Maryland Adopts Changes to Spousal “Elective Share” Rules
The Maryland legislature recently made significant changes to the state’s “elective share” law. The elective share refers to the right of a surviving spouse to receive a share of their deceased spouse’s estate, notwithstanding the provisions of the deceased spouse’s will (or intestate succession law if there is no will). Under existing law, the surviving spouse can elect to receive one-third of the deceased spouse’s estate if the deceased spouse had surviving children, or one-half if they died without surviving children.
Critically, existing law limits the surviving spouse’s elective share to the deceased spouse’s probate estate. That is to say, the elective share could only reach assets passing under the deceased spouse’s will or intestate succession. In many cases, this excludes most if not all of a deceased spouse’s property. For example, property previously placed into a trust or a life insurance policy passing to a non-spouse beneficiary is not part of the probate estate.
Legislature Defines “Augmented Estate” for Spousal Inheritance Purposes
To address this issue, the legislature passed House Bill 99, which Gov. Larry Hogan signed into law in May 2019. This bill, which takes effect in October 2020, amends the elective share law such that it will apply to an “augmented estate.” In addition to the probate estate, the augmented estate will also include:
- any revocable trusts established by the deceased spouse;
- any property where the deceased spouse had a “qualifying power of disposition” immediately before their death;
- any “qualifying joint interests” held by the deceased spouse; and
- any “qualifying lifetime transfers” of the deceased spouse.
The surviving spouse’s elective share will then be based on the augmented estate less certain reductions, which include:
- the funeral and administration expenses of the deceased spouse’s estate;
- any family allowances permitted by law;
- any legally enforceable debts or claims against the deceased spouse’s estate;
- any assets held in a trust that was not established by the deceased spouse, if said assets were not “previously owned” by the deceased spouse, or if they were previously owned by the deceased spouse but sold for “adequate consideration” in a “bona fide” sale;
- any assets held in certain types of federal qualified disability trusts, special needs trusts, or 529A college savings accounts; and
- certain interests in real property held by the deceased spouse by reason of their retention of a life estate in said property; and
- certain irrevocable transfers made by the deceased spouse before their marriage to the surviving spouse, or two years before their death, whichever occurred later.
The augmented estate less these reductions is considered the “estate subject to election.” From this, the surviving spouse will be able to claim their elective share (one-half or one-third) less any previous “spousal benefits” received from the deceased spouse via trust.
Speak with a Maryland Estate Planning Lawyer Today
As noted above, the new elective share rules do not take effect until October 2020. If you are currently married and have questions about whether the amended law will affect your own will or trust, it is a good idea to speak with a qualified Maryland estate and succession planning lawyer as soon as possible. Contact Henault & Sysko, Chartered, at 410-768-9300 today to schedule a consultation.