Sentimental Assets

What You Should Know About Spousal Inheritance Rights

Estate planning can be tricky, especially when you’re getting remarried. You may want to limit your partner’s rights to assets, especially when it comes to providing for others. This can include children from a previous spouse. In many states, property laws can apply, regardless of the terms of the estate plan. These are the same no matter how many times you have been married. Here’s how you can prepare your assets and plan for your future with your new spouse. .

Defining A Spouse’s “Elective Share”
Spousal property rights originate from state law, so it’s critical to familiarize yourself with the laws in your state to achieve your planning objectives. Most, but not all, states provide a surviving spouse with an ’elective share‘ of the deceased spouse’s estate, regardless of the terms of his or her will or certain other documents.

Generally, a surviving spouse’s elective share ranges from 30% to 50%, though some states start lower and provide for progressively larger shares as the duration of the marriage increases. Perhaps the most significant variable, with respect to planning, is the definition of assets subject to the surviving spouse’s elective share rights.

In some states, the elective share applies only to the “probate estate” — generally, assets held in the deceased spouse’s name alone that don’t have a beneficiary designation. In other states, it applies to the “augmented estate,” which is the probate estate plus certain non-probate assets. These assets may include revocable trusts, life insurance policies, and retirement or financial accounts that pass according to a beneficiary designation or transfer-on-death designation.

By developing an understanding of how elective share laws apply in your state, you can identify potential strategies for bypassing them.

Using Planning Strategies
Elective shares are designed to protect surviving spouses from being disinherited. But there may be good reasons for limiting the amount of property that goes to your spouse when you die. For one thing, your spouse may possess substantial wealth in his or her own name. And you may want most of your estate to go to your children from a previous marriage.

Strategies for reducing the impact of your spouse’s elective share on your estate plan include making lifetime gifts. By transferring property to your children or other loved ones during your lifetime (either outright or through an irrevocable trust), you remove those assets from your probate estate and place them beyond the reach of your surviving spouse’s elective share. If your state uses an augmented estate to determine a spouse’s elective share, lifetime gifts will be protected so long as they’re made before the lookback period or, if permitted, your spouse waives the lookback period.

Seeking Professional Help
Elective share laws are complex and can vary dramatically from state to state. If you’re remarrying, we can help you on evaluate their impact your estate plan and explore strategies for protecting your assets.

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