with the remainder to be distributed to their children upon her death. However, to get the lifetime benefit from the trust, the husband's will requires the wife to leave her share of the community property to the trust. If the wife elects to keep her share of the community property, she will receive no benefit from the trust after her husband's death. If the wife elects to contribute her share of the community property to the trust, she will receive benefits from the husband's share of the property during her lifetime but she may also be treated as having made a taxable gift to the trust.

How Is The Election Made?

In separate property states, in order to claim the right of election, the surviving spouse must initiate legal proceedings. Typically, the election is made in writing (or by petition), which is filed with the probate court and served on the executor. The local probate court will then order the beneficiaries, and/or the executor for the estate, to contribute a pro rata share of the estate's assets to satisfy the surviving spouse's elective share.

What Are The Tax Consequences?

Separate Property States

In separate property states, amounts received by the surviving spouse pursuant to a spousal election, qualify for the unlimited marital deduction and may reduce estate taxes owed on the decedent's estate.

Community Property States

In community property states, there is no effect on the amount includable in the decedent's taxable estate; only the decedent's share of community property is includable, whether or not the surviving spouse takes under the will or under state law. However, if a surviving spouse in a community property state makes a widow's election by contributing his or her share of community property to a trust created by the deceased spouse, he or she may be treated as having made a taxable gift of that property to the beneficiaries of the trust.

This material was prepared by Broadridge Investor Communication Solutions, Inc., and does not necessarily represent the views of The Retirement Group or FSC Financial Corp. This information should not be construed as investment advice. Neither the named Representatives nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information or call 800-900-5867.

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