Divorce Meets Estate Planning – What is an Elective Share and What Does it Mean to Waive it in a Settlement?

201401.16
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Once you have negotiated a settlement in your divorce case, the next step is to put it all together into a formal settlement agreement that each side signs. Typically these agreements (often referred to as PSAs or MSAs for Property Settlement Agreement or Marital Settlement Agreement) contain a fair amount of ‘boilerplate’ language. One standard provision that many lawyers put into PSAs is a provision where each party agrees to waive any interest they might have in the “augmented estate” of the other or waive any right to “an elective share.”

As I read carefully through the agreement with clients prior to signing (which you should always do with your lawyer, by the way) and discuss their questions, many clients will ask what these things are. The answer to that question first requires a little background.

In law school, I had a trusts and estates professor who told us that “the one person you can’t truly disown is your spouse.” Turns out, he was absolutely right.

Virginia Code § 64.2-302 describes when and how a spouse may claim an “elective share” in the estate of the other spouse. Specifically, this code section states:

A.     A surviving spouse may claim an elective share regardless of whether (i) any provision for the surviving spouse is made in the decedent’s will or (ii) the decedent dies intestate.

In other words, regardless of whatever the will of the deceased spouse says, the surviving spouse can claim the elective share (even if the will in question doesn’t leave the surviving spouse anything). So what exactly is an elective share, you ask? Virginia Code § 64.2-304 answers that question for us, and states as follows:

If a claim for an elective share is made, the surviving spouse is entitled to (i) one-third of the decedent’s augmented estate if the decedent left surviving children or their descendants or (ii) one-half of the decedent’s augmented estate if the decedent left no surviving children or their descendants.

The “augmented estate” is simply the actual “probate” estate that is transferred upon the death of the deceased, but may also be “augmented” by including other property that was not included in the probate estate or property that was gifted to others during the time that the spouse was alive.

Now that we know what these terms mean, why are we dealing with them in a settlement agreement as part of a divorce?

The simple answer is that there may be some period of time between the date that you sign the settlement agreement and the date that you are actually divorced (i.e. the date the judge signs your divorce order). For many, this period of time can be as little as a few weeks or months, but for others it can be even longer.

As a result, it is still possible for the elective share and augmented estate concepts to apply – because even though you are in the process of getting divorced, you are not actually divorced yet. As a result, this waiver language works to prevent the other from taking advantage of the provisions of the law that allow for a spouse to take advantage of the provisions of the law allowing for an elective share.