Maryland law provides protections so that a spouse cannot be disinherited. Absent a valid prenuptial (or postnuptial) agreement, the law currently in effect grants a surviving spouse the right to elect to receive a fixed portion of the deceased spouse’s probate assets instead of what their last will and testament provided. This is called taking an elective share, as it is a right that must be exercised by the spouse and is not automatic.
Currently, a surviving spouse who is dissatisfied with what they would receive under a predeceasing spouse’s will could can elect instead to take either a one-third share when the decedent has surviving children, grandchildren, or more remote descendants, or a one-half share when they do not. Spousal inheritance rights do not typically apply to assets that pass on via beneficiary designation, for example, life insurance proceeds, pay on death financial accounts, or individual retirement plans.
This system was created when it was typical for the majority, if not all, of a person’s assets to pass through probate. What has happened over time, however, is that (1) people started amassing assets in retirement plans which do not pass through probate, and (2) trust laws evolved such that people began leveraging revocable living trusts as a means of avoiding probate.
In 2019, the Maryland General Assembly passed a bill, signed by Governor Hogan, that increases a spouse’s protections by expanding on the types of assets they can elect to receive at the death of their spouse. Under the new Augmented Estate Law, which goes into effect on October 1, 2020, surviving spouses will have access to the following assets if left out of the planned inheritance:
- the decedent’s probate estate
- the decedent’s revocable trusts
- property with respect to which the decedent, immediately before death, held a qualifying power of disposition
- the decedent’s qualifying joint interests
- the decedent’s qualifying lifetime transfers
- certain life insurance policies
The augmented estate is reduced by:
- expenses and claims
- assets belonging to certain type of trusts assets, for example, certain special needs trusts, or when the assets in trust were not previously owned by the decedent
- certain joint interests
- lifetime transfers and property in which a decedent had a qualifying power of disposition to which the surviving spouse consented during lifetime
- certain irrevocable transfers
- certain life estates
- spousal benefits (note that this does not refer to government or other similar benefits, but instead is a complex calculation of the benefits received by the spouse from decedent, reduced by other values)
Whether you are: happily married and foresee leaving everything to your spouse; are estranged, separated, or divorced and do not plan to provide your spouse/ex-spouse; are a part of a blended family; or are simply concerned about the stability of your children’s marriages and want to protect their inheritance, it is important to understand the impact that Maryland’s new law could have on your estate. Making the necessary adjustments now is the best way to protect against potential family conflicts and judicial intervention in the future. Don’t wait, contact us now to discuss!