11.3 Transfer of Death Accounts

Est. & Trusts § 16-109(a) provides:

(b) Rights of Creditors. – This title does not limit the rights of creditors of security owners against beneficiaries and other transferees under the laws of this state.

Est. & Trusts Article § 16-109(b).   The statute does not provide separate remedies for creditors.   This is, in fact, the language of the pre-1998 Uniform Nonprobate Transfers on Death Act.   The amendments to the Uniform Act in 1998 took a very different approach – protecting creditors if the probate assets were insufficient to cover all valid claims:

Except as otherwise provided by statute, a transferee of a nonprobate transfer is subject to liability to any probate estate of the decedent for allowed claims against decedent’s   probate that estate and statutory allowances to the decedent’s spouse and children to the extent the estate is insufficient to satisfy those claims and allowances.   The liability of a nonprobate transferee may not exceed the value of the nonprobate transfers received or controlled by that transferee.

Uniform Nonprobate Transfers on Death Act § 102(b).   The Comments set out the basis for this reversal:

1.                 Added to the Code in 1998, this section extends protections for family exemption beneficiaries and creditors of decedents to new categories of non-probate transferees of decedents.   However, unlike conventional and cumbersome probate protections, the remedy contemplated by this section is to enforce a duty placed on nonprobate transferees to contribute as necessary to satisfy family exemptions and duly allowed creditors’ claims remaining unpaid because of inadequate probate estate values.   The maximum liability for a single nonprobate transferee is the value of the transfer.   Values are determined under (b) as of the time when the benefits are “received or controlled by the transferee.”   This would be the date of the decedent’s death for nonprobate transfers via a revocable trust, and date of receipt for other nonprobate transfers.   Two or more transferees are severally liable for proportions of the liability based on the value of transfers received by each.

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If there are no probate assets, a creditor or other person seeking to use this section would need to secure appointment of a personal representative to invoke Code procedures for establishing a creditor’s claim as “allowed.”   The use of regular probate proceedings as a prerequisite to gaining rights for creditors against nonprobate transferees has been a feature of UPC Article VI since original promulgation in 1969.   It works well in practice inasmuch as Article III procedures for opening estates, satisfying probate exemptions, and presenting claims are extremely efficient. Id. cmt.

As stated, the Maryland Act does not include a special remedy for creditors on transfer of death accounts.   Presumably, such creditors would need to base its claim on the fraudulent conveyance act.