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:

• The claim must be signed and acknowledged by the surviving spouse.
• The claim should be filed with the Circuit Court and with the executor or administrator of the estate.
• During the term of the claim, the estate must pay interest at the rate of six percent (6%) of the net estate (excluding taxes), not distributed to the spouse.
• Once the claim is made, it is the duty of the party claiming the augmented estate to pursue the claim. The burden of proof is on persons seeking inclusion of assets and on persons seeking the exclusion of assets.
• For valuation purposes, the value of gifts is the value on the date of transfer unless an interest is retained by the decedent.

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:

• What happens when a spouse who makes an augmented estate claim dies before final resolution of the claim?
• If a spouse is not competent, can another party make the claim on the spouse’s behalf without Court order?
• It is possible to settle an augmented estate claim without a Court determination?
• Are discounts for minority interest and lack of control applicable in the augmented estate situation?
• Is interest due on the full amount of the augmented estate claim or only the difference between what the spouse is owed under the Last Will and Testament and the amount of the augmented estate claim?