Elective Share Reform: What You Need to Know about Recent Legislation

This spring, the Maryland General Assembly passed nine bills affecting estate and tax planning, probate, and trust administration.  The most impactful and important of these laws was House Bill 99 (Senate Bill 192): Elective Share of Surviving Spouse.  After years of effort, the new law aims to better protect surviving spouses from attempted disinheritance by their partner.

For hundreds of years England and most states in the United States have had laws to address the situation where a spouse dies (the “Deceased Spouse”) with a will that leaves a small or no portion of their assets to their spouse (the “Surviving Spouse”).  To avoid having a destitute Surviving Spouse completely disinherited by the Deceased Spouse who then may go on public assistance, elective share laws give the Surviving Spouse an option to elect against the will and take a “statutory share.”  Maryland’s current statutory share is either one-third or one-half of the Deceased Spouse’s estate, depending on whether the Deceased Spouse has any descendants.  Maryland’s new law broadens the scope of assets that are included in calculating the statutory share.

Historically, when calculating the statutory share, the only assets taken into account were the Deceased Spouse’s “probate estate.”  This meant that most times the Deceased Spouse’s retirement accounts, life insurance policies, assets held in a revocable trust, and jointly-owned property were left out of the calculation.  Because of this, the Surviving Spouse might not receive the benefit of the Deceased Spouse’s assets passing outside of probate.

Under the new law, the “taxable estate” of the Deceased Spouse will be used to calculate the Surviving Spouse’s statutory share.  Since the “taxable estate,” subject to certain exemptions, will be based on the net value of almost all the assets the Deceased Spouse owned, controlled or had an interest in at the time of death.  As with the current law, the electing Surviving Spouse’s statutory share will be reduced by the amount otherwise received “from” the Deceased Spouse.

Critics of the pending change argue that its implementation could result in extensive litigation over the nature and value of the Deceased Spouse’s assets and increase the time and expense required to conclude matters following the Deceased Spouse’s death.  Others fear the new law could lead to unjust results when the Deceased Spouse had children and significant assets before marrying the Surviving Spouse.

The new law expanding the reach of the elective share applies to persons dying on or after October 1, 2020.  This gives individuals significant time to prepare for this change.  For example, a Surviving Spouse can opt to waive their right to make an elective share after their spouse dies. Additionally, a spouse who has significant assets prior to the marriage may wish to enter into a prenuptial agreement.

For questions about the new Maryland’s law and how to plan for this change and other estate planning matters, please contact the attorneys at Azrael, Franz, Schwab, Lipowitz & Solter, LLC.

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