The Net Economic Effect of a "Widow's Election" in the Community Property States.

The purpose of this article is to analyze the widow's election in terms of its net economic effect upon the electing taxpayer and to determine if such effect supports the charge that the election creates a taxpayers utopia, out of the community property jurisdictions. An outstanding example of the conceptual and practical difficulties that can result when the community property system and the Federal estate and gift tax laws must be reconciled is provided by the real estate planning device commonly known as the widow's election. The judicially determined estate tax consequences of this election are highly controversial. Many commentators believe that these consequences provide a sizeable and unjustifiable tax benefit to residents of community property states who are able to utilize the election. This analysis of the widow's election solely in terms of its economic effect is too narrow in perspective to lead to a final conclusion as to the correct Federal estate tax consequences that should result from the election. However, this type of study should clarify the objective economics of a complex, much faceted, interfamily transaction that will continue to be utilized by estate planners in the community property jurisdictions.