ELECTIVE SHARE GUIDE
B. The rule: A surviving spouse has a right to a certain minimum portion of the decedent’s estate, regardless of the decedent’s will. The spouse must elect against the will in order to take that minimum portion. This is generally an either-or choice: Do you want your share under the will, or do you want your “elective share”?
2. The estate
A. The spouse has a right to a certain portion of something. The first question is, what? You must determine what the elective share is calculated against. The answer depends on the statute of your jurisdiction.
i. In some states, the share is calculated against the net probate estate, period. If decedent transferred everything prior to death, leaving the probate estate empty, then the elective share is x% of $0.
ii. In those states, you might want to try to use one of the judicial theories to argue for including assets not in the probate estate. Those theories include
a. Illusory transfer
b. Fraudulent transfer
c. No present donative intent (failed gift).
iii. Other states have statutes that permit consideration of assets not otherwise in the probate estate. Exactly which are available varies widely.
B. The “augmented estate”
i. This is the UPC’s solution. The UPC defines something called “the augmented estate” that includes the net probate estate plus other assets. The elective share is calculated against the augmented estate.
ii. The “nutshell” version of the augmented estate is: Everything he ever owned, plus everything she ever owned, regardless of where it came from or whether it was transferred before decedent’s death.
iii. The list from the UPC is:(edited by me to expand the concepts accurately) follows:
a. Decedent’s net probate estate
b. Decedent’s nonprobate transfers to Others
c. Decedent’s nonprobate transfers to Spouse
d. Spouse’s net assets
e. Spouse’s nonprobate transfers to Others
f. Spouse’s nonprobate transfers to Decedent.
iv. * (Learn this one) Here is an alternate statement of what is included in the augmented estate. This is closer to what the UPC actually says:
a. Decedent’s net probate estate (i.e., total assets at death)
b. Decedent’s nonprobate transfers (whether to Spouse or to Others)
c. Spouse’s net assets (i.e., what would be net probate estate if Spouse were the Decedent)
d. Spouse’s nonprobate transfers (i.e., what would be included if Spouse were the Decedent).
v. If it helps to think of it this way, you could also say that you calculate the Decedent’s “augmented estate” and then calculate the Spouse’s “augmented estate” as if the Spouse were the one who had died and add those together.
vi. The goal is to gather up all the same property whether in connection with the Decedent or the Spouse.
3. Calculating the share
A To determine the elective share, multiply the elective share percentage against the “augmented estate.” The percentage set forth under the UPC 1990 varies depending on how long the spouses were married.
B. Now here is the confusing part:
The Surviving Spouse is “credited” with
(1) any nonprobate transfers from the Decedent to them
(2) marital assets already owned by the Spouse
That is, you must subtract out those items that represent the spouse’s share of the “augmented estate.” The net result is the spouse’s elective share.
C. If it helps you to think of it this way, this is very, very similar to the concept of advancement that we studied during our look at intestacy. The “hotchpot” is equivalent to the “augmented estate” – remember that to get the “hotchpot” we had to add the advancement back in to the probate estate. You then calculate the intestate share against the hotchpot to determine each heir’s portion. Then the heir who already got some of their share by advancement, you subtract out of their share whatever they already received.
D. If you prefer, another way to think about this is to eliminate double counting. This is the “shortcut” method we discussed briefly today. My advice if you prefer this method is list all the assets that would be counted under the UPC, then cross off all duplicates. Calculate the elective share percentage against that total, and you are done. This will produce a more accurate result than trying to leave the spouse’s portion out of the equation entirely.
4. Identifying the assets correctly
A. The hardest part of all of this is determining whether each asset does or does not go into the augmented estate.
B. The descriptions above are overly brief. In real life, you must always review the statute carefully to determine which assets are included. There are three reasons for this.
i. One is that nobody can remember all this accurately every day.
ii. Another is that not every state has the 1990 UPC. It is not yet the law in even a majority of states. The old UPC does things a little differently.
iii. The final reason is that even in states that have adopted the 1990 UPC, there may be variation as to the specifics!! Remember that “uniform” statutes are never truly “uniform!!
C. You do not have to master every particular for purposes of our final exam. Any question about the elective share will involve assets that obviously must or must not be included under whatever statute I provide.
