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  1. #1

    Default Testamentary Trust vs. Elective Share

    My question involves estate proceedings in the state of: PA

    Hello,
    My mother has a long history of financial irresponsibility. My dad and I are concerned that if he dies, Mom would quickly blow through his small estate. As it stands, the house, vehicles, and bank account are all in his name only. So in drafting his Will, my thought is to leave the entirety of his estate to a Testamentary Spendthrift Trust, with Mom as the beneficiary and me as the trustee. That way I can dole out the money appropriately, particularly for larger lump-sum purchases, like a new car when needed. Note: She would still have other income - Social Security, and a modest pension from my Dad.

    I want to keep things real simple. I'm leaning away from a Living Trust because of the upfront hassle. Plus if Mom dies first, then it would all have been a waste. (If that happens, the Will simply diverts the estate to his children.)

    My question is, would the Testamentary Spendthrift Trust satisfy the elective share law? In other words, would the Court view the estate as hers, leaving her no grounds to contest? I can see Mom not being happy with me being the gatekeeper of her funds and wanting to fight it.

    If there's a better way to go about this, I'm all ears. But I like the idea of simply naming the trust in the Will, and granting the Executor (me) full discretion as to the actual creation and administration of the trust. If and when that time comes, I pay an Attorney to make it bulletproof. Think Probate will let that fly?

    Also, how much involvement does the Court have during the life of the Trust? If it means we don't have to pay recurring administrative fees, could Mom choose to waive Court oversight?

    Thanks

  2. #2
    Join Date
    Oct 2014
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    Default Re: Testamentary Trust vs. Elective Share

    Quote Quoting madsaborlatino
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    My question is, would the Testamentary Spendthrift Trust satisfy the elective share law? In other words, would the Court view the estate as hers, leaving her no grounds to contest? I can see Mom not being happy with me being the gatekeeper of her funds and wanting to fight it.
    Your father really ought to consult an estate planning attorney in Pennsylvania about this. It is risky for you to give him advice on what to do when you are not an expert in the area, and that also raises potential unauthorized practice of law issues. That said, it appears that the answer to your question is putting your mother’s bequest in the form of a spendthrift trust will not prevent her from taking property outright by electing against the will. Understand that the idea of the elective share is for the spouse to look at the will and decide that if she doesn’t like what the will gives her she can opt to take her elective share directly out of the estate instead. As relevant here, the Pennsylvania statutes provide that she gets an elective share interest in following property of the decedent (your father):

    2203. Right of election; resident decedent.

    (a) Property subject to election.--Except as provided in subsection (c), when a married person domiciled in this Commonwealth dies, his surviving spouse has a right to an elective share of one-third of the following property:

    (1) Property passing from the decedent by will or intestacy.

    20 Pa C.S. 2203

    Thus she gets a one-third interest in the property that is in his probate estate. That is the property that would, but for the elective share, be passed by his will or intestacy to others. Note that the testamentary trust would be the beneficiary of the spendthrift trust, not your mother, so giving the assets to a trust does not give her the one-third interest in the property that the statute says she is entitled to get.

    So, to make your idea work, your father would need your mother to execute a valid waiver of her right to the elective share.

    As for other suggestions for how to deal with this, I’ll leave that up to the estate planning attorney that your father really ought to be consulting on this. Now is the time to get it right. Once he dies, it’s pretty much too late to fix it and make it “bullet proof.”

  3. #3

    Default Re: Testamentary Trust vs. Elective Share

    Thank you.
    Question, though:
    You said "Note that the testamentary trust would be the beneficiary of the spendthrift trust, not your mother, so giving the assets to a trust does not give her the one-third interest in the property that the statute says she is entitled to get."

    How is a trust the beneficiary of the trust?

  4. #4
    Join Date
    Oct 2014
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    Default Re: Testamentary Trust vs. Elective Share

    Quote Quoting madsaborlatino
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    Thank you.
    Question, though:
    You said "Note that the testamentary trust would be the beneficiary of the spendthrift trust, not your mother, so giving the assets to a trust does not give her the one-third interest in the property that the statute says she is entitled to get."

    How is a trust the beneficiary of the trust?
    I meant to write that the testamentary trust (the spendthrift trust) would be the beneficiary of the property transferred to it by the will, not your mother. The trust would own it, not your mother. So it does not help to satisfy what the statute requires which is that the surviving spouse gets a one-third interest in the estate property if she claims her elective share.

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