Probate is the legal process of administering a Decedent’s Last Will & Testament (“Will”), whereby assets owned by the Decedent at death are distributed pursuant to the terms of their Will, or if there is no Will, according to a given state’s law of intestate succession. In general, each state/jurisdiction has its own procedures for distributing the assets of a person that has died (the “Decedent”). Some people draft their estate plans with the goal of avoiding probate, and the associated administrative burden and length of time it can take, at all costs. Below is a list of the practical steps to be taken in the Probate Administration of an Estate in the State of Maryland. The filings addressed below are specific to Maryland and will differ from the procedure of other states.
Stage One – Information Gathering
Upon the death of a loved one, the first step is to grieve and be there to support the Decedent’s other loved ones. A quick email or telephone call to the lawyer that prepared the Decedent’s Will is recommended so that the lawyer can begin gathering the information necessary to open the Estate. Information to gather includes: 1) location of the original Will; 2) the most recent bank and investment account statements; 3) documents related to any real property owned by the Decedent; 4) information related to any retirement accounts or life insurance policies; and 5) the names and addresses of all persons named in the Will, just to name a few.
While every Estate is different, it is not atypical to formally open an Estate more than a month after the Decedent’s death. There may, however, be circumstances where it is necessary to immediately seek to open a Probate, such as where an asset of the Estate, such as a home, is at risk unless payments are made.
Stage Two – Opening the Estate
Once the information gathering stage is complete and the lawyer has the information necessary to open the Estate, a petition is filed with the Register of Wills of the county in which the Decedent was a resident prior to death. The petition is filed by the Petitioner, who is often the Personal Representative (also referred to as the Executor or Administrator of an estate), named in the Decedent’s Will. If the value of the probate estate (not including non-probate assets) is less than $50,000, a Small Estate will be opened, and if probate assets are greater than $50,000, a Regular Estate is opened.
A quick note on probate assets versus non-probate assets. A probate asset is anything that the Decedent owned in their individual capacity upon their death, while a non-probate asset can be thought of as assets of the Decedent that pass directly to a beneficiary by virtue of how the asset is titled. An example of a non-probate asset is a jointly-held bank account (held with a surviving spouse) or a retirement account with a valid designated beneficiary. These assets pass directly to 1) the surviving joint owner in the case of the bank account, and 2) the named designated beneficiary in the case of the retirement account, without going through the probate process.
To open a Regular Estate in Maryland, the following documents are filed:
- Regular Estate Petition – requests the Court to appoint the Petitioner as Personal Representative of the Estate and provides the Court with the information necessary to do so.
- Schedule A – provides the Court with an estimated value of the probate estate.
- List of Interested Persons – identifies for the Court all beneficiaries named in the Will (known as legatees), all individuals who would inherit if the decedent died without a Will (known as heirs), and the Personal Representative(s) named in the Will.
- Notice of Appointment/Notice to Creditors/Notice to Unknown Heirs – notice that an estate is opened must be published in a local newspaper. The notice is signed by the Personal Representative and the Register of Wills then forwards the Notice for publication. A Creditor has six months from the Decedent’s death to file a claim in the Estate. If a claim is not timely filed, the Personal Representative may be able to deny that claim and not be required to pay it.
- Nominal Bond – a bond must be posted for every Regular Estate opened in Maryland. If the decedent’s Will waives the need for bond (which is standard language in Wills prepared by an attorney), a Nominal Bond must be filed (which is less expensive than the cost of a Regular Bond). The purpose of the Nominal Bond is to guarantee the Estate’s payment of any probate fee or inheritance tax due.
The court will usually take one to two weeks from the filing of the above papers to open the Estate and issue Letters of Administration (“LOA”). Letters of Administration are often required by financial institutions before providing sensitive information to the Personal Representative. LOAs allow the Personal Representative to legally “stand in the shoes” of the decedent and generally lead to less resistance when dealing with any Estate-related matters. It is the date of appointment of the Personal Representative that dictates the remaining filing deadlines in the administration of a Regular Estate.
