Maryland’s new Augmented Estate Law was created to enable a surviving spouse, who was not adequately provided for by his/her deceased spouse, to elect to receive a share of substantially more of the deceased spouse’s assets than ever before.
But, it has the major, and perhaps unintended, consequence of affecting some estate plans and prenuptial and postnuptial agreements already in place.
In Maryland, if a spouse dies without adequately providing for his/her surviving spouse, then unless the surviving spouse has waived an interest in his/her deceased spouse’s estate, the surviving spouse is entitled to receive part of the deceased spouse’s estate.
This entitlement, commonly referred to as the “elective share” is one-third to one-half (depending on whether the deceased spouse has a surviving decedent) of part the deceased spouse’s estate. The purpose of this law is to protect surviving spouses from not being provided for by their spouse upon their spouse’s death.
Previously, the elective share only applied to the part of the deceased spouse’s estate that passed through probate. But, effective October 1, 2020, Maryland’s new “Augmented Estate” Law enables a surviving spouse, upon the death of his/her deceased spouse, to receive a greater share of the deceased spouse’s assets than ever before by applying the elective share to both assets that pass through probate and assets that do not pass through probate.
Many assets do not pass through probate. Examples of assets that do not pass through probate are: Transfer on Death (TOD) accounts, accounts jointly titled with others; some trusts; and assets with beneficiary designations, such as 401K accounts and life insurance policies.
Previously, unless the deceased spouse set up his/her estate for their surviving spouse to receive assets that do not pass through probate, such as these, then the surviving spouse could not receive an elective share of them upon his/her spouse’s death.
The new law enables a surviving spouse to receive an elective share of assets that pass through probate and assets that do not pass through probate. The effect of this new law is that more types of assets are included in those that a surviving spouse may take an elective share of. Therefore, surviving spouses who are not adequately provided for by their deceased spouse’s estate plans will be entitled to receive an elective share of more types of assets, which, depending on the deceased party’s holdings, likely enables to surviving party to more assets.
Similarly, spouses who did careful estate planning to exclude certain assets from passing through probate so their surviving spouse would not be able to receive an elective share of these assets will need to re-think their strategy.
Many people want to limit what they leave their spouse upon their death, especially in the event they have children from a prior marriage who they want their assets to go to. By agreement, a spouse can waive his/her rights to make claim to an elective share or to his/her spouse’s estate.
Prenuptial and postnuptial agreements allow you to make binding and enforceable estate provisions, such as a waiver of his/her spouse’s estate or to claim an elective share, or mandate what one spouse receives in the event of their spouse’s death. If you have or want an estate plan that does not leave the majority of your assets to your spouse, you should consider getting a prenuptial or postnuptial agreement.
In addition, if you have a prenuptial or postnuptial agreement that limits what you are giving your spouse in the event of your death, you should revisit that through the lenses of how, if at all, this new law may change the effect of your intentions, and consult a lawyer as to whether you need to amend your agreement accordingly, assuming your significant other is willing.