D. That said, you should know to include the general property types we have discussed throughout the course, including:
i. The net probate estate, obviously
ii. Property held in joint tenancy (regardless of who the other joint tenant is)
iii. POD accounts of whatever type (checking, brokerage, etc.)
iv. Insurance proceeds if decedent had power to name beneficiary
v. Assets that decedent placed in trust IF decedent
a. had a right to income OR
b. had a general power of appointment
vi. Any other kind of gratuitous transfer (i.e., a gift – not a bona fide sale) to any other person IF the transfer was made during the two years immediately preceding decedent’s death.
D died leaving a will that left his entire estate in equal shares to his children. The net probate estate has a value of $100,000. D and D’s surviving spouse, S, owned a home in joint tenancy with right of survivorship. The home is valued at $100,000. At death, D was the owner of a life insurance policy that was to pay $100,000 in equal shares to D’s children. At death, D also had a general power of appointment over a trust D established during D’s and S’s marriage. The trust held assets totaling $100,000. Also, D made an outright gift of $100,000 to D’s children one year before death. Calculate S’s elective share under the 1990 UPC. Spouse’s net assets consist of nothing other than the joint tenancy for the home. Spouse made no nonprobate transfers of property at any time. Spouse has no interests in trust, no POD accounts, no powers of appointment, nor any other assets that would have to be included in the augmented estate if Spouse were the decedent. D and S were married 40 years. What is S’s elective share under the 1990 UPC?
AUGMENTED ESTATE INCLUDES:
D’s net probate estate $100,000
D’s share of residence * 50,000
Life insurance proceeds** 100,000
Trust assets** 100,000
Outright gift*** 100,000
Spouse’s net assets (share of house) 50,000
TOTAL AUGMENTED ESTATE $500,000
* Joint tenancy under the UPC passes automatically and surviving spouse owns the same thing, but this is about calculating shares and we treat as one-half.
**Decedent had a general power of appointment in that decedent had power to name a beneficiary.
***Remember to look at when the gift was made. If it was made over 2 years before death, we will not bring the gift back in.
Under the 1990 UPC ‘ 2-202(a), S has a right to 50% of the augmented estate. 50% of $500,000 is $250,000.
S must be credited with assets already owned or received in nonprobate transfers from D. The only thing this includes is S’s share of the home.
Gross Elective Share $250,000
Less credits 50,000
NET ELECTIVE SHARE $200,000
5. Sources from which Elective Share is payable
A. Note that 2-209 is talking about sources to pay the elective share – but the first source is those assets already transferred to the spouse. This is the “credit” that was already demonstrated in the calculation above!
B. Next you turn to the decedent’s probate estate. If that is sufficient to pay the entire elective share, then that’s where you stop. Important: To the extent this reduces the probate estate, gifts under the will might have to abate!!! That is, you pay the elective share, then you adjust gifts under the will according to what we learned before about order of priority and how categories abate to pay higher-priority items.
C. After that you can try to go after the recipients of the nonprobate transfers. Those recipients are personally liable for their pro-rata share of the elective share, but only to the extent they still have the property or its proceeds!!! If the property is already gone, there is not much you can do.
6. This is very important. Time limit is 9 months after date of death or 6 months after start of probate, whichever is later, unless you get an extension. Regardless of the “start of probate deadline,” if you file longer than 9 months after the date of death, you cannot include the nonprobate transfers unless you get an extension.
7. Exceptions: In some statutory schemes, the spouse can take the share provided under the will AND sufficient other assets to equal the elective share. Thus, if the will leaves something specific, like the family home, the spouse MIGHT be able to take that first, and then “fill in” with other assets. Otherwise, the spouse has to relinquish the specific gift and take pro-rata value of all the assets. Depending on the circumstances, this might require sale of the family home, as just one example.
There are some exceptions, which are described in this guide under Section 7.
I have edited this to expand the concepts accurately. This is NOT exactly what the code says, but it is what it means!
This is somewhat overly simplified, but sufficient for our purposes in this class.
Note that the transfers described in i. through v. do NOT have to fall within this time frame. This is ONLY for any other transfer not already gathered up.