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Augmented Estates

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Jonathan Kinney
BKK Wills, Trusts and Estates Newsletter
November 2010

Join me on a short history of the law of trusts and estates in Virginia. Prior to the complex planning vehicles we are so familiar with, such as revocable trusts and financial accounts involving beneficiary designations, Virginia’s system for guaranteeing an inheritance to a spouse was fairly straightforward. If a spouse was excluded from a person’s last will and testament, he or she had the ability to ‘renounce’ it and force the estate to pass according to the laws of intestacy. This meant that he or she would stand to inherit at least one-third of the probate estate, which was better than nothing.

With the arrival of more complex estate planning strategies, such as trusts, IRAs, assets held with right of survivorship and assets bearing beneficiary designations, the notion of the probate estate (which includes only those assets held in the sole name of the decedent at the time of death), has been severely eroded. Now the probate estate does not necessarily represent the full value of a decedent’s property, and as a result, the legal doctrine of renunciation is not sufficient to capture all of a decedent’s assets.

This is where the concept of the augmented estate comes into play and replaces renunciation as a way for a surviving spouse to make a more meaningful claim against the estate of their deceased husband or wife. Under this more modern system, a surviving spouse may make a claim for a statutory share of either one-half or one-third of the deceased spouse’s augmented estate. The augmented estate is the probate estate added to certain non-probate assets (i.e.a bigger picture look at a decedent’s assets).

In simple terms, the "augmented estate" includes all real estate owned by the decedent, less certain allowances, exemptions, funeral costs, and expenses and debts of the estate. The value of trust assets, insurance policies, retirement and annuity benefits, employee benefits is considered and the value of any transfers made during the marriage to third parties for less than adequate consideration and those transfers made to the spouse both before and during the marriage is also considered. The surviving spouse is entitled to one-third of the resulting total, with a credit received for any amounts already received as a result of survivorship or beneficiary designations.

The rules for making an augmented estate claim are fairly straightforward:

Since there is a relative scarcity of court decisions in the augmented estate area, there are a number of unanswered questions in this area. For example: