When you draft your last will and testament, you are free to leave your property to almost anyone you choose. However, deciding who gets to inherit from you is also deciding who doesn't get to inherit from you. You can make provisions to disinherit your children if that is your wish. However, Michigan law provides substantial restrictions for attempts to disinherit your spouse.
Now wait a minute, why would anyone want to disinherit their own spouse? Consider some scenarios that do not necessarily involve marital hostility. First, spouses who have been separated for a long time but do not divorce for religious reasons may not be inclined to leave gifts to one another. Second, a testator who remarries for a second time may be inclined to leave assets to the children of his first marriage to avoid the estate eventually going to the stepchildren. Finally, the surviving spouse may simply be considered financially irresponsible to the testator who wishes to preserve a sizable portion of the family fortune for the next generation.
However, Michigan law provides a mechanism for a spouse to take a portion of the estate even against the terms of the will. Known as the right to elective share, the surviving spouse can make one of the following elections regarding the decedent spouse's estate to the probate court:
- Abide by the terms of the last will and testament. MCL 700.2202(2)(a).
- Elective Statutory Share: Take ½ of the sum or share that would have passed to the spouse had the testator died intestate, reduced by ½ of the property derived by the spouse from the decedent by any means other than testate or intestate succession upon the decedent's death. MCL 700.2202(2)(b).
- Dower Rights: Exercise the right to dower (for surviving wife only, not surviving husband) and claim one-third interest in the real property that the decedent husband owned during marriage. (Public Act 489 of 206 abolished this option for decedents that died on or after April 6th, 2017). MCL 700.2202(2)(c).
MCL 700.2102(1) defines the intestate share of a decedent's surviving spouse as one of the following:
- (a) The entire intestate estate if no descendant or parent of the decedent survives the decedent.
- (b) The first $150,000.00 ($229,000.00 in 2018*), plus 1/2 of any balance of the intestate estate, if all of the decedent's surviving descendants are also descendants of the surviving spouse and there is no other descendant of the surviving spouse who survives the decedent.
- (c) The first $150,000.00 ($229,000.00 in 2018*), plus 3/4 of any balance of the intestate estate, if no descendant of the decedent survives the decedent, but a parent of the decedent survives the decedent.
- (d) The first $150,000.00 ($229,000.00 in 2018*), plus 1/2 of any balance of the intestate estate, if all of the decedent's surviving descendants are also descendants of the surviving spouse and the surviving spouse has 1 or more surviving descendants who are not descendants of the decedent.
- (e) The first $150,000.00 ($229,000.00 in 2018*), plus 1/2 of any balance of the intestate estate, if 1 or more, but not all, of the decedent's surviving descendants are not descendants of the surviving spouse.
- (f) The first $100,000.00 ($153,000.00 in 2018*), plus 1/2 of any balance of the intestate estate, if none of the decedent's surviving descendants are descendants of the surviving spouse.
*This amount may be adjusted by the Michigan Department of Treasury pursuant to MCL 700.2102(2).
If choosing the elective statutory share, the reduction by ½ of the value of all property derived by the spouse" by other means includes all of the following transfers:
- "A transfer made within 2 years before the decedent's death to the extent that the transfer is subject to federal gift or estate taxes." MCL 700.2202(7)(a).
- "A transfer made before the date of death subject to a power retained by the decedent that would make the property, or a portion of the property, subject to federal estate tax." MCL 700.2202(7)(b).
- "A transfer effectuated by the decedent's death through joint ownership, tenancy by the entireties, insurance beneficiary, or similar means."
The personal representative must notify the surviving spouse of the right to election within 28 days of his or her appointment. MCL 700.3705(5). The surviving spouse may only select one of the options unless the testator's will clearly provides the surviving spouse can pick more than one choice. The election must be made within 63 days after the presentment of claims or within 63 days after service of the inventory upon the surviving spouse, WHICHEVER IS LATER, but it must be exercised in the surviving spouse's lifetime. MCL 700.2202(3).
If a surviving spouse fails to make an election within the statutory time frame, then it is presumed that said surviving spouse elects to abide by the terms of the will. MCL 700.2203. "Filing of a petition to admit the will of a deceased spouse, failing to object or consenting to admission of the will to probate, or accepting appointment as a personal representative does not prevent a surviving spouse's election to take against the will." MCL 700.2204. The surviving spouse can waive the right to the spousal election in a written contract after fair disclosure (e.g. prenuptial agreement or antenuptial agreement). MCL 700.2205.
