Thursday, July 19, 2012

Reciprocal Wills and Contracts Between Spouses

In a case decided back in April, the Virginia Supreme Court again addressed whether reciprocal wills (which are essentially mirror images of each other) executed by spouses are irrevocable.  The case is Keith v. Lulofs (link here).

Often, spouses who have both have children from previous marriages both execute wills that are mirror images of each other, and typically provide that one's entire estate goes to the spouse, if they survive the decedent spouse, and if not, to the children from both marriages in equal shares (or in shares agreed upon by the spouses).  So, the first spouse dies, and then the surviving spouse changes his or her will to leave more, or everything, to his or her own children.  The children of the deceased spouse are none too happy about that, and when the surviving spouse dies, they claim that the couple had an agreement to keep their reciprocal wills unchanged.  This was essentially the situation in the Keith case.

The Court made clear that, under Virginia law, reciprocal, mirror image wills by spouses are not by themselves an agreement between the spouses to keep them unchanged.  Rather, it must be proved that the spouses actually had an agreement (a contract) to that effect.

The Court explains the legal and practical reasons for this being the rule, which for those reasons does make some sense.

If you and your spouse want reciprocal wills to be irrevocable and unable to be changed by the surviving spouse, they need to state that clearly in the wills or a separate document.  While such an agreement can be proved even if there is no written agreement saying that, this case shows how hard that can be.

Tuesday, July 17, 2012

Virginia's Augmented Estate and Elective Share

Virginia, like most states, has a statute which allows a surviving spouse to take an "elective share" of their deceased spouse's "augmented estate" in lieu of what the surviving spouse would otherwise receive under a will and through nonprobate transfers of assets, such as life insurance and bank and stock accounts with beneficiary designations.

The purpose of the statute is to prevent a husband or wife from disinheriting their spouse.  I find that many people do not know that, because of the augmented estate statute, they effectively cannot disinherit their spouse.

I leave it to others to talk about the public policy behind the statute.  But, the statute is not well-known, is difficult to apply in many cases, and can cause a great deal of conflict, particularly between a surviving spouse and stepchildren.

Under the statute, a surviving spouse who elects to take his or her share of the augmented estate gets one-third of the augmented estate if the decedent has children or their descendants, or one-half if there are no children.

The augmented estate is so named because it includes more than just the probate estate - some jointly titled bank and stock accounts, some life insurance, and even certain gifts made by the decedent within five years of death are included.  Certain assets are also expressly excluded, such as assets inherited by the deceased spouse and kept as separate property.

If the decedent tried to leave nothing to the surviving spouse (or less than what the spouse would get under the statute), the surviving spouse can (and must) file for the elective share within six months of the later of (1) the admission of a will to probate or (2) the qualification of the administrator of an intestate estate.  The filing is made in the circuit court clerk's office in the jurisdiction where the estate is probated.

A detailed explanation of the calculation, payment and finalizing of a surviving spouse's elective share claim is way beyond the scope of this blog post. Suffice it to say that disputes arise fairly often regarding the calculation of the augmented estate and whether certain assets are included or excluded.