In nearly every U.S. state, property rights — including estate rights — apply to spouses, whether the marriage is a first or subsequent marriage. Although the laws are complex and can vary dramatically from state to state, you should at least review your estate plan if you've remarried to help ensure your assets will go where you intend. Here's an overview of how states regard estate plan provisions — and what you can control.
Spousal property rights are creatures of state law, so it's critical to familiarize yourself with the laws in your state to achieve your planning objectives. Most 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. The remaining states (except Georgia) are community property states.
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 nonprobate assets, such as: revocable trusts; life insurance policies; retirement accounts that pass according to a beneficiary designation or transfer-on-death designation; jointly owned assets that pass automatically to a joint owner; and lifetime gifts made during a specified "lookback" period prior to death.
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. Or perhaps the bulk of your wealth is tied up in a family business that you want to keep in the family.
Strategies for minimizing 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.
Another option may be to transfer assets to a revocable trust. In most (but not all) probate-only states, transferring assets to a revocable trust is sufficient to shield them from your spouse's elective share. In augmented estate jurisdictions, the elective share generally applies to revocable trusts. However, the laws of some states provide that the augmented estate only includes assets transferred to a revocable trust during marriage. In that case, it may be possible to protect assets from the elective share by transferring them to a revocable trust before remarrying.
Other strategies that might be available:
Community property states take a different approach to protecting a surviving spouse's interests. Rather than provide the spouse with an elective share of the deceased spouse's assets, community property laws generally give each spouse an undivided one-half interest in all money earned and property acquired during marriage, regardless of how it's titled. Certain exceptions exist.
In other words, there's no need to give a surviving spouse the ability to override the terms of the deceased spouse's estate plan because the deceased spouse lacks the power to dispose of the surviving spouse's half of the community property. But as in elective share states, there may be strategies to limit the surviving spouse's rights to marital property. For example, the surviving spouse can waive his or her rights to them in a prenuptial or postnuptial agreement.
Remarriage generally requires you to review most of your financial arrangements — and this includes your estate plan. Work with a professional advisor to evaluate the impact of state laws on your plan and to potentially establish a trust or use other strategies to help ensure your wishes will be carried out. Be sure to review your estate plan if you move to another state.
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