In Maryland, spouses are given the right to an elective share in a decedent spouse’s estate. This means that a surviving spouse can elect to receive an amount set forth under Maryland statute rather than the amount that was left to the surviving spouse under the terms of the decedent’s Will, if anything.
Pursuant to Maryland Annotated Code Estates & Trusts Article, section 3-203, et. seq., a spouse’s elective share is one-third of the net estate if there are surviving issue of the decedent (children or descendants of deceased children) and one-half of the net estate if there are no surviving issue of the decedent.
The spouse must file an election to take the elective share within nine months of the date of death or six months after the appointment of the Personal Representative, whichever is later. If the spouse dies prior to filing the election, the election cannot be made by the surviving spouse’s Personal Representative.
In Maryland, there is a continuing problem in determining which assets should be included when determining the surviving spouse’s interest.
The Maryland Court of Appeals decided the Karsenty case nearly two years ago. In Karsenty v. Schoukroun, 406 Md. 469, 959 A.2d 1147 (2008), the decedent was married at the time of his death. He also had a daughter from a prior marriage who was 14-years-old at the time of his death. He had provided for his daughter through a Revocable Trust. A Revocable Trust directs how assets will pass after death, similar to a Will, but the assets held in a Revocable Trust do not pass through probate after death.
The Revocable Trust was the subject of litigation. The surviving spouse claimed that the Revocable Trust was a fraud on her marital rights and the assets in it should have been included in calculating the elective share. The Trustee of the Revocable Trust and the guardian of the decedent’s daughter claimed that the Revocable Trust assets should not be included in calculating the elective share because the decedent provided separately for his spouse and because the decedent owed a duty under a separation agreement with his first wife to provide for his daughter upon his death.
In the Karsenty case, the court ruled that there are certain factors that a trial court must consider when determining whether to invalidate non-probate transfers in computing the elective share. The courts must make determinations on a case-by-case basis.
The factors that the Court of Appeals set forth for lower courts to consider in determining whether the surviving spouse’s elective share should be adjusted to include the value of non-probate transfers include:
- the degree of control over the assets retained by the decedent during his lifetime;
- the degree to which transfers during life depleted the value of property available to the surviving spouse;
- whether the decedent exercised retained control over the assets transferred during life or otherwise enjoyed the property at issue; and
- the relationship between the decedent and the person or persons who benefit by the challenged non-probate transfer.
However, the Court of Appeals was clear that this list is not exhaustive and other factors can and should be considered, when warranted. The Court of Appeals reversed the decision of the Court of Special Appeals, which found in favor of the wife, and the case was remanded for further proceedings. While the result in this case, which favored the daughter, was what most would consider the equitable result, the impact on future litigation is not clear even two years later.
After this ruling, there is great uncertainty in this area of law that could be avoided if the legislature enacts a statute that created the right to an augmented estate. In States using the augmented estate approach, all property of the decedent, probate and non-probate, is added together to determine how much the amount the surviving spouse is entitled to receive. Absent such action by the legislature there is no predicting what a surviving spouse will ultimately take. Even more problematic, although the surviving spouse can essentially pull back into the equation non-probate assets received by non-spousal beneficiaries, the non-probate assets received by the spouse are not usually considered.
This allows the surviving spouse to derail the decedent’s estate plan. If minor children from a first marriage are involved, as in the Karsenty case, this result could be disastrous. Compounding this problem is the fact that many, if not most, clients who enter into marriage are not aware of the rights that marriage gives to a surviving spouse upon death and the effective ability of the surviving spouse to receive assets that were designated to go elsewhere or, at the very least, involve all of the intended beneficiaries in time-consuming and expensive litigation.
Helen M. Smith is an Associate with the law firm Hodes, Pessin & Katz, P.A., in its Towson office. She concentrates her practice in estate planning, and estate and trust administration.