2017 Report From The Maryland General Assembly Estate Planning and Probate Legislation

At the beginning of the year, 2017 was looking to be a very productive one for the General Assembly when it came to bills affecting estate planning, taxes, probate and medical decision-making.   However, as the Session progressed, important bills got sidelined so that by the end of the Session, only a handful of significant bills were actually passed.

In this summary of the 2017 Session, there will be a review of those bills that passed, some of which will - no doubt - be important, and a review of some of the bills that went nowhere, except onto a list of bills to be addressed again in next year’s General Assembly.

The bills that passed will, for convenience purposes, be grouped into three broad categories: Estate Planning, Probate, and Medical Decision-Making. 

ESTATE PLANNING

In 2014, the Maryland Trust Act (“MTA”) was passed by the General Assembly.  The purpose of the MTA was to incorporate some uniformity to the rules and laws affecting trusts in Maryland.  Ever since the passage of the MTA in 2014, however, there have been constant amendments passed to address various aspects of the MTA that required adjustment.  This year was no exception.  Three bills were passed that amended the provisions of the MTA. 

Delete the Requirement that a Trustee Provide Notice to Self:

SB792 is the simplest of the three MTA bills because all it does is to exempt a Trustee who is also a qualified beneficiary from having to give notice to himself or herself when notice may otherwise be required.  This includes the requirement to provide annual trustee’s reports.

So-Called “Secret Trusts” May Now Be Possible:

SB793 is actually a very interesting bill that should provide the practitioner the ability to set up trusts for individuals and designate persons other than the qualified beneficiaries to receive any required

notices or trustee reports under the MTA.  Under current law, a qualified beneficiary is entitled to receive trustee reports, accountings and other information about a trust.  Now, however, the person creating the trust can designate someone else to receive such information on behalf of a beneficiary.  In effect, the beneficiary will not even need to know the trust exists, which, in some cases, can be very useful.  The bill also establishes the standard of care that the person receiving notice on behalf of a beneficiary owes to that beneficiary.

Exemption for Taxes/Fees When Transferring a Motor Vehicle from Trust:

The final bill under the MTA, SB449, deals with a little known, but very frustrating tax trap.  Several years ago, the General Assembly authorized the transfer of a grantor’s motor vehicle into a revocable living trust, and waived any transfer taxes and most of fees associated with the transfer.  But, what happens when the grantor transfers the motor vehicle out of the trust?  Under the previous law, the trust was liable to pay the 6% excise tax and certain fees, regardless of the relationship of the transferee to the grantor.  However, if there had been no trust, the owner could have transferred the motor vehicle to certain relatives and other permitted transferees without having to pay the excise tax or those fees.  Under the new legislation, the exemptions that an owner of a motor vehicle currently has regarding the excise tax and certain fees will equally apply to the grantor of a revocable trust.

Using TOD Provision to Transfer a Motor Vehicle upon Death:

Another bill regarding motor vehicles is HB492.    Under this bill, a “sole owner” of a motor vehicle my designate a “TOD” beneficiary so as to avoid estate administration.  To make this designation, one must apply to the MVA for an updated certificate of title that reflects the TOD beneficiary.  A TOD beneficiary may be removed by the owner by requesting a new certificate of title without the designation. 

Filial Support Obligation; Transfer of Real Property by a Sole Proprietor to a LLC:

There were two other bills passed by the General Assembly that may have limited impact, but if applicable to a particular situation, they will be important.  One is SB676 which prohibits the state from trying to require a child with sufficient means to pay for the needs of a destitute parent.  Under current law, a fine of up to $1000 could have been imposed.  This law strikes down the ability of the State to pursue a child to provide support to a destitute parent.

The other bill, SB111, allows a sole proprietor to transfer real property into a single-member LLC where the single member is the sole proprietor, without having to pay real estate recordation and transfer taxes associated with that transfer. 

PROBATE

Two bills were passed in this year’s General Assembly that will affect the administration of some estates in Maryland. 

