§ 352 THE ELECTIVE SHARE

• Jurisdiction: South Carolina
• Section: Chapter 3 Wills

§ 352 The elective share

Perhaps no other provisions of the SCPC have generated more controversy than those dealing with the spousal elective share. Historically, surviving spouses in South Carolina were protected from disinheritance by common law rights of dower and curtesy. While a dower provided a surviving wife with a life estate in one-third of the real estate owned during the marriage by the deceased husband, curtesy gave the surviving husband a life estate in the lands owned by the deceased wife if the husband and wife had children surviving from their marriage.³²⁹ In 1883, curtesy was abolished,³³⁰ and in 1984, dower was held unconstitutional.³³¹ Thus, after the abolition of curtesy and until the effective date of the SCPC in 1987, a wife could disinherit her husband, while from 1984 to 1987, a husband could disinherit his wife.

This ability to disinherit a spouse ended with the enactment of the SCPC.³³² For the first time, South Carolina provided a statutory elective share right to a surviving spouse.³³³ Similar to the elective share statutes in most states, South Carolina's version was idiosyncratic and significantly different from the Uniform Probate Code (UPC) version.³³⁴ one substantial difference was that South Carolina charged only probate assets with the elective share,³³⁵ while the UPC included nonprobate assets, as well as property owned independently by the surviving spouse—the so-called "augmented estate approach."³³⁶

The SCPC introduced to South Carolina law the concept of the elective share, or the forced share, of the surviving spouse against the decedent spouse's probate estate.³³⁷ The Code defines probate estate as "the decedent's property passing under the decedent's will plus the decedent's property passing by intestacy, reduced by funeral and administration expenses and enforceable claims."³³⁸ The surviving spouse of a domiciliary decedent may opt to take an elective share of one-third of the decedent's probate estate.³³⁹ The right to an elective share of a non-domiciliary is determined by the laws of the state of domicile at the time of death.³⁴⁰

Section 62-2-201. Right of elective share.

(a) If a married person domiciled in this State dies, the surviving spouse has a right of election to take an elective share of one-third of the decedent's probate estate, as computed under Section 62-2-202, the share to be satisfied as detailed in Sections 62-2-206 and 62-2-207 and, generally, under the limitations and conditions hereinafter stated.

(b) If a married person not domiciled in this State dies, the right, if any, of the surviving spouse to take an elective share in property in this State is governed by the law of the decedent's domicile at death.

(c) "Surviving spouse", as used in this Part, is as defined in Section 62-2-802.

Section 62-2-202. Probate estate.

(a) For purposes of this Part, probate estate means the decedent's property passing under the decedent's will plus the decedent's property passing by intestacy, reduced by funeral and administration expenses and enforceable claims.

(b) Except as provided in Section 62-7-401(c) with respect to a revocable inter vivos trust found to be illusory, the elective share shall apply only to the decedent's probate estate.

Whether one qualifies as a surviving spouse is determined under SCPC section 2-802.³⁴¹

§ 352.1 Calculation of elective share and application of property to satisfy elective share

Prior to the 2013 amendments, the SCPC calculation was relatively simple. The elective share was one-third of the probate estate—defined as those assets passing under the deceased spouse's will³⁴² —less claims and administrative expenses.³⁴³ This calculation rendered a gross amount (gross elective share or gross amount) for the elective share claimant, but the gross amount was reduced by the value of any probate transfers to the surviving spouse.³⁴⁴ If the gross elective share minus the value of probate transfers to the surviving spouse resulted in a positive amount (net elective share), the spouse could take the net elective share from the probate estate.³⁴⁵ Thus, the elective share claimant would be entitled to a total of one-third of the value of the deceased spouse's probate estate.³⁴⁶

Despite the apparent simplicity of the elective share calculation—which, according to the prior statutory language, excluded nonprobate transfers from any aspect of the calculation—the South Carolina Supreme Court effectively changed the calculation in certain revocable trust situations. In Seifert v. Southern National Bank of South Carolina,³⁴⁷ the South Carolina Supreme Court determined that a revocable inter vivos trust created by the deceased spouse was illusory because the settlor retained excessive control over the revocable trust, thereby rendering it invalid.³⁴⁸ Because the court concluded that the settlor failed to transfer his assets to the revocable trust, which was effectively void ab initio, he still owned the assets at the time of his death.³⁴⁹ Therefore, those assets were probate assets subject to the elective share.³⁵⁰

