Introduction to Estate Planning in a Nutshell by Robert J. Lynn & Robert Lynn

Author:Robert J. Lynn & Robert Lynn
Language: eng
Format: epub
ISBN: 9781642425987
Publisher: West Academic
Published: 2019-07-27T16:00:00+00:00

In many states a decedent’s surviving spouse is entitled by law to an elective share of the decedent’s estate, and the surviving spouse cannot be deprived of his or her elective share by the decedent’s will. A surviving spouse who is dissatisfied with the provision, if any, made for him or her in the decedent’s will might elect under statute to “take against the will” of the decedent and thereby acquire an elective share in the estate.

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Suppose that A, while married to B, transfers property irrevocably in trust to pay the net income to A for life, and on A’s death to distribute the trust corpus to C. A dies survived by B and C, and leaves a will that makes no provision for B. The corpus of the irrevocable trust is not a part of A’s estate for probate purposes, nor in many states is it viewed as a part of A’s estate for purposes of determining B’s elective share if B elects under statute to take against A’s will. (The corpus is includible in A’s “gross estate” for federal estate tax purposes, however, under § 2036 of the Internal Revenue Code.)

Suppose that A, instead of creating an irrevocable trust as described in the preceding paragraph, creates a revocable trust with beneficial interests identical to those just described. A dies survived by B and C, and leaves a will that makes no provision for B. The corpus of the revocable trust is not a part of A’s estate for probate purposes. (The corpus is includible in A’s gross estate for federal estate tax purposes, however, under §§ 2036 and 2038 of the Internal Revenue Code.) Whether the trust corpus is viewed as a part of A’s estate, if B elects to take against A’s will, turns on state law. In most states, by statute or judicial decision, the revocable trust is likely to be viewed as a will substitute for purposes of determining B’s elective share, with the result that B may be able to reach all or a portion of the trust property to satisfy her elective share. (This is also the result under § 2–205 of the Uniform Probate Code.) In a few states, however, the revocable trust is not viewed as a will substitute for purposes of the elective share statute. In such states, the revocable trust may 203

be used to insulate property from the claims of a surviving spouse who might be dissatisfied with the provisions of the decedent’s will.

Even if the law of the settlor’s state of domicile treats the revocable trust as testamentary for purposes of the elective share statute, the settlor might attempt to insulate property from a potential claim under the elective share statute by creating a revocable trust in another state where the revocable trust is not so treated, fixing the administration of the trust in that other state and making that other state the situs of the trust. However, in this connection it bears emphasis that the courts of

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