Pennsylvania Trusts and Estates Blog

The question of what a surviving spouse inherits from a deceased spouse is a complicated one. The answer is the typical lawyer's response, "It depends." Some scenarios can help to illustrate the issues. To keep the examples simple, I am going to assume that the husband dies before the wife - forgive me, all you husbands out there.

● Joint property. Any asset that is titled to a husband and wife jointly, joint with right of survivorship (JWROS), or as tenants by the entirety, passes to the wife at the moment of husband's death. It does not pass under the will and title vests in the surviving joint owner immediately.

● Beneficiary designations. Life insurance, qualified plans, IRAs, annuities, and other contract rights are paid to the beneficiary that was designated by the owner. For qualified retirement plans (but not IRAs) there are federal requirements that the beneficiary must be the surviving spouse unless the surviving spouse has consented in writing to the designation of another beneficiary.

● Property owned by the deceased husband alone. Any asset that is owned by the husband in his name alone, becomes part of his estate.

● Intestacy. If deceased husband had no will, then his estate passes by intestacy. The portion of the estate wife receives depends on whether or not the deceased husband leaves living issue or living parents. If the deceased husband leaves no living issue (issue are children, grandchildren, etc.) and also no living parent, then the wife receives his whole estate.

If deceased husband leaves no living issue, but leaves a living parent or parents, then the wife gets the first $30,000 plus one-half of the balance of the estate. The parents receive the balance.

If the deceased husband leaves living issue, all of whom are also issue of the wife (in other words, the surviving spouse is the mother by birth or adoption of all of the decedent's children), then the surviving spouse gets $30,000 plus one-half of the balance of the estate.

If there are surviving issue of husband, one or more of whom are not issue of the wife, then the wife receives one-half of the estate and the issue receive the balance.

● If deceased husband left a will, but the will either makes no provision for wife, or very little provision, or if husband has arranged title of assets so that there is no probate estate, the wife is entitled to elect a statutory forced share. (A spouse who for one year or more before the death of the deceased spouse has "willfully neglected or refused to perform the duty to support the other spouse," or who for one year or more has "willfully and maliciously deserted the other spouse" shall have no right of election, or even of receiving an intestate share.)

If wife makes this election, whether the marriage lasted for one day or fifty (50) years, the elective share is one-third (1/3) of: (1) the property that passes under the decedent's will (2) property from which the decedent was entitled to receive the income if that property was transferred by the decedent during the marriage, (3) property transferred by the decedent during life where the decedent could revoke the transfer and get the property back, or could withdraw or invade the principal of the property for the decedent's own benefit (for example, property in a revocable trust), (4) joint property owned with another to the extent the decedent could have conveyed or revoked the joint account, (5) annuity payments to the extent the annuity was purchased during the marriage and the decedent was receiving payments, and (6) gifts made within one year of death to the extent they exceed $3,000 per beneficiary.

The following property interests are not subject to the election: (a) any transfer made with the consent of the surviving spouse, (b) life insurance on the decedent's life, and (3) retirement plans (although many retirement plans other than IRA's must be paid to the surviving spouse unless the surviving spouse consented to a different beneficiary designation).

Note that a spouse cannot take both an intestate share and a statutory forced share. Care must be taken to determine which options are available to the surviving spouse and which option produces the best result.

● If the husband made a will before he married, then the surviving spouse will receive the share of the estate to which she would have been entitled if the husband had died without a will, unless the will gives her a larger share, or unless it appears from the will that it was made in contemplation of the marriage.

● If husband made a will and was later divorced, the law provides that any provision in that will for the benefit of former wife is ineffective. The former wife has no rights in husband's estate, either as a beneficiary or as an executor or administrator. The will is not revoked, it is interpreted as if the ex-wife had predeceased her ex-husband.

All of the scenarios described above state general principles of law in Pennsylvania. Spouses are free to make contracts with each other agreeing to different dispositions. If the spouses made a pre-nuptial agreement or a post-nuptial agreement, the terms of those agreements will prevail.

So you're getting married? Did you invite the IRS to the wedding? On the list of things to do from hiring the hall, choosing the caterer, and mailing the invitations, don't forget a visit to your tax advisor.

The first thing you will learn about is the marriage penalty. The marriage penalty is a holdover from an earlier era when single income families were the norm. Since the tax code was written to tax household income instead of individual income; a married couple, both with similar earnings, pays more tax than the total tax of two single taxpayers with the same incomes as the married couple. This higher tax is what is referred to as the "marriage penalty."

The penalty manifests in two ways: 1) the standard deduction for a married filing jointly return is less than twice the single standard deduction; and 2) the combined income can push the couple higher into the tax brackets. Often the first tax return a couple files after marriage results in a big tax due because of under-withholding or underpayment of estimates. Even if you get married on the last day of the year, for tax purposes you are considered married for the entire year.

The marriage penalty does not apply to all married couples, it depends on the husband's and wife's respective incomes. Tax laws in more recent years have actually eliminated the marriage penalty for tax payers in lower tax brackets. So here's the good news: there's no marriage penalty built into the tax rate schedules in the 10% and 15% tax brackets.

Having decided to combine their lives, newly weds now combine their income. The decision as how to report this combined income on tax returns should be a topic of discussion with the tax advisor. Many credits and deductions are based on the total income reported on the return. When two taxpayers get married, their combined income may now be too high for certain tax credits. For example, a single mom qualifies for the Earned Income Credit. She marries a man making a good salary, and now their combined income on a joint return is too high for the Earned Income Credit.

