By ALAN S. NOVICK
Scripps Howard News Service
17-JUL-06
It is sometimes advantageous for a surviving wife or husband to decline the benefits in the dead spouse's will. Sometimes the survivor feels that he or she has not been left all that is due to her or him and so will waive the gifts under the will and take his or her statutory share.
The statutory share is called the "elective share," and is that portion of a decedent's property that the state legislature has decreed as being available to the surviving spouse regardless of the provisions of the will.
The amount of this share is that amount which is decreed by statute upon the date of death and not the amount that was decreed by statute on the date the will was signed. It is usually a percentage of the estate and varies from state to state. If there was a change in the state law between the time the will was signed and the date of death, it is the date of the new law which counts.
The right to make the election is held by the surviving spouse of the decedent or by a guardian of the property of the surviving spouse.
In other circumstances, a survivor may "disclaim" _ that is give up or forego a bequest or even a statutory share because there will be a better over-all tax result for the entire family. For example, if Mr. Bigbucks leaves Mrs. Bigbucks his entire estate of $10 million, she might "disclaim" $2 million of it so that her children (who are the contingent beneficiaries) get it immediately and without payment of estate taxes. The $2 million goes to the children without any estate tax because this is the amount of the "exemption equivalent" that every taxpayer can transfer free of estate taxes.
If Mrs. Bigbucks had kept the $2 million, it would be included in her estate and taxed at her death. With the disclaimer, the children get it immediately on Mr. B's death, tax free, and get an additional $2 million estate tax free on Mrs. B's death, if the exemption is still $2 million when she dies. This still leaves $6 million taxable on Mrs. B's death.
The rules for making a disclaimer or an election are very specific and must be followed with exactness.
The best plan is one in which neither an election against the will nor a disclaimer is desirable. But circumstances often change between the time a will is signed and the moment of death. Disclaimers and elections are valuable post mortem tax planning devices, but of equal importance is a periodic review of wills, trusts and finances to update all provisions in light of changing federal and state tax laws.
If a testator has no will, then the state's inheritance laws determine the amount that the surviving spouse inherits. These laws are also subject to change. Their provisions are generally not the same as the provisions for taking an elective share. If a person has no will and he or she changes his or her domicile to a state with different inheritance laws, the inheritance laws of the new state are the ones that apply.
(Attorney Alan S. Novick is a wills, trusts and estates lawyer. E-mail estate planning questions to an304@aol.com.)
