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Friday, January 4, 2019

Taking against the will: your Last Will and Testament may not be the last word on your probate estate

Most people are confident that their Last Will and Testament is the last word on how their probate estate will be distributed after they have died, and in most cases, they are probably right.  However, if you are married, Indiana law dictates how much of your estate your spouse is entitled to receive upon your death, regardless of what your Last Will and Testament says.  It is important for people who are married (and for people who are planning to get married) to understand how this law works and what they can do to ensure that their wishes can be carried out.

Here’s a basic overview of the law.  Indiana Code Section 29-1-3-1 says that a surviving spouse is entitled to “take against the will” one half (1/2) of the testator’s (i.e., the person who died leaving a will) net estate.  (Sometimes this amount is called the spouse’s “statutory share”.)  This amount is reduced if the couple had no children together and the testator was survived by children from a previous marriage – in that case, the surviving spouse can take one third (1/3) of the net personal estate (e.g., cash and other financial assets) plus one fourth (1/4) of the net value of any real estate owned by the testator.  Statutes like this one make me glad that I paid attention during math class – who knew that fractions really would have real-world applications?

The next question, then, is, “Why do I have to worry about this law?”  Well, if you are planning on leaving at least half of your estate to your spouse at your death, you probably don’t.  The situation in which we most often see this issue arise is a second marriage in which each spouse has assets that he or she wants to “stay in the family.”  For example, Husband and Wife each have significant assets of their own when they are married.  Wife has two children from a previous marriage, and Husband has several nieces and nephews.  Husband and Wife agree that they want Wife to be able to leave all of her assets to her children, and they want Husband to be able to divide his assets among his nieces and nephews.  If the only thing they do to accomplish that outcome is write wills in which they exclude each other, they cannot be completely confident that their wishes will be fulfilled.

Your next comment might be, “My spouse is a good person.  I am confident that he or she will honor my wishes and will not try to take my children’s inheritance away from them.”  In many cases, you may be right.  A spouse does not automatically receive the statutory share under Indiana Code 29-1-3-1; he or she must file an election with the court to take against the will.  Unfortunately, however, there are a few situations in which your spouse, no matter how faithful he or she is to your wishes, may not have a choice in the matter.  For example, if your spouse needs Medicaid benefits to help pay for long term care, Medicaid rules likely require him or her to file an election to take against the will or face a penalty period in which Medicaid will not cover the cost of his or her care.  Another example might be if your spouse is incompetent at the time of your death, his or her guardian might find that it is the guardian’s fiduciary duty to file the election to take against the will.

The good news is that you have options that will protect your estate from an attempt to take against the will, but it’s important to know that they require you to plan ahead.  One of the best ways to protect your assets is to execute a prenuptial agreement prior to your marriage.  If you each disclose your assets and have the opportunity to consult an attorney regarding your rights, you can create an agreement in which each spouse waives his or her right to take against the will.  If you are already married, you can still enter into an agreement in which one or both spouses agree to waive the right to take against the will, but you must make sure that the agreement is in writing, signed by both spouses, and is made with full disclosure and for fair consideration.  Indiana Code Section 29-1-3-6 sets out the requirements for making a valid waiver of the right to take against the will.

In summary, it is usually possible to create an estate plan that will effectively carry out your wishes.  However, it is important to be aware of potential obstacles to your plan.  The attorneys at Severns and Howard can work with you to review your goals for your estate and help you create a plan you can be confident will achieve those goals.



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