Ben Franklin proposed making the turkey the national bird of the United States. He also observed that “in this world nothing can be said to be certain, except death and taxes.” If Ben were alive today, he might add “debt” to his famous quip (especially if he lived all of these years and never got out of the print industry.)
For many of us, in one form or another, debt is as certain as death and taxes. In addition to being burdensome during life, debt will also impact how assets pass to loved ones after death – especially if an estate is insolvent (i.e., the assets of an estate are worth less than the total amount that the estate is indebted to its creditors.)
If you anticipate that you will pass away with significant debt, I empathize. Law school is expensive and my own student loan debt is substantial. This holiday season, if I perish in some kind of catastrophe involving a turkey and a deep-fryer, the debt of my estate will likely exceed the current value of my assets.
The good news is that this does not necessarily mean that my spouse will receive nothing from my estate. Likewise, if this is your situation, your surviving spouse or registered domestic partner – and in some cases, your surviving children – may still be able to receive a portion of your estate.
In Washington, by statute1, the surviving spouse or partner (and in some cases, surviving children) of a decedent can file a petition seeking an award for financial support from the property of the decedent’s estate. This is known as a family support award.
The award takes priority over all other creditor claims, though an award cannot be made unless the costs of the decedent’s funeral, last sickness, and administration (of the estate) have been provided for. Also, any property that is part of the award is still subject to any encumbrances (e.g., liens, mortgages, etc.) that already exist against that property.
Up to $125,0002 of the decedent’s assets can be awarded. The court where the petition is filed has the discretion to increase or decrease this amount.3 The award can be made from the community property or the separate property of the decedent, including from probate assets or nonprobate assets.
The surviving spouse or partner is eligible to file the petition. If he or she does so, and the decedent is also survived by a child (or children) who is not also the child of the petitioning spouse or partner, then that child can also petition for a share of any award granted. If there is no surviving spouse or partner, then minor children can petition.4
Thus far, I have discussed the family support award as an option for the eligible survivor(s) of an estate with significant debt or of an insolvent estate, who would otherwise receive little or nothing. To be clear, the surviving spouse or partner (or child) of any estate can petition and be granted an award. In any case, there are other considerations that must be taken into account.
An award can derail what the decedent intended to accomplish with his or her will. This is because the award is funded from the property of the estate as a whole. Unless the court says otherwise, the assets that fund the award are determined by a process called abatement. The result could be a reduction in the amount of gifts that the decedent left to other beneficiaries. Or worse, for some beneficiaries the result could be no gift at all.
Another way that an award can frustrate the decedent’s estate plan is if the award is made out of separate property, which a surviving spouse would otherwise not have any right to. For example, perhaps the decedent inherited a family cabin (an inheritance is separate property) during her second marriage, but desires to keep it in her family by devising it to her children from her first marriage. However, if her second spouse survives her and petitions for family support, it is possible that an award could include the cabin.
With families where the decedent has children from a prior marriage, if the surviving spouse or partner is granted an award, those children may also petition. It is not difficult to envision a scenario where a stepchild petitions for the sake of creating conflict and depriving a stepparent of the full award. In addition, there is no restriction in the family support statutes to keep a purposely disinherited child, spouse, or partner from petitioning.
Whatever your own situation, keep in mind that family support exists and that if awarded, it will affect how the assets of an estate pass, for better or worse.