NO BETTER VIEW: Elective share needs reformed

By Julia Belian Consider two theories: Despite marriage, spouses remain, fundamentally, separate individuals, and each spouse has an absolute right to dispose of property titled in his or her name however he or she wishes. Or, in the alternative: Marriage is an economic partnership, and both spouses have rights in property accrued during the marriage, regardless of in whose name such property is titled. If you have ever been divorced, or known anyone who has, you no doubt recognize the second statement as the presumption that governs divisions of property upon divorce. Divorce courts will divide ownership of property accrued during the marriage equitably between the two spouses, even if all such property is titled in the name of only one. If you have not yet died, however, you may not yet realize that ending a marriage in death triggers very different rules. If you die without a will, your surviving spouse has a right, under the rules of intestate succession, to at least some of the property in your estate. States vary regarding how much will pass to your surviving spouse, but only Georgia fails to provide for a surviving spouse to gain at least a life estate in the decedent's property. Most states, including Michigan, provide that the survivor has a right to either a fraction of the decedent's estate (ranging from one-fourth to one-half, depending on how many children each spouse parented with the survivor or otherwise), a stated amount, or some combination of the two. For example, in Michigan, a surviving spouse of an intestate decedent will receive at least $100,000 (adjusted for inflation) "off the top" of the decedent's estate, plus a fraction ranging from one-half to three-quarters of the rest. What if you don't like that outcome? Will the law permit you to execute a will that deliberately and intentionally leaves your spouse nothing? Generally, no, but a spouse's right to receive property not devised under the decedent's will varies much more widely from state to state than does the right to property under intestacy. As American society evolved over the latter half of the 20th Century, the understanding of marital property rights evolved from the idea that spouses have only a right of continued support (i.e., alimony), to the idea that marriage is an economic partnership conferring rights in the property itself, which must be equitably divided when the marriage ends. As these ideas evolved, the spouse's rights to "elect" against the will also evolved, moving from dower (which is founded on the idea of providing a source of income for support) to full property rights in a portion of the decedent's probate estate. Probate, however, is no longer the only (or even primary) way to transfer property at death. Bank accounts, brokerage accounts, retirement plans, trust assets, and insurance proceeds are just some of the non-probate methods by which wealth can be held during life and transferred at death. Such non-probate assets pass entirely outside of probate. Most states have responded by developing statutes to deal with the reality that the probate estate may not hold the bulk of a decedent's wealth. The Uniform Probate Code has led the charge in this regard, devising a complex arithmetic for "augmenting" the estate by taking into account all property over which either spouse has control (or had control shortly before death) and calculating the spouse's elective share against this more expansive collection of assets. The most recent revision of the UPC also takes into account the length of the marriage. But the Uniform Probate Code is not the law of any state unless that state enacts it. Michigan has largely done so, tracking the most recent version of the UPC in most of its crucial features, with one glaring exception: the spousal elective share. Proponents of Michigan's sweeping probate reform, enacted in 1998 as the Estates and Protected Individuals Code, very consciously and deliberately "deferred" any reform of the elective share (see Robin D. Ferriby, "The Estate Settlement Act -- A Probate Code for the 21st Century," 75 Mich. B.J. 1302). To date, the Legislature has failed to reconsider the topic, allowing "deferral" to turn into outright disregard and neglect. As a result, Michigan today has one of the least protective elective share provisions in the country. In any given estate, the decedent's total asset picture, coupled with the math of estate distribu-tion, will determine whether a spouse ends up holding only a little or a lot of the property that the decedent controlled at death. But in Michigan, it is still possible for any spouse to leave their widow or widower absolutely nothing, if he or she plans carefully. One of the first keys to this strategy is recognizing that Michigan's elective share is calculated on the basis of the probate estate alone. Thus, by transferring assets into a trust or other non-probate vehicle, a spouse can defeat the elective share entirely. Michigan is not alone in making this possible, as at least eight other states have similarly limited the reach of the elective share. But equally important is Michigan's determination of the share for the spouse. Of those states that do limit the elective share to the probate estate, Michigan is especially parsimonious regarding this calculation. Even if a decedent holds all assets in forms governed by the probate courts, a surviving spouse in Michigan may elect, at best, only half the amount he or she would have a right to under intestacy. Moreover, that amount is further reduced by the value of any property the spouse "derives" from the decedent by non-probate means. See MCL 700.2202. The policy rationale for this approach cannot be discerned from either the Code or contemporaraneous commentary, which extolled the benefits of "the uniformity [EPIC] would bring to Michigan probate practice." (Ferriby). Arguably, it also works as a disincentive to probate at all; surviving spouses must resist the temptation to claim no will was ever found, which would at least double the amount of property to which the survivor has a right. Although other states likewise limit a spouse's ability to elect against the decedent's will, only five states -- Missouri, Kentucky, Rhode Island, Connecticut, and Georgia -- seem as determined as Michigan to leave the spouse with so small a share. Worse yet, no one seems to notice or care. In the more than fifteen years since EPIC was enacted, not one bill has been proposed that would alter this portion of the Code. In an era when Michigan hopes to attract new business and regrow the economy, such a policy is bad policy. Michigan needs to continue its progressive development of probate law by reforming the elective share to more nearly track the approach of the Uniform Probate Code. It should not be more profitable to divorce your spouse than to survive your spouse. ---------------- Associate Professor Julia Belian finds deep satisfaction in learning and teaching the ancient roots and contemporary twists of Property Law and Estates & Trusts, which are also her primary areas of scholarship. She earned a Master of Divinity degree at Yale University in 1993 and her J.D., with distinction, at Emory University in Atlanta, Georgia, in 1996. Published: Fri, Apr 4, 2014