Probate and Revocable Living Trusts in Maryland
The legal definition of probate is the proving of a last will and testament. Oftentimes, probate describes the Court process of administering a decedent’s estate after he or she dies. The probate estate consists of all the assets that are in the decedent’s sole name on the date of death. On average, the probate administration process takes about a year to conclude. However, in many situations, the initial administration of a revocable living trust could take just as long, if not longer.
Any assets that have a joint owner, a beneficiary designation, or are pre-titled or pre-funded into revocable living trust pass outside of the probate administration procedure. Although all of the assets in a revocable living trust in Maryland are subject to the gross taxable estate, any assets that have been pre-funded into a revocable living trust avoid the probate administration process.
Benefits of Revocable Living Trust to Probate Process
Probate has suffered from an unfavorable public opinion over several years. There is a misunderstanding that probate is an onerous and costly process. If done well, Maryland probate can be a streamlined process and there are advantages to the probate procedure.
One of the primary advantages of probate is the abbreviated statute of limitation period for creditors to file a claim. Under Maryland law, the regular statute of limitations for bringing an action or claim is usually three years. When a decedent’s estate has been probated, that period is abbreviated to six months.
Another advantage of probate is that there is some Court oversight regarding the amount of the actions of the personal representative, expenses of the estate, and the personal representative’s commissions that can be requested.
Another advantage of probate, that is not a requirement of most trusts, is that a personal representative is bonded. Even when a last will and testament for a decedent dying in the State of Maryland waives bond, Maryland law requires the personal representative to have a nominal bond.
The nominal bond usually covers up to $25,000 and can be used in the event that the personal representative absconds with the estate assets and the bond proceeds can cover Court fees, taxes that may be owed or in some situations, even attorney’s fees.
Possible Disadvantages
One disadvantage to probate is that the probate procedure can sometimes be a longer process, delaying the distribution of assets to the named beneficiaries of an estate plan. Because the nominated personal representative must be appointed by the court to serve, the payment of expenses or other costs may take a few additional weeks. However, in most scenarios, administering a revocable living trust is very similar time-wise to the probate process, and both, take about a year on average to complete.
Another disadvantage of probate is that it is a public process. Any documents that are filed with the Register of Wills become part of the public record and anyone has the right to view those documents. Those documents usually include the last will and testament of a decedent, all of the assets of the decedent, as well as an accounting of the income, gains and losses of the decedent.
When Probate Should Not be Avoided
There are many factors to consider when deciding whether or not to avoid probate. Some of these factors include the client’s needs, desires, goals, assets, family dynamic, how their assets are titled, and the nature of their assets. Probate avoidance is something that should be discussed with an estate planning attorney on a case by case basis. It is a decision that is made along with an individual and their estate planning attorney based on each client’s unique individual situation.
