Aesop’s fables might tell the stories this way:
Once there was a fellow who married a wonderful woman; they had children and a nice life. They lived at #2 Elm Street. Eventually his care for her turned to disdain. He took residence with another and lived separate and apart from her and the children. He lived for many years in a nearby village and amassed a considerable fortune. When he died, he left his fortune to his friend, although he never divorced his wife. The paramour lived a glamourous lifestyle while the wife was destitute. The wife sought legal advice and was told that she could take a one-third share of her husband’s estate under local law. But the estate was hidden and she was unable to find it, for the decedent had given it to his paramour. The wife appealed to a judge, who rightly found that the greedy old man had treated his wife wrongly and demanded that the hidden assets be returned and counted and a portion be given to the wife. It was an equitable and right result.
Enter another family, at #3 Elm Street. It was a second marriage, and each had children from their previous marriages. Life was happy. The husband ran a successful business, and he planned for his daughter to take it over one day. The couple retired, and eventually the business owner died. In his Will, he left the business to his children and provided for his wife handsomely in other ways. He was interested in avoiding the probate process, and so he retitled assets jointly and provided beneficial designations to his wife on life insurance and retirement accounts. Unfortunately, the wife wanted more. She consulted with a local attorney and found that she could take a one-third share of her husband’s probate estate by electing against his Will. The wife did so, demanding a one-third interest in the business, throwing it into turmoil, and jeopardizing the employment of many. She ended up with far more than was expected and frustrated the intent of her late husband.
The moral of both stories is: under the current Maryland elective share statute, parties are free to be fair, but not necessarily required to play fairly.
Current Maryland law states that a surviving spouse is entitled to elect to take, against the Will of the deceased spouse, up to one-third of the “net estate” if there are surviving descendants, and up to one-half of the “net estate” if there are no surviving descendants. (“Net estate” is a defined term under the current statute and basically means the probate estate of the deceased spouse less certain deductions such as funeral expenses, legally enforceable debts of the deceased, a small family allowance, etc.) Case law in Maryland has revised the calculation of the elective share to allow, in certain cases, inclusion of assets not in the probate estate but otherwise controlled or owned by the decedent, such as assets titled in a revocable living trust. Maryland case law shows that the current statute does not go far enough to protect the surviving spouse — and may not protect the decedent’s heirs.
Legislation has been proposed in Maryland this year that will remedy the fact patterns in both of the “fables” above. See go.msba.org/electiveshare17. The proposal pools probate and non-probate assets owned by or controlled by the decedent, deducts certain enumerated expenses, divides the remaining assets by either 3 or 2 (depending upon whether there are descendants of the decedent living), and finally subtracts from that quotient the value of assets going directly to the surviving spouse.
Although the proposed formula is not complicated, finding the assets may still prove to be a challenge. The proposed legislation has two principal effects. First, it would protect the spouse who is unfairly and intentionally disinherited. Second, this proposed legislation would protect the testamentary intent of a decedent who provides for a spouse outside the probate estate (i.e. through the joint titling of assets, beneficiary designation on accounts or a revocable living trust). Moreover, the proposed legislation has the ancillary effect of precluding the need for litigation (and the expenses thereof) to determine the composition and extent of the assets subject to the elective share. The proposal is a creative and comprehensive solution to the problem of elective share inequity while preserving the testamentary intent of the decedent.