In today’s society, estate planning is becoming more sophisticated. One aspect of this sophistication involves the manner in which a decedent leaves his assets. An individual may have an interest in a family business that he does not want to pass to his spouse (because the family does not want the spouse to receive such an interest or the spouse wants no involvement in the business), or the decedent may want to leave his entire estate to his children from a prior marriage. Whatever the reason, more and more wills do not leave all of the decedent’s assets to his surviving spouse. As a result, an unsuspecting spouse may be left with little or none of the decedent’s estate.
In such circumstances, Pennsylvania law provides for a spousal elective share. Regardless of what the will says, the spouse is entitled to one-third of the following property: (a) property passing from the decedent by will or intestacy; (b) income from property that the decedent conveyed during the marriage (provided that at the time of death, the decedent had the right to withdraw that income); (c) for the duration of the spouse’s life, use of property that was conveyed during the marriage (provided that at the time of death, the decedent had the use of the property); (d) property conveyed during the marriage to the decedent and one or more individuals with right of survivorship; (e) survivorship rights conveyed to a beneficiary of an annuity to the extent it was purchased by the decedent during the marriage and the decedent was receiving annuity payments from the annuity at the time of his death; and (f) property conveyed by the decedent during the marriage and within one year of his death to the extent that the aggregate amount of the conveyance exceeds $3,000.
A spouse’s elective share will not include any of the following assets (except to the extent that the assets pass as part of the decedent’s estate to his heirs): (a) the proceeds of life insurance policies; (b) employee retirement plans, including IRA’s and 401k plans; (c) property passing by the decedent’s exercise of any power of appointment given by someone other than the decedent; and (d) any transfer of an asset made with the express consent of the surviving spouse.
A surviving spouse who wants to take the elective share must file a written statement in the office of the clerk of the Orphans’ Court in the county where the will was probated. The election must be filed by the later of 6 months after the decedent’s death or 6 months after the will was probated.
As with most decisions made in life, a surviving spouse’s exercise of the elective share has certain consequences. The surviving spouse will have to disclaim the following: (a) property subject to the election but not awarded to the surviving spouse; (b) property passing by the decedent’s exercise/nonexercise of power of appointment; (c) property in any trust created by the decedent during life; (d) proceeds of life insurance on the decedent where the premiums were paid by the decedent or his employer, partner or creditor; (e) annuities purchased by the decedent, or his employer, partner or creditor; (f) employee benefits attributable to services performed or disabilities incurred by the decedent (for example, pensions, stock bonuses or disability benefits); (g) community property to the extent of decedent’s contribution; and (h) property given by the decedent during his life to his spouse (or the proceeds thereof) which the spouse owns at the time of the decedent’s death. If the surviving spouse cannot disclaim any of the property described in this paragraph (because, for example, he has already accepted the property), then he must convey or release any interest in such property to the person who would have received the property if the surviving spouse had disclaimed his interest.
This is a complex area. Call us if we can help.
– Andrew Berenson