The New York case and statutory law impose many lifetime duties on New York State resident spouses; a spouse cannot avoid some of those duties in death. The surviving spouse is entitled to a minimum portion of the deceased spouse’s estate.
The law carefully defines the amount to which the surviving spouse is entitled. The part to pay cannot be avoided by most among the living transfers, but like any right, it can be affected by the words and actions of the claimant. The provisions of Estates, Powers of Attorney and Trusts Act 5-1.1-A (EPTL) affect how the elective share is measured, its character and from what property it will be paid.
A spouse’s elective share is equal to the greater of (1) $50,000 or (2) one-third of net assets. The calculation of a spouse’s elective share is not based on the size of his or her own assets, regardless of the source of those assets.
The elective part is a pecuniary amount, not a fractional part of the inheritance. Thus, the income obtained by the succession prior to its distribution will not be included, nor will the valuation or depreciation of the assets of the succession be taken into account. The computation of the elective participation of the surviving spouse is only part of the process. The part of the testamentary dispositions to which the surviving spouse is entitled is the amount of the elective part of him, reduced by certain interests that pass to him. The amount so reduced is equal to the “net elective share” of the surviving spouse.
A decedent’s estate consists of the property that passes under his or her will, the property that passes by intestacy distribution under EPTL 4-1.1, plus the “probate substitutes” described in EPTL 5-1.1-A(b)(1). A decedent’s net worth is determined by reducing the decedent’s estate for debt, administrative expenses, and reasonable funeral expenses. For purposes of the right of election, the decedent’s estate includes all of the decedent’s assets wherever located. Therefore, the surviving spouse has the right to elect over the decedent’s real and other property located outside of New York State.
All estate taxes must be disregarded when calculating net worth. However, the surviving spouse is not exempt from contributing the amount of such taxes, if any, prorated against him/her under EPTL 2-1.8. Reference to apportionment under EPTL 2-1.8 includes apportionment according to an address in the decedent’s will, which is a method of apportionment permitted by EPTL 2-1.8.
Unless the decedent has stipulated otherwise, no tax will generally be apportioned against the surviving spouse to the extent that the property passed to him or her qualifies for the marital deduction. In most cases, property interests that satisfy elective participation will also be eligible for the marital deduction. Exceptions include property that passes directly to a surviving spouse who is not a US citizen and cash bequests that, pursuant to an instruction in the will, are used to purchase an annuity for the spouse. Even if the spouse’s share is eligible for the marital deduction, an estate tax contribution may be required to the extent the spouse estate taxes they are attributed to transactions prior to death and not to assets included in the gross estate.
Not all obligations are treated as debt for purposes of defining net worth. If they were, an individual could easily defeat his or her spouse’s right of choice simply by executing a contract to bequeath his or her estate to another individual or individuals. New York courts, for example, have held that the obligation in a separation agreement to bequeath a portion of a person’s estate or specific assets to a former spouse is subordinate to the subsequent spouse’s right of choice. The beneficiary of a contract to make a legacy is often viewed by the courts as a legatee rather than a creditor. In contrast, a decedent’s obligation under a separation agreement to make alimony payments after death is treated as an estate-reducing debt that is subject to the right of election. The distinction between the two is tenuous. A debt that becomes due upon the death of a deceased spouse seems to fall somewhere between the two. It is unclear how it will be treated under EPTL 5-1.1-A.