Worse, the woman has a low amount withheld on her earnings because she expects to get the Earned Income Credit. After the marriage, she finds out the amount withheld is not enough to cover her share of the tax.

A single person can deduct up to $3,000 in excess capital losses against ordinary income, but the amount doesn't double to $6,000 for a married couple - it remains $3,000.

A single person who actively participates in renting out real estate can deduct up to $25,000 of losses against his or her earned income if his or her modified adjusted gross income is $100,000 or less. This deduction is the same for a married couple as it is for a single person.

While filing a joint return results in a lower tax for most couples, they don't have to file joint returns. They can file as "married filing separately." Married filing separately is not like filing two single returns. In our example, the earned income credit can't be claimed at all on a married filing separate return. Some other credits and deductions , such as the Child and Dependent Care deductions, American Opportunity and Lifetime Learning credits, the student loan interest deduction and the up to $25,000 of rental real estate losses are not allowed on a married filing separate return.

On the plus side, newly married couples may have increased limits for tax-deductible IRA contributions. If the couple's income meets certain limits, they could qualify for more of a deduction. In some scenarios, one spouse also may "borrow" from the other's earnings to meet the limits.

Likewise, if a spouse claims medical expenses or other itemized deductions that are limited by their adjusted gross income, filing separately may be the way to go because the single income produces a lower limit. However, if the spouse wants to claim credits or deduct his or her IRA contribution, the couple probably needs to file jointly.

Sometimes only after the wedding, you find our that your spouse has debts, back child support, defaulted student loans, unpaid income taxes, you name it. All of these things can be offset against taxpayer refunds. You might find your tax refunded scooped to pay your spouse's debts. This can be a nasty surprise. There is a procedure, the Injured Spouse Allocation, whereby the debt-free spouse can get his or her share of the refund, but it takes months to actually get the money.

Everyone's situation is different, so it is important to consult with a tax professional before making any important decisions, especially the decision to marry.

In Pennsylvania, you can disinherit your children, but you can't disinherit your spouse. In fact, in all but one of the fifty states, you cannot disinherit a spouse. In Georgia it is permitted.

If you leave a will that makes little or no provision for your surviving spouse, or if you have arranged title of assets so that there is no probate estate, your surviving spouse is entitled to elect a statutory forced share. The spouse is entitled to one-third of various property interests of the decedent.

It is the policy of the law to make sure that a surviving spouse does not become impoverished because of the loss of the support of the deceased spouse as well as to reward the spouse's contribution to the financial success of the marriage. The survivor is entitled to what our legislature has determined to be a "reasonable" share, that is, one-third (1/3).

Whether the marriage lasts for one hour or fifty (50) years, the elective share is and remains one-third (1/3). The share is not limited to property acquired after the marriage, but applies to all of the decedent's property interests including gifts and inheritances.

The share is not paid automatically. There are specific procedural requirements. To claim the share the surviving spouse must "elect" to take the share. The surviving spouse is entitled to this one-third (1/3) even if divorce proceedings are pending, or even if the spouses have been estranged and living apart for years. The spouse has six months from the later of the date of death or the date of probate to make this election. The election is made by filing a claim with the Clerk of the Orphan's Court in the county of the decedent's domicile.

If there is a pre-nuptial agreement or post-nuptial agreement, often the spouses waive the right to make this election. That solves the problem. But many times such an agreement is not a practical solution, or is personally unacceptable to the parties to the marriage.

What are the property interests that a surviving spouse can reach? In general, these are property interests that were either owned by the decedent at death, or were transferred by the decedent during life but from which the decedent had the right to withdraw income or principal.

Let's look specifically at what types of property are subject to the spouse's election:

The following property interests are not subject to the election:

If the surviving spouses makes the election to take the one-third (1/3) share, then he or she gives up any other provisions that were made for him or her. Making the election is considered to be a disclaimer of all benefits passing to the surviving spouse under the will.

In other words, you can't keep what the first spouse gave you and get a one-third (1/3) share. You have a choice: You can keep what you got, or you can give up what you got and elect a one-third (1/3) share.

What do you have to give up if you elect to take one-third? (1) all items passing to the surviving spouse by will or intestacy, (2) any interest as a beneficiary in a trust created by the decedent, (3) proceeds of insurance to the extent premiums were paid by the decedent or his or her employer, (4) annuities, (5) retirement plans, and (6) joint property owned by the decedent and surviving spouse to the extent it is attributable to contributions from the decedent. Any gifts made by the decedent to the surviving spouse during life are an offset against the elective share.

Obviously, this is a complicated analysis. If you are a surviving spouse, determining whether or not you should elect your one-third (1/3) share is a many-faceted decision. You will need competent advice from an attorney if you are faced with this decision. Similarly, for a spouse who is intent on reducing the value of the effective share, there are steps that can be taken such as maximizing the investment of assets in property not subject to election (retirement plans are a good example; insurance is another example).

It is not uncommon for a spouse to be afraid that her surviving spouse will wreak havoc with the intended distribution of assets. For example, what if the deceased spouse was a business owner who intended to pass the business to her children from a prior marriage. This plan could be destroyed if the surviving spouse "elects" to take one-third of the assets, thus defeating the plan. For this reason, it is very important that the estate planner take steps to ensure that the business owner's intentions are carried out.

The elective share is another example of restrictions on the disposition of property imposed by the legislatures. It may give options, or hope, to someone who otherwise is cut off. On the other hand, it may make it impossible to carry out the intentions of a person as expressed in his or her will. If you are involved in a situation where this may be an issue, you need to seek competent professional advice.