Why Maryland’s New Augmented Estate Law Means You May Need a Prenup

You May Also Need to Revise the One You Already Have

Erin KopelmanErin Kopelman, Principal

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.

Are You a Millennial Thinking about Marriage? Here’s What You Should Know about Divorce

Liz EstephanLiz Estephan, Attorney

Millennials are causing a 24% rate in decline in the divorce rate, according to Business Insider.

There are a few reasons for this statistic like waiting longer to get married, establishing careers, and paying off student loan debt. But if you are a millennial and have decided to get married or are thinking about marriage, here’s what you should know about divorce.

Accounts and Assets

If you and your soon-to-be spouse decide not to have any joint accounts, this does not mean that you do not have an interest in his or her account.

Once you are married, at least in the District of Columbia and Maryland, typically any income to either you or your soon-to-be-spouse is considered marital property. You and your spouse should have frank conversations about your financials and disclose any and all accounts to each other.

Upon divorce, marital assets and accounts are equitably divided.  If you do not know your spouse’s accounts and assets and your spouse is not forthright when you are navigating a divorce, you may have to spend more money in discovery to determine all of your spouse’s accounts and assets.

Real Property

Are you and your soon-to-be spouse thinking about buying property in Maryland or the District of Columbia? Perhaps you had better wait until you are married.

When you are married and buy property in either of these two jurisdictions, there is a presumption that you and your soon-to-be spouse will be tenants by the entirety rather than joint tenants or tenants in common. Tenants by the entirety means that each spouse has an undivided interest in the real property and there is a right of survivorship (if one of you were to pass, the survivor would assume ownership of your home). Maryland has a presumption that real property owned by a married couple is held as tenants by entirety.

If you purchase property before you are married, you could either be tenants in common or joint tenants.

Tenants in common means that you and your soon-to-be spouse have an undivided interest in the property, you are joint owner, but you each own a specific share of the property, your shares do not necessarily have to be equal. Tenants in common do not have a right of survivorship. This could become an issue if your soon-to-be spouse has children from a previous relationship or marriage as the children could inherit your soon-to-be spouse’s interest in the property, not you.

Joint tenants means that you and your soon-to-be spouse have an undivided interest in the real property with rights of survivorship. You and your spouse must intend to create a joint tenancy and the deed should reflect a joint tenancy. Maryland has a presumption against joint tenancy.

Non-marital Property

Do you have a trust, inheritance or real property that you received prior to marriage? This type of property is typically considered non-marital property. For example, if you thinking about using an inheritance to put towards a down payment on a home with your soon-to-be spouse, do not lose track of any of the documentation showing where the money originated.

If you divorce, you want to prove to your spouse and potentially a court, that you have a greater interest in the property because of your non-marital contribution. If you have significant premarital assets, you should consider a prenuptial agreement.