Elective Shares Flashcards
What is the surviving spouse’s elective share?
$50,000 or 1/3 of the estate, whichever is greater.
How is the elective share amount calculated and payed?
In theory, the elective share is only applied to the testator’s net probate estate (the value of the estate after payment of debts, but before payment of estate taxes). If the elective share amount is not satisfied for the surviving spouse - others contribute proportionally or pro rata.
What are testamentary substitutes?
To prevent a testator from defeating the elective share statute, the elective share includes the probate estate AND testamentary substitutes (collectively known as the augmented estate or the “elective share estate).
What are considered testamentary substitutes?
Remember: Testimentary Substitutes need a LEG UP.
Totten Trusts: include bank accounts in the testator’s name in trust for another, and payable on death securities.
Survivorship Estates: including joint tenancies, tenancies by the entirety, joint bank accounts, and survivor bank accounts. (WATCH OUT for pre- and post- marriage scenarios).
Lifetime transfers with strings attached:
i. transfers where testator retains the power to revoke, invade, consume, or dispose of the principal, or name new beneficiaries; AND
ii. transfers (irrevocable) made during the marriage, where the testator retained a life estate.
Employee pension, profit sharing, and deferred compensation plans: note if it is called a “qualified plan” - only 1/2 is a T-sub regardless of beneficiary.
Gifts made within one year of death:
i. Gifts in excess of $14,000 (the annual gift tax exclusion); AND
ii. “Gifts causa mortis”: Gifts made in fear of impending death (regardless of the amount of the gift).
U.S. Government bonds or other POD (“pay on death”) arrangements
Powers of appointments: property over which the testator held a presently exerciseable general power of appointment.
Generally, if the testator has an interest in that property, it’s a T-sub - the exception is gifts. Thus almost all non-probate transfers are testamentary substitutes.
What are not testamentary substitutes?
Remember LOGPIT
Life Insurance: whether payable to the surviving spouse or a third party.
One half (1/2) of a qualifed pension and profit sharing benefits
Gifts of less than $14,000 made within one year of death
Pre-marriage irrevocable transfers (e.g. a gift to a friend prior to marriage)
Irrevocable transfers made more than one year before death: these are transfers where the testator did not retain the power to revoke, invade, consume or dispose of the principal, or name new beneficiaries.
Transfers (irrevocable) made during the marriage: where the testator retains a life estate.
Generally, if the testator does not have an interest, then its not a t-sub. Major exception - life insurance.
How do you calculate the elective share estate?
Generally the full value of the T-sub is included except:
a. Survivorship estates involving the testator and third party: consideration furnished test applies - surviving spouse has burden to prove the amount of the decedent’s spouses contribution to the asset.
b. Survivorship estates involving the testator and the surviving spouse: 1/2 is a T-sub.
c. Survivorship estates created before marriage involving the testator and third party: the consideration furnished test applies, but only 1/2 of the property’s value is a T-sub, because pre-marriage gifts are not T-subs.
What is the elective share quick formula? How do you determine whether the surving spouse’s elective share is satisfied?
Elective share estate:
Net probate estate/intestate estate
+ T-Subs (full value)
+ T-Subs with surviving spouse (1/2 in)
+ T-Subs with third party (consideration furnished)
1/3 of elective share estate = elective share amount.
Net Elective Share:
Elective share amount
- Amount surviving spouse recieves under Will or via intestacy
- T-Subs with surviving spouse (1/2 out)
REMEMBER: if the surviving spouse is not fully “satisfied,” all other beneficiaries contribute pro rata. Also, watch out for “elective share trusts.”
What is the effect of an elective share trust on the elective share?
You read the trust as though the surviving spouse predeceased the testator, as though there is no life estate in the surving spouse, and accelerate to the remainder (i.e. kill the trust).
Does a spouse of a decedent not domiciled in NY at the time of his or her death have the right of election?
No.
What is exempt property?
Items which the surviving spouse gets first/ off the top, before distributing or doing anything else. In addition to the elective share, the surviving spouse is entitled to exempt personal property up to $92,500 in value, including:
a. one car;
b. furniture, appliances, electronics, etc.
c. cash allowances;
d. animals, farm machinery, tractors, etc.
e. Books, DVDs, CDs, software, etc.
What are the circumstances that disqualify spouse from taking elective share?
DISMAL - same as intestacy
Divorce
Invalid divorce/annulment
Separation Decree
Marriage is void
Abandonment
Lack of Support