EXAMPLE: Mrs. White is the surviving spouse of Mr. White who passed away on January 1st, 2018, leaving an estate worth $500,000.00. Mrs. White and Mr. White were also joint owners of a house worth $200,000.00. Mr. White had created a last will and testament that bequeathed $50,000.00 to Mrs. White but left the remainder of the estate to their son, Budd White. The son petitions the court on February 1st, 2018 to initiate estate administration proceedings, become the decedent's personal representatice, and admit the last will and testament to probate. He serves Mrs. White with a notice of right of election on February 15th, 2018. Budd White files a notice to creditors in the local legal newspaper on February 20th, 2018 which creates a deadline of June 20th, 2018 for presentment of claims. Budd White also serves a copy of the estate inventory on April 1st, 2018. Mrs. White has the following choices:
- Mrs. White can choose to abide by the terms of the will and accept the $50,000.00 bequest. If Mrs. White does not make an election by August 22nd, 2018, it is presumed that she will abide by the terms of the will. Although Budd White served the inventory on Mrs. White on April 1st, 2018 which would create an election deadline 63 days later on June 3rd, 2018, the statute entitles her to the later time period 63 days after the date for presentment of claims on August 22nd, 2018.
- Mrs. White can choose to take her elective statutory share against the will. Since there is a surviving descendant of both the husband and wife, her intestate share of the estate would be the first $229,000.00 plus one-half of the remaining balance of $271,000.00 ($229,000.00 + $135,500.00 = $364,500.00). Mrs. White is entitled to one-half of the intestate share ($182,250.00) reduced by one-half of the non-estate "property derived from the spouse, in this case being the jointly-owned home worth $200,000.00 ($100,000.00). The total elective statutory share is $182,250.00 reduced by $100,000.00, or $82,250.00.
- Mrs. White CANNOT elect the rights to dower since her husband died on January 1st, 2018, well after the effective date of Public Act 489 of 2016. However, since dower rights would only entitle her to 1/3 of the real estate, she would do far worse than if she simply chose the elective statutory share. Dower rights were more valuable in the past when a great deal of wealth was attached to land ownership.
Mrs. White clearly benefits from choosing the elective statutory share over abiding by the terms of the will. In addition, surviving spouses have numerous other rights they may exercise against the estate IN ADDITION to the elective statutory share:
- Homestead Allowance: The surviving spouse is entitled to a homestead allowance of $15,000.00 (adjusted to $23,000.00 in 2018). MCL 700.2402.
- Family Allowance: The surviving spouse is entitled to a reasonable family allowance for his or her maintenance during the administration of the estate. MCL 700.2403. The allowance may be paid in a lump sum or periodic payments. The statute does not specify a maximum dollar amount, but the personal representative may grant up to $18,000.00 (adjusted to $27,000.00 in 2018) paid as a lump sum or periodic payments with additional amounts that may be authorized by the probate court. MCL 700.2405.
- Exempt Property: The surviving spouse is "entitled to household furniture, automobiles, furnishings, appliances, and personal effects from the estate up to a value not to exceed $10,000.00 (adjusted to $15,000.00 in 2018) more than the amount of any security interests to which the property is subject." MCL 700.2404.
For the purposes of elective statutory share, MCL 700.2801 states that a "surviving spouse" does NOT include any of the following:
- (a) An individual who obtains or consents to a final decree or judgment of divorce from the decedent or an annulment of their marriage, which decree or judgment is not recognized as valid in this state, unless they subsequently participate in a marriage ceremony purporting to marry each to the other or live together as a married couple.
- (b) An individual who, following an invalid decree or judgment of divorce or annulment obtained by the decedent, participates in a marriage ceremony with a third individual.
- (c) An individual who was a party to a valid proceeding concluded by an order purporting to terminate all marital property rights.
- (d) An individual who, at the time of the decedent's death, is living in a bigamous relationship with another individual.
- (e) An individual who did any of the following for 1 year or more before the death of the deceased person:
- (i) Was willfully absent from the decedent spouse.
- (ii) Deserted the decedent spouse.
- (iii) Willfully neglected or refused to provide support for the decedent spouse if required to do so by law.
How can a testator avoid his spouse taking the elective statutory share? The primary method this can be accomplished is by creating a revocable or irrevocable inter vivos trust to manage your assets. Michigan appellate courts have continuously held that assets owned by a grantor trust are not subject to spousal election (trust assets generally do not pass through probate). The trust assets will be distributed according to the terms of the trust instrument. Additionally, if there is an estate subject to the spousal election, that amount will be reduced by one-half of the amount distributed to the surviving spouse by the grantor trust (since it is "property derived by the spouse"). Proper planning must be made while the testator is still alive to avoid unintended consequences. It is well worth the time to speak to an experience probate and estate planning attorney to ensure your wishes can be served in your unique life situation.
If you have any questions about elective spousal shares or any other legal matter, do not hesitate to contact the probate lawyers at Kershaw, Vititoe & Jedinak PLC.