Stage Three – Administering the Estate
After an Estate is opened and Letters of Administration are issued, the Court will provide the Petitioner with a “Deadlines and Responsibilities” document. This informs the Personal Representative of his or her duties and states when the 1) Inventory, 2) Information Report, and 3) First Accounting is due. Each of these filings are addressed below:
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Inventory – the Inventory must be filed within 3 months of the appointment of the Personal Representative (the date of appointment of a Personal Representative is the date on the Letters of Administration). The purpose of the Inventory is to provide the Court with the date of death value of all probate assets owned by the decedent immediately prior to death.
For checking accounts, this is relatively simple as a bank statement from the month the decedent died is often sufficient to determine the date of death value. However, with assets like real property or closely-held businesses, the value reported on the Inventory can be more difficult to determine and often times requires a formal appraisal.
- Information Report – the Information Report is a filing specific to Maryland that pertains to the collection of inheritance tax. The Information Report is also due within three months of appointment of the Personal Representative. Only six states impose an inheritance tax, which is a tax that applies to the person inheriting from the estate (as opposed to the Maryland Estate Tax which applies to the estate itself). Inheritance tax is a ten percent tax that, generally speaking, only applies to persons outside of the Decedent’s immediate family. That is, persons that typically receive in an estate (surviving spouse, child, grandchild, or sibling), do not pay inheritance tax. However, a niece/nephew or a friend that is provided for in the Decedent’s Will would pay the Comptroller of Maryland a 10% Inheritance Tax on the value of the bequest received.
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First Accounting and any subsequent Accounting (if necessary) – The First Account is due nine months from the appointment of the Personal Representative. The Accounting shows the Court all of the expenses paid for by the Estate, income realized by the Estate and any distributions to persons named in the Will. The Accounting is what must be filed and accepted by the Court in order for the probate administration to conclude.
If all probate assets of an Estate cannot be distributed within nine months of the Personal Representative’s appointment, an “Interim Account” must be filed, and subsequent Accounts are due every six months thereafter until a Final Account is filed and accepted. The “Final Account” will show all probate assets as being distributed pursuant to the terms of the Will and end with a balance of zero (representing that nothing is left in the Estate and all assets have been distributed). Also note that a First Account can be a “First and Final Account,” if all Estate assets can be distributed within nine months of the Personal Representative’s appointment. Nine months to a year is the standard timeline to close an Estate that does not have any underlying issues.
Stage Four – Closing the Probate Estate
After a Final Account is accepted by the Court, the Estate will be closed. The Personal Representative has thirty days from the Account being final to distribute the assets of the Estate. In reality, this looks like checks being issued to beneficiaries, or wires being transferred to the bank accounts of the beneficiaries named in the Will. With regard to real property, this would involve a Deed being signed by the Personal Representative and recorded in the county in which the real property is located.
Stage Five – Concluding All Matters Related to the Estate
Once the Probate Estate is closed, it is still the Personal Representative’s duty to resolve all aspects of the Decedent’s Estate. This includes things like verifying that the Decedent’s Final Personal Tax Return (Form 1040) has been filed. Or, if the Estate realized any income during the administration, a Fiduciary Tax Return would need to be prepared and filed (known as a Fiduciary Tax Return). Both the Final Personal Tax Return and any Fiduciary Tax Return are the responsibility of the Personal Representative. Additionally, if there are any non-probate assets, like Life Insurance Policies or Individual Retirement Accounts, the Personal Representative will want to make sure that all claim forms have been submitted by the relevant named beneficiaries on those non-probate assets.
Conclusion
The information and filings noted above are specific to Maryland and are not directly applicable to other states. With this being said, the general idea of providing the Court with information related to assets of the Decedent and detailing where those assets are directed is the general purpose of any probate proceeding. Some people see the above as an administrative nightmare and the goal of their estate plan is to avoid probate so that their loved ones can gain access to their inheritance in a more efficient and less painstaking way. While the above is not as burdensome as the probate process in other states, avoiding probate in Maryland is a very reasonable and attainable goal.
If Maryland’s probate process seems daunting to you, there are strategies that can be employed during life to avoid probate. Generally, estate planning to avoid probate takes more time and effort during life, but can ultimately save your loved ones time and money after your death.
