“As estate attorneys and advisors, one of our primary goals is to do what’s in the best interests of the estate. We strive to minimize the amount of the estate subject to estate tax to maximize the value of property passed tax-free to the intended beneficiaries of the decedent. While individuals prepare their wills with the best of intentions, estate disputes often arise even in well-prepared estates. 

The marital deduction is one of the most important tools that an estate can use. The deduction allows for the tax-free passing of assets to a surviving spouse by reducing the value of the estate for all assets that pass to the surviving spouse. But, the exact timing of when a surviving spouse has a nonterminable interest is complicated by settlement payments in estate disputes and court judgments.

Whenever an estate dispute occurs, estate attorneys and advisors need to consider all options before deciding on settlement or further litigation. A major deciding factor is whether the course of action will allow for or prevent the estate from using the marital deduction.

A common scenario faced by estate attorneys and advisors is when a surviving spouse has a terminable interest under a prenuptial agreement and decides to contest the validity of the agreement. Settling the dispute or proceeding with litigation is a major decision for the estate.  If the estate decides to settle the dispute, the estate may be able to preserve the marital deduction by structuring the settlement payment as a statutory election. If the estate proceeds forward with litigation and is unsuccessful in court, any court award the estate pays to the surviving spouse would qualify for the marital deduction.  An estate attorney or advisor must consider the effect of any course of action on the marital deduction.”

We close the week with commentary by Brett L. Bueltel, A. Kelly Walker and Jamie L. Seitz that analyzes when terminable interests prevent the marital deduction in estate disputes.

Click this link to read their commentary.

EXECUTIVE SUMMARY:

As estate attorneys and advisors, one of our primary goals is to do what’s in the best interests of the estate. We strive to minimize the amount of the estate subject to estate tax to maximize the value of property passed tax-free to the intended beneficiaries of the decedent. While individuals prepare their wills with the best of intentions, estate disputes often arise even in well-prepared estates. 

The marital deduction is one of the most important tools that an estate can use. The deduction allows for the tax-free passing of assets to a surviving spouse by reducing the value of the estate for all assets that pass to the surviving spouse. But, the exact timing of when a surviving spouse has a nonterminable interest is complicated by settlement payments in estate disputes and court judgments. This commentary analyzes when terminable interests prevent the marital deduction and consider some strategies to allow for the marital deduction.

HOPE THIS HELPS YOU HELPS OTHERS MAKE A POSITIVE DIFFERENCE!

Brett L. Bueltel

A. Kelly Walker

Jamie L. Seitz

CITE AS:

LISI Estate Planning Newsletter #2641, (May 17, 2018) at http://www.leimbergservices.com Copyright 2018 Leimberg Information Services, Inc. (LISI). Reproduction in Any Form or Forwarding to Any Person Prohibited – Without Express Permission.