This does not mean that Shimp I concerns about joint wills can be ignored when drafting joint trusts, but that the inherent pitfall of using a joint estate planning vehicle must be dealt with at the planning stage – not let it become a litigation generator for later on.
Shimp I described a joint will as having two separate components: the will component and the contract component. By nature, wills are “ambulatory” and can be revoked or modified by the survivor. The joint will, however, may also be a contract between the couple enforceable after the second death by a third party beneficiary. This contract is not ambulatory. The interplay of these two components can make joint wills, and by extension, joint trusts confusing.
In Shimp v. Huff, 315 Md. 624 (1989) (“Shimp II”), the surviving husband of Shimp I died leaving his joint will intact. The issue in Shimp II was whether Mr. Shimp’s new wife could take her elective share against his assets regardless of the contractual rights emanating from the joint will with his first spouse. The Court held, based on public policy, that the elective share trumped the contract.
Shimp I and II involved a contract to make a will. A tenant by the entirety immunity trust, on the other hand, would involve an inter vivos trust that most likely becomes irrevocable at the first death. The two most common situations where the tenant by the entirety immunity trust would be useful are (i) when the couple wants to preserve the property for later disposition in a blended family situation or as a hedge against remarriage, or (ii) when the couple wants to maximize the asset protection benefits regardless of the order of death. Given these concerns, the tenant by the entirety immunity trust would provide that it becomes irrevocable at the first death. Before that event, of course, it could remain revocable but it should only be revocable by the act of both spouses to enhance the tenant by the entirety attributes. Under the holding of Karsenty v. Schoukroun, 406 Md. 469 (2008), Shimp II should have no application to a trust that becomes irrevocable at the first death. In the last legislative session, the General Assembly considered a bill that would pull the assets of a revocable trust into the base for elective share purposes. This bill would not extend to assets in an irrevocable trust. Accordingly, a tenant by the entirety immunity trust should be free from a Shimp II attack should the surviving spouse remarry.