Changes to Maryland’s Elective Share Law & Why You May Need to Update Your Estate Plan
What Is an Elective Share Law?
A new Maryland law that affects the spousal elective share went into effect on October 1, 2020. Many states have “elective share” laws, which allow a spouse to take a certain amount of the estate passing through the will, regardless of what the will says. The goal of the law is to prevent surviving spouses from becoming impoverished after being disinherited, intentionally or accidentally, when their spouse dies. When most or all of a decedent’s assets pass through probate, the law functions as intended. However, many people try to avoid passing anything through probate. Thus, in practice, the goal was often thwarted when a large portion of a persons assets are passed outside of the will, or non-probate.
When nearly everything is passed outside the will, the elective share law is not triggered, and the surviving spouse can be left with nothing, or next to nothing. To address this issue, the Maryland legislature passed a law enlarging the estate subject to the elective share. Items once considered outside the estate are included in an “augmented estate”, which is now used to calculate the estate subject to election.
Augmented Estate and Estate Subject to Election
Before the new law, a surviving spouse’s elective share was limited to the net probate estate. The “augmented estate” includes items that are not passed through the will or intestacy. Under the new Maryland Estates and Trusts Article 3-404(a), the following items are now included in the value of the decedent’s augmented estate;
(i) The probate estate of the decedent;
(ii) All revocable trusts of the decedent;
(iii) All property with respect to which the decedent, immediately before death, held a qualifying power of disposition;
(iv) All qualifying joint interests of the decedent; and
(v) All qualifying lifetime transfers of the decedent.
However, the estate subject to election is not necessarily the same as the augmented estate, because numerous exceptions apply. Under 3-404(b), the estate subject to election is calculated by reducing the value of the decedent’s augmented estate by items such as funeral and administration expenses, family allowances, enforceable claims and debts against any part of the augmented estate, and the value of assets included held in certain types of trusts or accounts like special needs trust created under 1614(a)(3) of the Social Security Act.
Many of the other exceptions depend on timing, and whether the surviving spouse consented to the disposition. A valid prenuptial or postnuptial agreement could affect how the law is applied, since the right of election of a surviving spouse may be waived before or after marriage by a written contract, agreement, or waiver (3-406). Depending on whether the decedent has surviving descendants, the elective share is either one–third or one-half of the value of the estate subject to election, reduced by the value of all spousal benefits (3-403). Given the complexity of the new law, it is best to discuss your particular circumstances with an experienced estate planning attorney.
Updating Your Estate Plan
Changes to Maryland’s estate laws are yet another reason to keep your estate plan up to date. For example, if you are separated (but not legally divorced) from your spouse, the new law may operate in a way that has unintended consequences, especially if you have left most of your estate to children, other members of your family, or charitable causes. Perhaps your estate plan was created with primarily tax planning in mind, but it has not been updated since you got married.
To ensure your estate plan accurately reflects your wishes, it should be reviewed and updated at least every 5-10 years, but especially as you experience major life events like marriage, divorce, deaths in the family, and buying or selling major assets. Preparing now by having a comprehensive review of your assets and estate plan can help prevent misunderstandings, confusion, and family disagreements in the future.
Consulting an Experienced Attorney
For years, Bethany G. Shechtel, Esquire has guided her clients through the estate planning process. The best estate planning strategy depends on your unique circumstances and the laws that apply. If you have questions about whether your estate plan meets your current needs, contact BGS Law, LLC.