Avoiding Probate in Maryland

Probate means proving someone’s last will and testament. Traditionally, probate is the process of starting the court proceedings so that someone may be appointed as personal representative of an estate. It is often the first step in administering an estate after someone has passed away.

It may be helpful to hire a Maryland probate lawyer as soon as possible after the loss of a loved one. In the event that the decedent has worked on planning their estate with an attorney prior to their death, an individual may go back to that attorney or may choose to seek a new attorney.

What it Means to Avoid Probate

Avoiding probate generally means that no assets are passing through the probate administration procedure, and therefore, the last will and testament, if one has been created, or laws of intestacy do not govern any assets.

Typically, when someone passes away, their assets pass in four ways. The first way assets pass is according to the beneficiary designation. For example, life insurance policies and retirement assets often name an individual that is automatically entitled to receive the assets at the death of the owner. The second way assets pass is according to the ownership of the asset or titling of the asset. For example, often, a married couple owns their residence as tenants by the entirety. Tenants by the entirety is a type of ownership that allows the residence to pass by operation of law to the surviving spouse. The third way assets pass is according to trust provisions if they have been pre-funded into a trust. Any assets in the decedent’s sole name at the date of death without a joint owner or named beneficiary pass according to the last will and testament and are subject to probate.

Many individuals mistakenly think that their last will and testament governs all of their assets regardless of titling or beneficiary designation. Where individuals name beneficiaries or joint owners on all of their assets without coordinating with their overall estate plan, the result could be an illiquid estate or unintentional beneficiaries.

Probate Avoidance Planning in Maryland

For some clients, avoiding probate is a priority. However, probate—especially in the state of Maryland—is fairly streamlined and usually not an onerous process. There are multiple ways to avoid probate if that is a concern, but it may be helpful to discuss your wishes with an attorney so that so that the attorney can review the entire estate plan as a whole in light of your family dynamics, other goals, and the nature and titling of the assets.

How an Attorney Helps in the Process

A Maryland probate attorney can assist a client during the estate planning process to determine if there is a way to create an estate plan to avoid probate and whether or not avoiding probate is beneficial. These decisions need to be made carefully and deliberately. After someone has passed away, the option to avoid probate is usually not available.

Why a Person Should Not Avoid Probate

The question of avoiding or not avoiding probate is a decision that should be made on a case-by-case basis. An attorney can often assist with reviewing the nature of an individual’s assets, family dynamics, overall goals, estate tax exposure, and any number of factors to determine whether avoiding probate is possible and advisable.

There are pros and cons to the probate administration procedure. For example, if an individual owns real estate in multiple states, it may be cost and time effective to plan to avoid probate in multiple jurisdictions. In addition, avoiding probate may allow an individual that has concerns regarding privacy to keep his or her wishes for the distribution of his or assets at death from becoming part of the public record.

However, probate can also allow for the abbreviating of the creditors period, and unknown creditors or heirs to come forward within a proscribed time period. In addition, probate can allow for some court oversight and transparency throughout the administration process.

Disadvantages of Avoiding Probate

One of the advantages of the Maryland probate process is that it begins at the start of the creditors’ period, which can shorten the statute of limitations to file a claim against the estate. It also allows some courts supervision over the named Personal Representative. For many estates, it forces a Personal Representative to check in with an attorney or check in with the courts to learn about the other deadlines that may be plaguing the estate—such as estate tax deadlines, income tax filing deadlines, or other deadlines that may not be necessarily related to probate—but it does often force someone to speak with a professional regarding the administration of the estate.

Living Trusts and Role in Maryland Probate Process

A revocable living trust is a trust that is established and funded during the lifetime of a person. It is usually revocable and completely amendable while the creator, called a settlor, is alive and maintains required capacity. During the lifetime of the settlor, the assets of the trust are often used for the support of the settlor. Assets that are pre-funded into a revocable living trust typically pass outside of the probate process, and pass instead, according to the trust provisions.

Assets that have been funded into a living trust during the lifetime of the settlor pass outside of the probate administration proceeding. However, many non-probate assets are still considered part of a decedent’s gross taxable estate for estate tax purposes. A common misunderstanding is that assets of a revocable living trust are not subject to estate tax. For example, a person who dies with real estate in his sole name with a value of $100K, and a revocable living trust with assets that are valued at $2.5 Million, has a probate estate of $100K, but may have a gross taxable estate of $2.6 million.