This question comes up every once in a while in my practice, and usually NOT for nefarious reasons! Yes, of course, some people want to do this because they are estranged from their spouses, but there are many other motivations that are not borne out of animosity.
A couple might be in a second marriage with children on one or both sides from previous marriages. Each might want to disinherit the other in order to provide for his or her own children. Each might have sufficient resources of his or her own and does not need the resources of the other after the first death.
Another reason would be to avoid disqualifying the other for Medicaid (Tenncare) and to preserve those assets for the next generation.
The question then becomes how to disinherit the spouse given that in Tennessee (as in many other states) the surviving spouse has the right to take a statutory share of the decedent spouse's estate no matter what the decedent spouse's will says.
Here is a summary of those rights:
RIGHTS OF SURVIVING SPOUSE IN TENNESSEE
A surviving spouse may elect against the will to claim "exempt property", defined as tangible personal property of the decedent located in the principal residence and one or more motor vehicles, up to $50,000 in the aggregate.
A surviving spouse may elect against the will to claim a year's support. This amount is not the same for every surviving spouse. It depends on the standard of living to which the surviving spouse had been accustomed.
The surviving spouse is entitled to homestead rights in all events; he or she does not have to elect against the will. If the decedent owned a homestead and did not leave it to the surviving spouse, then the surviving spouse can claim the right to live in it for the rest of his or her life.
A surviving spouse may elect against the will to claim his or her "elective share" of the probate estate, calculated as follows:
First, calculate the value of the "net estate". The net estate is what is left of the probate estate after deducting secured debts, funeral and administration expenses, the award of exempt property, homestead allowance, and year's support allowance.
Second, multiply the net estate by the correct percentage:
|If the decedent and the surviving spouse were married to each other:||The elective-share percentage is:|
|less than 3 years||10%|
|3 years but less than 6 years||20%|
|6 years but less than 9 years||30%|
|9 years or more||40%|
Finally, take the result obtained in "Second" and deduct the value of all assets includable in the decedent's taxable estate (note that taxable estate includes assets that passed outside of probate) that were transferred, or deemed transferred, to the surviving spouse or for his or her benefit, but excluding the homestead allowance, exempt property and year's support allowance. Examples include:
- Bank account received by the surviving spouse as the surviving joint tenant under a right of survivorship
- Proceeds of a life insurance policy that had been owned by the decedent
- Items inherited by the surviving spouse via the decedent's revocable living trust or a joint living trust.
THE KEY IS TO AVOID PROBATE
Remember, a will governs the probate estate; it does not govern assets that pass outside of probate. Take a look at the surviving spouse's rights described above again and calculate how much a surviving spouse would receive out of a $1 million taxable estate after a 10 year marriage but assume that all of the assets passed outside of probate, such as by way of a revocable living trust.
If you answered "zero", then you are correct. And therein lies the key. The way to disinherit a surviving spouse in Tennessee is to avoid creating a probate estate. If there is no probate estate, then there is no elective share. The important thing to understand is that simply making a will that disinherits a surviving spouse will NOT work to disinherit the surviving spouse.
There are many ways to avoid creating a probate estate in Tennessee. Here are some examples:
- Name someone other than your spouse as the death beneficiary on your bank and brokerage accounts and your life insurance policies. Just be aware of the pitfalls of this technique if you name people rather than a trust.
- Name someone other than your spouse as the death beneficiary of your qualified retirement plans. Just be aware of the pitfalls of this technique if you name people rather than a trust. Also, in most instances, your spouse's signature will be required.
- Transfer your properties to a revocable living trust that disinherits your spouse.
- Transfer your properties to an irrevocable trust that disinherits your spouse.
- Transfer your properties to your intended heirs, reserving a life estate to yourself. (We are not fans of this technique, however, because of the loss of control during lifetime, exposure to the residual estate owner's creditors, and many other concerns.)
Please note that this will not work in every state! If you reside in Arizona or Alaska or California or Colorado or Oregon or Tennessee, give us a call at 931-250-8585 to schedule an appointment to discuss your options. If you reside in any other state, consult an attorney in that state.