A new augmented estate law, also known as the new elective share law, was signed into law by Governor Hogan and became effective October 1, 2020. This new law may significantly impact the finances of many Maryland families who fail to initiate proper estate planning techniques to circumvent some unintended results that may occur under this law without proper planning.
The Old Elective Share Law
Prior to the enactment of this new elective share or augmented estate law, a spouse that survived the death of the other spouse was entitled to take an elective share of the estate in the amount of 1/3 if the deceased had surviving children and ½ if the deceased did not have surviving children. This prevented a spouse from disinheriting the other spouse and leaving the entire estate to children or other beneficiaries. A valid prenuptial or postnuptial agreement could waive these rights.
The New Elective Share Law
The provisions allowing those elections remain in place; however, the new law increases the surviving spouse’s ability to recover assets from the deceased spouse’s non-probate assets. Under this new version the surviving spouse can also recover assets from payable on death bank accounts, life insurance policies and retirement accounts. It also allows the spouse to recover assets from a revocable or living trust in which the spouse was not listed as a beneficiary.
These laws were enacted to prevent spouses from circumventing probate by moving assets into trusts or other non-probate accounts or property to effectively disinherit the spouse. To better protect the surviving spouse these laws stand for the proposition that the augmented estate (i.e. non-probate assets) should be fair game to include in the elective share.
Calculating the elective share is likely to be a much more complex process for all parties involved. Surviving spouses in a second or subsequent marriage will be greatly impacted by these changes. In these marriages, it is common for someone creating an estate plan to intend to leave the majority of assets to biological children from a previous marriage. The surviving spouse may thwart these intentions by taking 1/3 of both probate and non-probate assets including those funding a living trust. This situation can now only be avoided by the use of a prenuptial or postnuptial agreement.
For more information on how your estate plan may be impacted by these new augmented estate laws, contact the experienced attorneys at Stouffer Legal in the Greater Baltimore area. You can schedule an appointment by calling us at (443) 470-3599 or emailing us at office@stoufferlegal.com.
