Q: I’m getting remarried but want my inheritance to primarily benefit my children. Will my revocable trust still protect my assets for them after I die?
A: Maybe. Many people are surprised to learn that surviving spouses in New Hampshire can claim an “elective share” of their deceased spouse’s estate to avoid being disinherited—or inadequately provided for—when the decedent dies. The portion the surviving spouse can claim depends on the circumstances. If the decedent has children, for example, the surviving spouse is entitled to one-third of the probate estate. However, New Hampshire currently takes the position that revocable trust assets are not automatically included as part of the decedent’s probate estate.
This means that, at present, assets in your revocable trust for your children may be safe if your surviving spouse waives testate distribution and elects to claim the statutory elective share. However, under certain circumstances your surviving spouse could seek to have the court set aside transfers of assets you made into your revocable trust. If the court determines that the transfers were indeed invalid, then those assets would become part of your probate estate, and thus included as part of the elective share calculation.
There are other potential pitfalls to consider as well. As an initial matter, the New Hampshire legislature could simply decide to follow the lead of many other states and expand the scope of the statutory elective share claim to include revocable trust assets. Similarly, if you move from New Hampshire to another state that already allows elective share claims to reach such assets, and your estate is probated there, then you run the risk that at least a portion of your revocable trust assets will be made available to your surviving spouse, even if contrary to your desires.
Second, if you fail to fully fund your revocable trust during your lifetime, and you die with assets in your own name, such as bank accounts or certain real estate holdings, then those assets which you may have intended to go to your children will be exposed if your surviving spouse claims the elective share.
Third, your revocable trust will not protect qualified retirement plans such as a 401(k) or 403(b).
Fourth, in the event you get divorced, a court will likely consider your revocable trust assets when dividing property.
Accordingly, you should proceed cautiously and consider additional planning. For instance, a prenuptial agreement could clearly define what each spouse would be entitled to, both in the event of a spouse’s death or a divorce. It could also waive the surviving spouse’s right to claim the elective share, among other provisions.
We always recommend speaking with an attorney to discuss your unique circumstances and ensure your estate plan aligns with your goals.
Know the Law is a biweekly column sponsored by McLane Middleton. Questions and ideas for future columns should be emailed to knowthelaw@mclane.com. Know the Law provides general legal information, not legal advice. We recommend that you consult a lawyer for guidance specific to your particular situation.