We have talked a bit lately about how estate planning cannot meet a one-size-fits-all approach. While this is primarily due to the differing situations and desires of each individual, it also has to do with the significant variations in state law.
For instance, there are many situations in which disinheriting one’s spouse may actually be appropriate. While this concept challenges our basic notions of marital responsibility, this is yet another area where the individual situation should dictate the solution. The spouse may be independently wealthy. The decedent’s children may have greater needs. There could be a blended family situation.
But most states have laws in support of the belief that no spouse should be disinherited without consent. Whether this is right or wrong, people can easily have their wills undone by “community property” or “elective share” laws.
Before delving further into this topic, let’s clarify some terms.
“Community Property” laws require the surviving spouse to take half of all property obtained in the marriage, regardless of what is stated in the will.
“Elective Share” laws enable the surviving spouse to supersede the will and opt for a stated percentage of the deceased spouse’s estate. A survivor who does not make this election within a certain period of time is presumed to have consented to the deceased spouse’s will.
“Non-Probate Property” includes assets that pass to your beneficiaries automatically and outside of the directions contained in your will. These include assets passing by contract (such as a life insurance policy or a retirement plan), by trust, or by law (such as jointly-held property). These categories are further discussed in this post.
“Probate Property” is any property that does not automatically pass to beneficiaries and instead passes by will.
Summary of Differing State Laws
Nine states automatically apply community property laws to married couples, while Alaska allows spouses to create such an arrangement in writing.
Georgia has neither community property nor elective share laws, so it is the only state that allows spouses to disinherit one another.
The remaining 40 states (including Alaska) and the District of Columbia enable the survivor to opt against the will and instead take a percentage of the estate. However, these states differ on what assets are included in the “estate”. States use one of three main approaches, which we cover below.
NOTE: I have intentionally oversimplified and condensed each of these states’ approaches in the interest of space and clarity.
Probate Property States
In these states, including Maryland, the decedent’s surviving spouse is entitled to take a percentage of decedent spouse’s probate estate only. Non-probate property (including shares of joint property and life insurance) and the survivor’s estate are not taken into account at all. Approximately 20 other states and DC use a similar calculation.
Augmented Estate States
These states closely follow the 1990 version of the Uniform Probate Code’s (UPC) definition of the “augmented estate”. This definition includes all of the decedent’s probate and non-probate property, but also all of the survivor’s estate as well. Many favor this approach because it becomes much harder for a wealthy spouse to disinherit the decedent’s less fortunate beneficiaries. About 10 states use this approach.
Probate + Non-Probate Property States
In these states, including Virginia and Pennsylvania, the decedent’s estate includes both probate property and some non-probate property (as in Pennsylvania) or all non-probate property (as in Virginia). Approximately 10 states overall apply these rules this calculation.
With so much emphasis in the news on federal estate and gift tax developments, it is very easy to gloss over or even ignore state estate law. As in our earlier discussion of per stirpes vs. per capita estate distributions, spousal disinheritance is another area of law where the states apply several different approaches to answering the same questions.
Some retirees will even go to the extent of choosing their state of residence based on estate distribution laws. But even if you do not have that ability, you most certainly should make state law a significant consideration when developing your estate plan.
- Can You Disinherit Your Spouse? (wills.about.com)
- Should You Disinherit Your Husband? (blogs.forbes.com)
- Spousal Disinheritance (epilawg.com)