A. How to Determine the Elective Share of the Estate

A testatrix cannot completely disinherit her spouse. In the event that she tries to do so, the surviving spouse may elect to take his spousal share, which is one-half of the net estate, or one-third of the net estate in the event that there are surviving issue of the testatrix.[1] The election is as to the “net estate,” which is defined as “the property of the decedent passing by testate succession, without a deduction for State or federal estate or inheritance taxes, and reduced by: (1) Funeral and administration expenses; (2) Family Allowances; and (3) Enforceable claims and debts against the estate.”[2] Thus, the “net estate” is limited to probate assets as it is only property “passing by testate succession,” which is countable as the net estate.[3] Necessarily excluded from the net estate are assets passing outside of probate, which includes assets held in trust, and assets and accounts titled to pass on death.[4] Maryland’s approach is different from many neighboring jurisdictions that utilize the concept of the ‘augmented estate’ to allow the surviving spouse to claim a share of non-probate assets.[5]

Maryland has recently changed its approach with the passage of SB192/HB99, which will change the electable estate from a “net estate” to the “taxable estate”. The term taxable estate is somewhat misleading because of the higher estate tax exemptions and it derives from how the estate tax would be calculated (i.e., looking at non-probate as well as probate assets). This change will go in effect on October 1, 2020.

The spousal elective share is in addition to the Family Allowance available to the surviving spouse, but the Family Allowance reduces the size of the net estate.[6] Income from the spouse’s share of the net estate is attributable to the electing spouse.[7] The net estate is valued as of the date of distribution.[8]

The Maryland Court of Appeals squarely examined the concept of ‘fraud on marital rights’ in its Karsenty opinion. The concept is that a transfer of assets from probate to non-probate would defraud the surviving spouse of assets from the net estate. Previous Maryland cases had looked at decedent’s intent with transferring assets outside of probate. To claw back non-probate assets into the net estate the focus will be “on the nature of the underlying inter vivos transfer.”[9] If the transfer “was ‘complete and bona fide’ or done in ‘good faith,’” then estate planning will be upheld.[10] Where the transfer is “‘a mere device or contrivance,’ ‘a mere fiction,’ ‘a sham,’ or ‘colorable,’” then it will be set aside.[11] The analysis for determining whether a transfer will be upheld is three-fold:

1. Surviving spouse must show that the decedent retained control over ‘transferred’ property;
2. The court shall not “second-guess reasonable and legitimate estate planning arrangements;”
3. A review of the Whittington factors:
   1. Extent of control exercised by the testator over the transferred property;
   2. Decedent’s motives;
   3. Transferee’s motives;
   4. Degree to which the transfer has deprived the surviving spouse of property
4. The extent to which the decedent actually exercised the control over the property;
5. The familial relationship between the decedent and the transferee.[12]

B.Elective Share Rights and Procedure

The surviving spouse must elect to receive the elective share within the later of 9 months after the decedent’s death or 6 months after the appointment of the personal representative.[13] The election must be in writing and signed by the surviving spouse.[14] If the surviving spouse is a minor or subject to a disability, then the guardian of the surviving spouse shall sign the disclaimer.[15] The right to elect is non-transferable.[16] The right to elect can be waived pursuant to a written contract.[17] Once the surviving spouse has elected, then they are no longer able to receive property pursuant to the will.[18] The election does not prevent the surviving spouse from receiving non-probate assets. DHMH may force the surviving spouse to elect against the estate.

If you need to elect against the estate, or are a personal representative/trustee dealing with potential litigation, then you should call for a free consultation. Our attorneys regularly litigate cases to verdict and have the experience you need when the litigation starts.

David A. (Andy) Hall, Esq.
King|Hall LLC
410-928-1104
5300 Dorsey Hall Drive
Suite 107
Ellicott City, Maryland 21042
andy@kh.legal

 

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[1] Estates & Trusts § 3-203.

[2] Id.

[3] Id.

[4] See id.

[5] See Karsenty v. Schoukroun, 959 A.2d 1147, 1158, 406 Md. 469 (Md. App., 2008)(referencing neighboring jurisdictions of Delaware, New Jersey, New York, and Pennsylvania).

[6] Estates & Trusts § 3-203(a)(3).

[7] Estates & Trusts § 3-203(e); see Frater v. Paris, 156 Md. App. 716, 848 A.2d 673 (Md. App., 2004); see also Gardner v. Mercantile Trust Co. of Baltimore, 164 Md. 280, 164 A. 663 (Md., 1933).

[8] Estates & Trusts § 3-203(d).

[9] Karsenty at 1172.

[10] Id.

[11] Id.

[12] Id. at 1173-80.

[13] Estates & Trusts § 3-206.

[14] Estates & Trusts § 3-207.

[15] Estates & Trusts § 3-204.

[16] Id.

[17] Estates & Trusts § 3-205. See Brees v. Cramer, 322 Md. 214, 586 A.2d 1284 (Md., 1989).

[18] Estates & Trusts § 3-208.