The Seifert decision not only affected elective share planning, but possibly called into question the validity of revocable trusts as a planning tool, even when used for purposes other than elective share avoidance and despite the common acceptance of revocable trusts as valid nonprobate transfers.³⁵¹ The South Carolina General Assembly responded to this latter concern by enacting section 7-112, which confirmed that revocable trusts were valid nontestamentary transfers.³⁵² When the General Assembly enacted South Carolina's version of the Uniform Trust Code,³⁵³ section 7-112 was moved to section 7-401(c).³⁵⁴

Although the legislative reaction to Seifert appeared to assuage possible concerns about the general validity of revocable trusts as nonprobate transfers, section 7-112 did not prevent the court from continuing to subject the assets of revocable trusts to the elective share. Section 7-112 arguably eliminated the court's rationale in Seifert by confirming the validity of revocable trusts as nonprobate transfers. Although that section provided that "[a] finding that a revocable inter vivos trust is illusory and thus invalid for purposes of determining a spouse's elective share rights . . . shall not render that revocable inter vivos trust invalid, but would allow inclusion of the trust assets . . . only for the purpose of calculating the elective share," a court considering the Seifert issue after the enactment of section 7-112 would seemingly have to find the transfer illusory for some reason other than the fact that the inter vivos revocable trust was never valid.³⁵⁵ The South Carolina Supreme Court subsequently recognized this issue in Dreher v. Dreher³⁵⁶ effectively continuing to use the Seifert rationale to subject the assets of a revocable inter vivos trust to the elective share calculation by finding that "the Dreher Trust is illusory and thus invalid for elective share purposes, but remains valid for all other purposes."

One of the issues remaining undecided in the wake of Seifert involved the treatment of assets passing to the surviving spouse under a revocable inter vivos trust. The court in Seifert held that, at least in certain cases, the assets of an inter vivos revocable trust were includible in the elective share calculation of the probate estate—a total that would be multiplied by one-third to determine the gross value of the elective share before offset for any probate assets received by the surviving spouse.³⁵⁷ Prior to an amendment in 2010, section 2-207 did not appear to specifically include assets passing to the surviving spouse under the revocable trust as an offset against the gross elective share.³⁵⁸ Thus, at least in theory, the assets of a revocable inter vivos trust could be included in the calculation of the surviving spouse's gross elective share, yet the surviving spouse would not be charged for assets received under that revocable trust. While the 2010 amendment to section 2-207 attempted to include revocable trust assets passing to the surviving spouse as part of the offset against the gross elective share, no court has considered whether the language of the amendment accomplished that goal.³⁵⁹

The 2013 amendments substantially change the elective share calculation methodology and clarified some of the previously unclear issues.

Most significantly, the 2013 amendments expand the list of assets included in the section 2-207 calculation of the offset against the gross elective share, as calculated under sections 2-201 and 2-202.³⁶⁰ The surviving spouse will now be charged with probate assets, as well as certain specified nonprobate assets received as a result of the deceased spouse's death: those nonprobate assets passing under a revocable inter vivos trust or by a beneficiary designation in a life insurance policy or retirement plan.³⁶¹ Thus, a deceased spouse may provide for the surviving spouse, at least in part, by nonprobate transfers that will reduce the gross elective share amount.³⁶²

Example 1

A deceased spouse's probate estate is valued at $750,000. Multiplying that amount by one-third renders a gross elective share of $250,000. The deceased spouse's will devises a house worth $100,000 to the surviving spouse, who is also the beneficiary of the deceased spouse's life insurance proceeds of $60,000. The value of the house and the life insurance proceeds are charged against the gross elective share, leaving the surviving spouse a net elective share of $90,000, which can be taken from the probate estate.

Example 2

A deceased spouse's probate estate is valued at $750,000. The deceased spouse was the settlor of a revocable inter vivos trust worth $150,000. The surviving spouse is not a beneficiary of the revocable trust. If a court—pursuant to Seifert, Dreher, and apparently section 7-401(c)—includes the value of the revocable trust for purposes of the elective share calculation, the "deemed"

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