New York case and statutory law impose upon New York State resident spouses many duties during life; a spouse cannot avoid some of those duties in death. The surviving spouse is entitled to a minimum share of the deceased spouse’s estate.
The law carefully defines the amount to which a surviving spouse is entitled. The share to be paid cannot be avoided by most inter vivos transfers, but as with any right, it can be affected by the claimant’s words and actions. The provisions of Estates, Powers, and Trusts Law 5-1.1-A (EPTL) affect the manner in which the elective share is measured, its character, and from what property it shall be paid.
A spouse’s elective share equals the greater of (1) $50,000 or (2) one-third of the net estate. The calculation of a spouse’s elective share is not based upon the size of his or her own assets, regardless of the source of such assets.
The elective share is a pecuniary amount, not a fractional share of the estate. Thus, income earned by the estate prior to its distribution will not be included, nor will the appreciation or depreciation of estate assets be taken into account. The computation of the surviving spouse’s elective share is only part of the process. The share of the testamentary provisions to which the surviving spouse is entitled is his or her elective share amount, reduced by certain interests passing to him or her. The amount as so reduced equals the surviving spouse’s “net elective share”.
A decedent’s estate consists of the property passing under his or her will, property passing by intestate distribution pursuant to EPTL 4-1.1, plus the “testamentary substitutes” described in EPTL 5-1.1-A(b)(1). A decedent’s net estate is determined by reducing the decedent’s estate by debts, administration expenses, and reasonable funeral expenses. For the right of election purposes, the decedent’s estate includes all property of the decedent wherever situated. Thus, the surviving spouse has a right of election against real and other property of the decedent located outside New York State.
All estate taxes are to be disregarded in calculating the net estate. The surviving spouse, however, is not relieved of contributing the amount of such taxes, if any, apportioned against him or her under EPTL 2-1.8. The reference to apportionment under EPTL 2-1.8 includes apportionment pursuant to a direction in the decedent’s will, which is one method of apportionment permitted by EPTL 2-1.8.
Unless the decedent has provided otherwise, generally no taxes would be apportioned against the surviving spouse to the extent that property passing to him or her qualified for the marital deduction. In most cases, property interests that satisfy the elective share also will be eligible for the marital deduction. Exceptions include property passing outright to a surviving spouse who is not a United States citizen and cash bequests that, pursuant to a direction under the will, are used to purchase an annuity for the spouse. Even if the spouse’s share is eligible for the marital deduction, a contribution to the estate’s estate taxes may be required insofar as the estate taxes are attributed to pre-death transactions rather than to property included in the gross estate.
Not all obligations are treated as debts for purposes of defining the net estate. If they were, an individual could easily defeat his or her spouse’s right to the election simply by executing a contract to bequeath his or her estate to some other individual or individuals. New York courts, for example, have held that an obligation contained in a separation agreement to bequeath a portion of an individual’s estate or specific assets to a former spouse is subordinate to a subsequent spouse’s right of election. The beneficiary of a contract to make a bequest often is viewed by the courts as a legatee rather than as a creditor. In contrast, a decedent’s obligation under a separation agreement to make post-death alimony payments is treated as a debt that reduces the estate that is subject to the right of election. The distinction between the two is tenuous. A debt that matures on the death of a decedent spouse seems to fall somewhere between the two. It is unclear how it will be treated under EPTL 5-1.1-A.