Increase in Spousal Share of Intestate Estate:

One bill is SB73, which affects the spousal share in an intestate estate.  When a decedent dies without a will, leaving a spouse but no minor children, or if a spouse dies leaving no surviving issue, but a surviving parent, the spouse will be entitled to receive $40,000 before the balance of the estate is distributed between the spouse and the adult children or parents of the decedent.  This is an increase from the current amount of $15,000.

Inheritance Tax of Domestic Partner:

The second bill, SB276, deals with the Inheritance Tax Exemption for a “Domestic Partner.”  Under current law, an affidavit is required to prove that a beneficiary is a domestic partner of the deceased.  Under the new law, documents from a long list of possibilities may be substituted for the affidavit.  This list includes a joint checking account or investment account; joint ownership or lease of a motor vehicle; powers of attorney or health care power of attorney where one person appointed the other as an agent; or, the designation of one partner as the primary beneficiary of the other partner under a Will, life insurance policy, or retirement plan, among other things.

HEALTH CARE DECISION-MAKING

The use (and abuse) of advance directives, including health care powers of attorney and living wills, continues to be addressed in the General Assembly.  This year had one bill that addressed possible abuse and another bill that should enable more people to make an advance directive.

Disqualified Individuals Serving as Health Care Agent or Surrogate:

In SB562, the General Assembly has provided that if a married couple has entered into a separation agreement or has filed for divorce, then each spouse will be prohibited from serving as a health care agent or as a surrogate for the other spouse.  However, should one spouse, after the execution of the separation agreement or after the filing for divorce, still wish for the other spouse to serve as such, this law will not prevent that other spouse from serving as such.   Additionally, when a protective order has been issued protecting one person from the acts of another, the person against whom the protective order was issued cannot serve as a health care agent for the person being protected.

Electronic Advance Directives; Signature and Witness Requirements:

The other bill, HB188, adds provisions that will facilitate the use of electronic advance directives.  It will now be possible, in certain cases, for an individual to complete an advance directive online without having to obtain witnesses and by using an electronic signature.  The goal is to increase access to a broader number of people to the opportunity to create an effective heath care power of attorney or living will.

BILLS THAT FAILED, BUT MAY BE BACK NEXT YEAR:

With 1200 bills filed in the Maryland Senate this year and 1661 bills filed in the House of Delegates, the General Assembly has a lot of work to do in just 90 days.  Often, good bills never get the attention they need to get a vote.  Three of those bills this year were: 

Elective Share Act:  Sometimes, for good reason or bad, one spouse may attempt to disinherit another spouse from inheriting anything upon the death of that spouse.  The current law is unclear what recourse a surviving spouse may have if that spouse is disinherited except that the surviving spouse is entitled to an elective share against the probate estate of one-third (1/3) if there are surviving issue or one-half (1/2) if there are no surviving issue of the deceased spouse.  A bill was submitted this year that would have defined the deceased spouse’s taxable estate, as that term is defined by the IRS, as the estate from which a surviving spouse may claim an elective share.  This was a complicated bill that required an examination of many factors, and agreement could not be reached this year on those factors that should be used to determine the final elective share to which a surviving spouse is entitled.

End of Life Options Act:  Residents in Oregon, Washington, California, Montana, Colorado, New Mexico, Vermont and the District of Columbia, have the ability to request assistance from their physicians in obtaining safe and humane medications so that they can end their own lives in certain, very limited situations.  The Maryland proposal, which mirrored the provisions in the other states, required a prognosis of death within six months, a finding of capacity of the patient, and a voluntary request by that patient on at least two occasions for the required assistance before the medications would be prescribed.  Because of the politics behind this proposal, the General Assembly was unable or unwilling to act this year.

Health Care Powers of Attorney for Minors:  A bill was submitted this year that would have allowed parents of a minor child to appoint a temporary health care agent to make limited decisions regarding the health care of their minor child if the parents were unavailable.  Typically, this is done when parents go away on vacation.  This bill ran into some controversy because the perception that this bill was not necessary.  Hopefully, this misunderstanding will be cleared up next year.

Michael Davis is an attorney with the Estate Planning practice group at Davis, Agnor, Rapaport & Skalny, LLC. For questions about this report, please do not hesitate to contact Michael.