A few weeks ago, we talked about the Maryland Estates and Trust code and the proposed changes to the spousal elective share.
For years, Maryland legislators have been proposing to change how the spousal elective share works. The general idea of the elective share is that a surviving spouse can make a claim against a deceased spouse’s estate. Depending on if there are children or not, that claim could be one-third to one-half of the assets.
The elective share does not come up very frequently, except in the instance when one spouse has disinherited the other. This is an old law that has been on the books for a long time and historically the surviving spouse could only claim against assets that go through the probate process. Assets that go through probate are assets that are solely titled in a decedent’s name. So what that means is that any assets that are jointly titled, have a beneficiary designation, or are titled in trust are not subject to probate and therefore not subject to the spousal elective share.
So, typically then a person who wants to disinherit their spouse has the option to create a trust and remove all of their assets from probate leaving nothing for their surviving spouse to file claim against. Not anymore.
Beginning 10/1/2020, Maryland will adopt a new law often termed the “augmented estate”. What this means is that the spousal elective share will extend beyond the probate estate to include non-probate assets as well. There are many challenges estate planners face and this is the reason why the legislators have given people over a year to figure out exactly how the law works. There are various exceptions, calculations and formulas to figure out exactly what is subject to the elective share claims, but the message is clear that it is no longer a matter of simply creating a trust to shield assets. A tool that may become more useful in estate planning contexts is a pre-nuptial agreement. Often in a pre-nup each spouse will waive their right to the elective share. This could be a good alternative, but will also require consent from both spouses and cannot be done unilaterally. Stay tuned for updates on how this law will be implemented. If you need to discuss how this new law may impact you, contact Sinclair Prosser Gasior today.