By Zachary W. Worshtil
On October 1, 2020, Maryland is set to join the growing ranks of states to integrate non-probate assets and arrangements in its law regulating spousal inheritance. On that date, Chapter 435 of the Acts of 2019, “Estates and Trusts – Elective Share of Surviving Spouse,” takes effect. This new elective share law can be found in Title 3, Subtitle 4 of the Estates & Trusts Code. Understanding of the new elective share law is vital for Maryland lawyers handling matters in numerous fields, including family law, probate and estate planning matters.
Our society has moved away from the antiquated notion of a widower’s dower rights. This concept has shifted over time into present day spousal election laws in numerous states, Maryland included. These laws permit a surviving spouse to elect to take a specified statutory share of their deceased spouse’s estate rather than the benefits (if any) provided to them in the Will. In fact, it is long-established Maryland public policy that the right of a surviving spouse not to be disinherited takes priority over a decedent’s independence in how to dispose of his or her property as they wish. After all, we have the freedom to disinherit other family members, i.e. children, siblings and any other heir-at-law; however, a surviving spouse’s rights takes priority over the freedom to dispose of one’s property as they wish. The Court of Appeals, in applying the existing statute, recognized the need “to balance the social and practical undesirability of restricting the free alienation of personal property against the desire to protect the legal share of the spouse.”
Maryland’s existing – and soon to be replaced – spousal election law, found in Estates and Trusts Code Ann. §3-203, permits a surviving spouse to elect a 1/3 elective share of their spouse’s estate when the deceased spouse has children, or 1/2 if the deceased spouse did not have any children. Notably, this current formula solely consists of probate assets, reduced by expenses, allowances and claims. In other words, the existing elective share law is limited to property of the deceased spouse’s probate estate and non-probate assets were excluded.
Since this existing spousal election law took its current form in 1978, the use of non-probate methods for holding and ultimately transferring property have become increasingly common (i.e. via trusts, jointly held property, etc.). Over time, the result of this shift is that it has become too easy for one to disinherit a future surviving spouse. Problematically, non-probate transfers hinder the intent of the spousal allowance law. The new elective share law attempts to address this predicament. As such, on October 1, 2020, Maryland will be joining a growing number of states in integrating non-probate arrangements in their law regulating spousal inheritance. Instead of only including probate property in the formula, this new law values the “augmented estate,” which consists of not merely the probate estate (i.e. assets held in decedent’s name alone at the time of his or her death), but all of decedent’s assets, including jointly owned assets and revocable trusts.
While this article cannot provide a full and comprehensive analysis of all the minutiae of the new elective share law, below are a handful of fundamentals of the changes:
New Elective Share Formula
Initial jurisdiction over issues related to the calculation of the elective share lies with the Orphans’ Court, pursuant to Estates & Trusts §3-401(c)(1). However, jurisdiction over actual assets from which the share will be paid remains in the Orphans’ Court for probate assets and Circuit Court for all non-probate assets. (Estates & Trusts §3-401(c)(2)). Pursuant to Estates & Trusts §3-102(a)(1)(iv)(2), the Orphans’ Court has the authority to issue orders “necessary to determine the value and source of payment of an elective share…”
The new formula is quite complex and the intricacies of calculating a specific elective share will take significant understanding and analysis by practitioners. The particulars of how to calculate the elective share formula can be found primarily in Estates & Trusts §3-404.
Who Can Make the Election?
Pursuant to Estates & Trusts §3-405, only the surviving spouse can make the election. The right to make the election cannot be transferred nor can it be exercised after death. If the surviving spouse dies before making the election, the surviving spouse’s estate cannot make the election even if otherwise timely.
This begs the question: what to do if the surviving spouse lacks the mental capacity to make this election? If the surviving spouse is incapacitated, the election can still be made in several ways, including via Court order; by an authorized guardian of the property; or by an authorized agent acting pursuant to a valid Power of Attorney.
Significance in Family Law Practice
Pursuant to Estates & Trusts §3-406, a current or soon-to-be spouse can waive his or her future right of election. This is not a change as the prior elective share law also enabled a spouse to waive the right of election, pursuant to Estates & Trusts §3-205. In fact, the language in both statues are nearly identical. The method of waiving one’s right of election would typically be through a prenuptial or postnuptial agreement; however, a valid waiver can be accomplished through any type of signed waiver, agreement or contract, as long as it is signed by the spouse waiving his or her right. Notable to any attorney that has drafted prior prenuptial and/or postnuptial agreements: any previously drafted agreement should still be protected. Practically, a practitioner drafting future prenuptial or postnuptial agreements where a spouse wishes to waive his or her right of election should incorporate the language found in Estates & Trusts §3-406(b). The language of the statute is below:
(b) Scope of waiver. — Unless the waiver provides to the contrary, a waiver of “all rights”, or equivalent language, in the property or estate of a present or prospective spouse or a complete property settlement entered into after or in anticipation of separation or divorce is a waiver of all rights of family allowance and elective share by each spouse in the property of the other and the right to letters under § 5-104 of this article, and is an irrevocable renunciation by each spouse of all benefits that would otherwise pass to the spouse from the other by intestate succession, by elective share, or by virtue of a will or revocable trust of the present or prospective spouse executed before the waiver or property settlement.
Pursuant to Estates & Trusts §3-407, the election must be made within the later of nine (9) months of the date of death OR within six (6) months of the initial appointment of a personal representative of a deceased spouse’s estate. The court may extend this filing period for an additional three (3) months at a time should a surviving spouse petition for an extension. If a surviving spouse files an election, the election can be withdrawn any time before the filing deadline expires.
Section 3-408 of the Estates & Trusts Code establishes the requirements of how to file the election. The election must be in writing and signed by the surviving spouse. If another person is filing on behalf of the surviving spouse (as discussed above) that person must sign the election. Helpfully, Estates & Trusts §3-408(b) provides a suggested form for filing the election.
If an estate has been opened and a personal representative has been appointed, the election must be filed with the Register of Wills for that jurisdiction, pursuant to Estates & Trusts §3-408(a)(i)(2). However, because a surviving spouse can file an election within (9) months of the date of death, there are situations where the election must be filed before an estate is opened. Hypothetically, a guardian for a terminally ill surviving spouse may want to file an election even if no personal representative has been appointed yet. In this scenario, when there is no probate estate, the surviving spouse would file an election with the Register of Wills where the decedent was domiciled, or the jurisdiction where the surviving spouse believes the largest part of the Maryland estate is located.
It remains to be seen how this new and complex law will impact the relevant legal fields, particularly estate litigation, estate planning, and family law. However, understanding of the changes will surely bring challenges and opportunities to legal professionals practicing in these fields.
Zachary W. Worshtil is an attorney at Ralph W. Powers, Jr., P.C. and member of the PGCBA Board of Directors. He concentrates his practice primarily in estate administration and probate litigation.