The portion of your estate that passes to your spouse is called the marital share. Typically, you would provide for your spouse by indicating in your Will how much of your estate is to go to them upon your death. We often refer to an “I Love You Dearly Will” as being one that leaves everything to my spouse if they outlive me or everything to my children if my spouse pre-deceases me. For the vast majority of married couples, this general disbursement plan is perfectly sufficient.
But, every family is different
What if your spouse came from a well to do family and would not have to rely on your estate to get by after you are gone? Well, then your decision might be to give it all to your children instead and not provide anything to your spouse in the Will. Or consider the possibility that you give a specific amount to your spouse and the rest to your children. Maybe you are separated but never got around to divorcing your spouse – but you did write them out of your Will. That’s OK, right? Maybe not, it gets complicated.
Clearly having a Will and specifically addressing your spouse in that Will is the best and safest approach. But even that path can have some potential road bumps. To understand what could happen, let’s take a very brief look at what would happen if you did not have a Will when you died. Then the laws of intestacy come into play. At a very high level, the law in Maryland provides that if you leave behind a spouse and minor child(ren), then the spouse will get one-half of the net estate and the remainder divided equally by the children. If there are no children, the spouse could get the entire estate. I say could get, because it depends on if there are grandchildren or the parent(s) of the deceased are still alive. But in general, if a person dies without a Will, their spouse gets one-half if there are minor children and the whole thing if there are not.
Surviving Spouse Elective Share
So the laws of intestacy govern what happens if you die without a Will and the probate process addresses what happens when you die with a Will. What could go wrong? Well, there is something called the surviving spouse elective share. This law was originally designed to ensure that one spouse could not completely write the other out of their Will and leave them destitute and a burden on the state. And in the beginning, this only applied to assets passing through probate. A savvy person could put the vast majority of their money in non-probate assets (like an IRA) and leaving nothing in the probate estate for the surviving spouse. So the legislature recently amended the law to say that the surviving spouse elective share now applies to something called the “augmented estate” which includes probate and non-probate assets and is calculated via a fairly complex series of considerations. This amendment goes into effect beginning in October 2020. The bottom line goes something like this. If there is a surviving issue (children or grandchildren) then the elective share is one-third of the estate minus a few things. And if there is no surviving issue, the elective share is one-half of the estate minus those same few things.
Disclaiming an Inheritance
Now here is where it gets tricky, if your spouse is not in complete agreement with you and you leave them too little in your Will, they could elect to decline or disclaim the share you willed to them and instead take their elective share as prescribed by law. So if the elective share is bigger than what you left them in the Will, they might choose the elective share. Moreover, the same law allows a spouse to take an elective share of the spouse’s estate unless otherwise agreed upon by waiver, prenuptial agreement, or postnuptial agreement. Waiving the right to an elective share is often part of pre-nuptial agreements.
The new law is fairly complex but does provide a degree of certainty when it comes to addressing the needs of a spouse in estate planning. The possible scenarios outlined above could all be affected by the change in the law in different ways. And the new law might influence your fundamental choices as to how your estate plan is structured. At what point do you need to be concerned about the interplay between competing interests in intestacy, probate, and augmented estates? Well, the more you have the more important it becomes. And the worse you treat your spouse in the estate plan, the more likely it will come into play. Check with an estate planning attorney like The Tyra Law Firm, LLC. We would be happy to assist you.