CSG Law Alert: Can You Disinherit Your Spouse?
In New Jersey and New York, like in most states, a spouse cannot be disinherited unless there is an express waiver through a prenuptial agreement or postnuptial agreement. Absent an express waiver, the surviving spouse may have the right to claim a portion of the decedent’s estate known as the elective share.
Under New Jersey law, a surviving spouse or domestic partner (both are referred to as “spouse” in this article) is entitled to one-third of the decedent’s “augmented estate.” Simplified, the augmented estate is the probate estate, less funeral and administrative expenses and enforceable claims, plus the value of certain lifetime transfers made for less than fair value and non-probate transfers to others, plus the value of lifetime transfers and non-probate transfers to the surviving spouse.
Surviving spouses do not get to pick and choose which assets they will receive from the estate. The elective share is first reduced by the value of the surviving spouse’s own assets and certain lifetime transfers. The amount is then further reduced by the value of any probate and non-probate assets received from the decedent upon death. The outstanding balance of the elective share is satisfied from the remaining augmented estate.
Not all New Jersey spouses may claim an elective share. No election can be made if the decedent and the surviving spouse had been living separate and apart or had ceased to cohabit under circumstances which would have given rise to a cause of action for divorce or nullity of marriage at the time of the decedent’s death. Also, as mentioned above, the right may be waived by agreement.
Under New York law, a surviving spouse’s elective share is the greater of $50,000 or one-third of the decedent’s “net estate,” unless the decedent and the surviving spouse were legally separated or if the surviving spouse had abandoned the decedent at the time of the decedent’s death. Like New Jersey, New Yorkers can waive the elective share right by agreement.
The net estate is calculated by adding the value of (i) certain transfers made by the decedent during the decedent’s lifetime, (ii) the decedent’s jointly owned property, (iii) property over which the decedent had an exercisable general power of appointment, and (iv) the decedent’s probate estate less funeral, administration expenses, and debts.
The surviving spouse’s share of one-third of the net estate is first satisfied by applying property acquired by the surviving spouse as a result of the decedent’s death. This would include assets that pass to the surviving spouse by the decedent’s will, operation of law or contract. The remainder of the elective share is satisfied from the remaining property in the net estate. The value of the surviving spouse’s interest in a trust for purposes of the elective share calculation is zero.
John and Jane were married and cohabitating at John’s death. John does not leave anything to Jane in his Last Will and Testament. John’s will leaves his net probate estate to his disabled brother. Neither John nor Jane have waived their elective share rights.
John’s Probate Estate Less Expenses and Debts
1. Cash and Securities that pass to John’s brother: $5,000,000
John’s Non-Probate Estate
2. Retirement account that named a marital trust for Jane as the beneficiary: $1,000,000
3. John has a general power of appointment over a trust established by his father with a fair market value of $2,000,000
Jointly Owned Assets
4. Marital Home Purchased by John: $1,000,000
5. Cash and Securities: $500,000
Under New Jersey law, the augmented estate would be determined by adding 1, 2 and 4 above ($5,000,000 + $1,000,000 + $1,000,000 = $7,000,000). One third of the augmented estate would be $2,333,333 ($7,000,000/3). Because Jane receives $1 million as a result of John’s death (the marital home), along with the equivalent of $500,000 from the marital trust, and has $500,000 in her sole name for a total of $2 million, the remainder owed toward the elective share (i.e., $333,333) would be paid from the estate’s remaining assets. If Jane died first and disinherited John, the elective share amount would be satisfied from John’s own assets so he would receive nothing from Jane’s estate.
Under New York law, the net estate would be determined by adding 1, 2, 3 and 4 above ($5,000,000 + $1,000,000 + $2,000,000 + $1,000,000 = $9,000,000). One third of the net estate would be $3 million ($9,000,000/3). Because Jane receives $1 million as a result of John’s death (the marital home) and the equivalent of $0 from the marital trust, Jane would receive the remaining $2 million from John’s estate. This means that John’s brother will receive $3 million. If Jane dies first, John would be entitled to about $166,666 ($500,000/3) from Jane’s estate.
As illustrated in the example above, the calculation of the elective share can vary greatly in different states and can be complicated. Additionally, the time in which you may file an elective share claim is limited. The CSG Law Trusts & Estates Group can help you navigate the elective share rules as part of your estate planning or can assist with elective share claims.