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Maryland’s New Augmented Estate Law
It has long been the law of Maryland that a spouse cannot be disinherited upon the death of the other spouse. This concept dates back to our common law. The purpose of this law is to ensure that the surviving spouse is adequately provided for during the remainder of his or her life.
The current law of Maryland protects surviving spouses from disinheritance. However, recently, significant changes have been made to that law. The legislature enacted the “Maryland Augmented Estate Law” Senate Bill 192/House Bill 99.
For a better understanding of the new and existing law we must define two types of assets, probate and non-probate. Probate assets are all assets that are solely owned by the decedent at the time of death and distributed in accordance with his or her will. The probate estate does not control assets that pass automatically by operation of law such as payable on death accounts, property that is titled as tenants by the entirety, accounts with designated beneficiaries, or jointly titled accounts. Such assets that are not controlled by a will and transfer by operation of law are known as non-probate assets. Non-probate assets also include various types of trusts, including revocable and irrevocable trusts.
The current law allows a spouse to take an elective share of the spouse’s probate estate, unless otherwise agreed upon by waiver, prenuptial agreement, or postnuptial agreement. Meaning, that if the surviving spouse is not properly provided for in the decedent’s estate plan, the spouse can elect to take a one-third share of the probate assets, or one-half share of the probate assets, if there are children, instead of accepting what is provided for them in the decedent’s will, if anything.
The new law will allow a spouse to take an elective share from both probate and non-probate assets, the “Augmented Estate.” The specifics of the augmented estate calculation are set forth in §3-404 of the Estates and Trusts Article of the Annotated Code of Maryland. The change expands the assets available for the surviving spouse to make a claim against when taking the spouse’s elective share. More importantly, the expansion of assets available to the surviving spouse include assets that were not only assets that the decedent had an interest in at the time of death, but also may include decedent’s transfers of assets that were made prior to the decedent’s death, unless the surviving spouse consented in writing to said transfer. Thus, prior gifts to persons other than the surviving spouse can come back into the estate and be subject to the elective share. As with most statutes, there are exceptions, for example, an account established under §529 of the Internal Revenue Code is not included in the augmented estate calculation, among other exceptions. In addition to the statutory calculation, the Court may consider other factors when determining the value of an augmented estate as set forth in §3-413 of the Estates and Trusts Article of the Annotated Code of Maryland. In sum, if the surviving spouse opts to take the spouse’s elective share, the new law allows more assets to be considered in determining the value of the augmented estate which may result in a larger share of assets for the surviving spouse.
What does this mean? If you are leaving most, if not all, of your estate to your spouse, the new law will not impact you. However, if you have an alternative estate plan, it may need to be reevaluated. The new law will not only impact estates and trusts, but other areas of law as well, such as family law and business succession planning.
As with any new legislation there are questions. The full implications of the new law are developing. We will be monitoring any new developments and challenges that may arise and providing updates.
The “Maryland Augmented Estate Law” takes effect October 1, 2020. There is still time to revisit and adjust your estate plan before the law takes effect. Please contact the attorneys of Adelberg, Rudow, Dorf & Hendler, LLC for all your estate planning needs.