Administrator Must File for Portability for Surviving Spouse, Court Says

People reviewing documentsThe administrator of a decedent's estate in Oklahoma appealed an order from the trial court forcing the administrator to file a federal estate tax return for the estate and elect portability of the Deceased Spousal Unused Exclusion Amount (DSUE) under the federal gift and estate tax laws. The surviving spouse asked for the order and wanted the benefits from the portability election.

In “In the matter of Estate of Vose,” 390 P.3d 238 (Okla. 2017), reported in Justia, the administrator argued that the district court erred on several grounds. One of the decedent’s children by a prior marriage refused to make the required election for transfer, even though the surviving spouse agreed to pay the cost required to prepare the required federal estate tax return.

Since 2010, a spouse has been permitted to transfer, at death, his or her unused gift and estate tax exemption to the surviving spouse. Prior to that date, each spouse had his or her own gift and estate tax exemption, but any portion of that exemption that remained unused by the spouse at death couldn’t be transferred to the surviving spouse.

The Court saw no merit in the personal representative’s argument that the surviving spouse didn’t have standing. The Court said the right to portability of the DSUE was a beneficial interest in the estate for the surviving spouse, regardless of the surviving spouse’s rights as an heir. As a result, the right to portability was an interest that qualified the surviving spouse to bring the lawsuit.

The estate’s administrator also claimed that the couple’s premarital agreement was a waiver by the surviving spouse of any rights to the estate making a portability election. However, the State Supreme Court said the right to portability became law in 2010, which was years after the premarital agreement was signed in 2006. Although the Court found that the couple did agree to a broad waiver of marital rights under the existing law when the premarital agreement was signed, the agreement didn’t speak to the issue of portability, because it wasn’t in the tax code at that point in time.

The Supreme Court upheld the trial court’s decision that the personal representative’s fiduciary obligations to protect estate assets applied and required him to preserve and transfer the decedent’s unused federal estate tax exemption to the surviving spouse.

The Oklahoma Supreme Court rejected these arguments and said that “[a]n administrator of an estate occupies a fiduciary relationship toward all parties having an interest in the estate.”

Accordingly, 26 U.S.C.A. § 2010 requires the administrator to make the election to allow portability of the DSUE, and the only person with an interest in and ability to use the DSUE (if it exists) is the surviving spouse. If the election isn’t made through the timely filing of an estate tax return, it’s lost.

The Oklahoma Supreme Court found no reversible error by the trial judge and affirmed.

Reference: Justia (January 17, 2017) “In the matter of Estate of Vose”


Blended Family Estate Planning

Biracial familyThe best time to start estate planning is now—before the plan needs to be implemented, says The Fairfield Bay News in “Estate Planning Tips for Blended Families.” Estate planning can be very complex with a blended family, so ask for help from a qualified estate planning lawyer.
Here are a few general ideas to help you think about your blended family:
Update Beneficiary Designations. Get all of your beneficiaries set and updated, like those on your retirement accounts and insurance policies. This will ensure that they reflect your blended family. It is important to remember that these designations take priority over the instructions in your will—it’s a totally separate deal.
Living Trust. While you’re at it, consider a professional trustee for a living trust. Trusts can help you to avoid probate and allow you the freedom to decide how and when you want your assets distributed. After you pass away, a properly created trust can provide a surviving spouse with income for life. After he or she dies, it will then give the children from an earlier marriage the remainder of the trust assets. To be fair to all, you may want to hire a professional third-party trustee who isn’t a beneficiary of the trust and isn’t entitled any of the trust assets. This person or company wouldn’t have a vested interest in how proceeds of the trust are distributed.
Prenuptial Agreement. When settling an estate, a prenuptial agreement can help eliminate disputes among members in a blended family. With a pre-nup, you can detail a separation of property for your will, your living trust, and any other relevant estate-planning arrangements in the event that you and your new spouse agree to keep your assets separate so you can each pass an inheritance to your own children.
Finally, be sure to share your estate-planning intentions with the members of your blended family. This can help prevent bad feelings and unpleasant surprises.
Reference: Fairfield Bay (AR) News (November 9, 2016) “Estate Planning Tips for Blended Families”

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