Today’s topic has caused many a “successor trustee in Florida” some serious concerns and loss of sleep during the Florida trust administration process. Most people aren’t aware of the concept of a “spousal elective share” and how the spousal elective share could derail your estate plan.
The elective share concept applies only in certain jurisdictions, such as Florida, so it is important to check your state’s laws on this issue. The elective share statute in Florida basically allows a surviving spouse to claim an “elective” portion of the estate rather than accept what is provided in a Florida last will or a Florida revocable living trust. In community property states such as California or Wisconsin, the surviving spouse generally has no right to an elective share because he or she already owns 1/2 of the community property assets.
So, the question is how this “election” by a surviving spouse can thwart an otherwise well prepared estate plan?
Elective Share Concerns and Multiple Marriages
Elective share issues are heightened where there have been multiple marriages and there are children from previous marriages.
The entire estate plan as specified in the revocable living trust may be interrupted by the spousal elective share. A surviving spouse can basically set aside the revocable living trust plan and take roughly 30% of the “elective estate” regardless of what the trust specifies.
The goal for any estate plan, as described in a revocable living trust, is provide for one’s spouse and also protect the estate for one’s children or other heirs. This spousal right is available regardless of who the Trustee is and regardless of what the trust says. This reality is especially common and most damaging in cases where the spouse was from a second (or third) marriage and the deceased spouse had children from previous marriages. I say “damaging” because a surviving spouse could claim the 30% elective share in order to preserve that portion of the estate for his or her own children from a previous (or later) marriage.
Elective Share Trust To Protect Your Estate Plan
An “elective share trust is an option to address the spousal elective share rights if this provisions is properly included in trust in advance. Setting up an elective share trust is essentially planning in advance for a possible future claim of the elective share by a spouse.
The elective share trust that can be included within (either directly or as a contingency) in a joint revocable living trust and requires that if my spouse makes an elective share claim, that portion of the estate shall be placed in an elective share trust. The advantage of this strategy, as opposed to an outright distribution of the elective share, is that the “electing spouse’ would retain an open right to utilize these assets and yet they could be distributed to the deceased spouse’s children upon the electing spouse’s death.
For all of the above reasons, people sometimes choose estate planning as a non-traditional couple verses traditional marriage.
Prenuptial Agreement to Protect Your Estate Plan
A waiver of elective share rights that is obtained in advance as part of a prenuptial agreement in Florida (or a postnuptial agreement) in Florida is another great way to protect the estate from derailment. In fact, the most direct and powerful way to address a possible elective share claim in advance is to obtain what is called a “waiver of elective share” in an enforceable Florida prenup or Florida postnup.
For those of you in marital bliss without knowledge of such matters, a pre nup is entered into before the marriage and a post nup is entered into after the marriage. You need to know that these documents can be difficult to enforce and thus should be professionally prepared by an expert attorney. Full disclosure of assets and proper execution is essential. If all the elements are met, this can be an effective strategy to waive elective share rights as well as other spousal rights (i.e. homestead waiver).
As always, the above strategies should be considered based upon your specific circumstances under the watchful eye of your trusted Florida estate planning attorney.
Steve Gibbs, Esq.