In Maryland, “Probate” refers to the process of administering the estate of a deceased individual under the supervision of the Orphans’ Court and Register of Wills. For regular estates (those with assets exceeding Fifty Thousand Dollars ($50,000.00)), the process takes at least six (6) months, with most estates being completed within a year.

For regular estates, probate includes filing the appropriate paperwork to open the estate, obtaining Letters of Administration (the documents that appoint a Personal Representative), preparing and filing an Inventory and Information Report listing the assets of the decedent, paying debts, preparing and filing Administration Accounts, and the ultimate distribution of the estate assets.

It is important that these documents are prepared correctly and submitted in a timely manner with the Orphans’ Court/Register of Wills. 

Navigating the process of estate administration can be overwhelming for the Personal Representative, often a family member with no previous experience in this area.

An attorney familiar with estate administration can simplify the process, ensure that the appropriate documents are timely submitted, and resolve unanticipated issues that can arise, such as disagreements regarding the value of assets, challenges to a Will, and the payment of inheritance and/or estate taxes.

In 2015, Maryland enacted the Maryland Trust Act, which completely revised the laws governing trust administration. Although the individual setting up a trust (called the “Settlor” or “Grantor”) often intends for the trust assets to be managed and distributed efficiently and without court involvement, the new laws included several provisions that heighten the duties of the person or entity managing the trust. 

To ensure a trust is administered properly and that taxes and expenses are minimized, an attorney can assist with:

–  Managing trust assets and ensuring compliance with record-keeping and reporting requirements;

–  Planning and providing advice designed to minimize estate, inheritance, and income taxes;

–  Preparing the trust’s income tax returns, known as “fiduciary income tax returns”; and

–  Addressing debts and claims against the trust assets

“Probate Court” generally refers to certain proceedings that occur under the jurisdiction of the Orphans’ Courts of Maryland, one of which is located in each county. The Orphans’ Court of each county works in conjunction with its county’s Register of Wills office to oversee and manage the administration of estates. In most Maryland counties, the Orphans’ Court is composed of three judges.

The rules regarding Orphans’ Courts differ among Maryland’s counties. In some, only attorneys may appointed as an Orphans’ Court judge. In those jurisdictions (currently, Baltimore City, Baltimore County, and Prince George’s County), a single Orphans’ Court judge may preside alone over cases. Outside of those jurisdictions, the Orphans’ Court judges preside over estates as a panel.

The Orphans’ Courts are in charge of approving the final filings in an estate’s administration; namely, the final administration account detailing the distribution of estate assets and petitions for compensation filed by the estate’s personal representative and attorney. 

Orphans’ Courts also have jurisdiction over disputes that occur throughout the estate administration process, including contests to a Will’s validity and interpretation, objections to the nomination of certain individuals as personal representative, the distribution of assets, and more. 

Decisions made after the death of an individual can have major tax ramifications for the deceased’s loved ones. Although the legislature’s decision to exempt estates below 5.3 million from estate tax has protected the majority of families from liability for this tax, those with large estates must still exercise care to ensure they are not subject to tax, especially upon the death of the surviving spouse. 

Most families also will be exempt from the Maryland inheritance tax, as Maryland does not tax assets to spouses, siblings, children, and grandchildren. Maryland does impose a ten percent (10%) inheritance tax on assets passing to domestic partners, friends, nieces, nephews, and other distant relatives, known as “collateral heirs.” 

The most significant post-death tax issues generally involve income tax liability. 

Whether an inheritance will be subject to income tax depends on the type of asset that is received. If a beneficiary receives dividends or interest, then the beneficiary will owe income tax on the dividends or interest, but not on the asset that generated the income. In contrast, a beneficiary will be required to pay income tax on the entire amount received from a retirement plan or tax deferred annuity. 

Finally, elections made with respect to the value of an asset can have a significant effect upon the recipient’s liability for capital gains tax. 

An attorney or tax professional can provide important advice to assist family members in minimizing taxes assessed on inherited property.