By Richard Rooney
Today many people are living longer than ever. At the same time cultural norms seem to have become more accepting of divorce. Consequently, knowing seniors in a second marriage is somewhat commonplace.
Love knows no seasons, and it’s great that people can find love in the later years of their life—but second marriages can lead to legal complications without proper planning. Seniors with second marriages often have children on both sides with a major stake in the old estate plan. Costly probate litigation can result from the conflicts of financial interests if wills or trusts and beneficiary designations haven’t been revised.
The best course of action for any couple, regardless of age, is to update their estate plan when major changes in their life, such as a second marriage, occur. But if that wasn’t done, the widow or widower still has options.
Fortunately, Michigan’s probate code allows for a number of overlapping protections for surviving spouses who are mistakenly left out of an estate plan.
Some of those protections are limited to just the deceased spouse’s probatable assets, meaning only the assets held solely in the deceased spouse’s name at the time he/she passed.
Some of the other protections are able to reach revocable trust assets.
And, in some circumstances the protections are subject to an “offset.” This means amounts the surviving spouse may have received outside of probate–such as a life insurance policy or jointly held property– factor into the final amount the spouse can get from probate assets.
The first major statutory protection for surviving spouses “missed” in a will is the spousal election. Every surviving spouse, unless that spouse has waived the right in writing, has the option to abide by the terms of the will or take an “elective share.” An elective share is half the “intestate share” reduced by half the value of assets the surviving spouse received outside of the probate estate.
The intestate share, which is the amount a spouse would receive if his/her spouse died with no will, can range from the whole probate estate to $145,000 (2014 inflation adjusted numbers) plus half of the remainder of the probate estate, depending upon what other heirs the deceased spouse left.
As a spousal election example, Spouse A dies, leaving a $400,000 probate estate and adult children. New Spouse B was never added to the estate plan or mentioned in the will but did receive $100,000 from a “pay on death” bank account or a “joint” bank account. Spouse B’s intestate share would be $272,500 ($145,000 plus half the remaining $255,000 of the probate estate). That means Spouse B can elect half of that amount ($136,250) reduced by half of the non-probate bank account payout ($50,000). Spouse B is entitled to $86,250 as a spousal elective share. This elective share is available to a widow or a widower.
Take note that a deadline is involved in making the spousal election and the election cannot reach trust assets.
The second protection surviving second spouses may use is the pretermitted spouse provision. The pretermitted spouse provision allows the surviving spouse whose deceased spouse has a will executed prior to the marriage to claim the full intestate share of the probate estate.
Unlike an elective share situation, the estate “pool” is reduced by anything devised to children of the deceased spouse who are not also children of the surviving spouse, whether devised directly or through a trust. Furthermore, if there is evidence that the surviving spouse was provided for outside of probatable assets, the probate court may disallow the provision’s applicability entirely.
A surviving spouse can both make a spousal election and make a claim as a pretermitted spouse. The probate court will grant the greater of the two amounts if the spouse qualifies for both.
The final set of protections for surviving spouses are known as allowances or exemptions and there are three of these. The purpose of these exemptions is to allow the surviving family some financial stability and security during the period of readjustment to losing a family member.
The three exemptions are known as the “Homestead Allowance,” the “Exempt Personal Property,” and the “Family Allowance.”
The homestead allowance, which is $22,000 for 2014, is an amount granted to surviving spouses to insure that they don’t end up out in the cold, so to speak. Despite the name there does not have to be a homestead involved, the amount is just a cash amount to which any surviving spouse is entitled.
The surviving spouse is also entitled to claim up to $14,000 (2014 numbers) worth of personal property of the estate that is “exempt” from other claims. The spouse may claim specific assets and may even claim cash if there is not sufficient personal property to satisfy the exemption amount. All surviving spouses are entitled to this exemption.
The family allowance is another allowance, for the surviving family to help support the possible loss of income for up to a year. The amount allowable, without probate court approval, is $26,000 (2014 numbers). However, this allowance is at the discretion of the personal representative and the surviving spouse would typically have to show a financial need in order to for a family allowance to be granted.
All three of the exemptions and allowances can be taken in addition to any elective share or pretermitted intestate share. The exemptions are taken before other claims and while they do not reduce the elective share directly, they will reduce the size of the estate. Additionally, Michigan’s Estate and Protected Individuals Code (EPIC, also known as the probate code) allows a surviving spouse to draw these claims from non-probate assets including revocable trusts–if the probate estate is not able to fully pay them.
This group of overlapping protections are available to surviving spouses under Michigan’s probate code, but there are important time frames for claiming them. Ideally preventing election situations in the first place with an accurate estate plan is the best approach.
If you find yourself heading into a second marriage later in life, consider revising your estate plans right away—be proactive. But if you have been omitted, and your spouse dies before they ever updated their documents, you may want to consult an attorney for assistance. Bradley A. Vauter and Associates, P.C., deals with probate and estates cases and would be glad to assist you.