When you pass away, the transfer of your assets to those you leave them to can be a complicated process. Here are the 3 most typical ways your assets might be passed down to your family or loved ones. For instructions on How to Administer an Estate, click here.
When no Estate Planning documents are in place, the State of Maryland must defer to Maryland Estate and Trust Code Title 3 where the laws of Intestacy are outlined.
50% of your assets are to be divided by law and distributed to your spouse, the other 50% shall be distributed to your children per-stirpes. If no children, then potentially 50% to your parent if married.
Per-stirpes is the method of division for subsequent heirs. For example, if you are survived by two siblings and a third sibling who passed away has four children, 1/3 would go to each sibling, then the final 1/3 shall be divided into 1/4 of the 1/3 share to the four children.
Generally, a Last Will and Testament will include three potential sections regarding the distribution of an estate. Charitable contributions are typically listed in a Will as a total percentage of your Estate.
Specific Bequests are then fixed amounts of cash or specific assets to be transferred to a specific individual or entity. For example, my 2035 Tesla Model Z shall go to my son, John. Or $500.00 shall be distributed outright to my grandchild, Sally.
Lastly, residual distribution is a distribution pattern for the remainder of your estate after distributions, debts, and expenses are completed. This may be for example, 100% of my residual estate to my Wife, Jane, in Trust.
Like a Last Will and Testament, the directions for how to distribute your estate are detailed in a Specific Bequest section as well as a Residual Distribution section of your Trust.
At this point, your assets would have already have been transferred into your Trust so they are not part of the Probable (Court Required) estate.
First, the Maryland Laws of Intestate state an order of priority for who can be named as the Personal Representative. If no Will exists, then the next tier of priority goes to your spouse or children with equal rights. Conflict in this priority shall be resolved by filing a request for Judicial Probate. The next priority of appointment would then go to any legatees (people who might inherit assets). Then followed by grandchildren, parents, siblings, other related individuals, creditors, and lastly any other person with an interest.
The Personal Representative is named in the Last Will along with a list of Successor Personal Representatives in the event that the one nominated refuses or is unable to act on your behalf.
Generally, you are the Trustee of your Revocable Living Trust. If you are serving with a Co-Trustee, they will continue to serve or a Successor Trustee may step in.
Once the Petition for the Intestate Probate of an Estate is approved by the Orphans Court, the Personal Representative is declared with a Letter of Administration. This along with a Death Certificate can then authorize this Personal Representative the ability to enter your home, establish a Tax ID (EIN), open an Estate Checking Account, hire an appraiser, secure a bond for their representation, give public notice of the Probate process, contact financial institutions for estimate amounts, and prepare an Inventory filing and Information Report for the estimation of Inheritance Taxes.
Once the Probate Court approves the Inventory Filing and the 6 month creditor period expires, an accounting of the Estate Gains and Losses, Misc. Principal Income, Regular Income, and Expenses can then be submitted to the Probate Court along with a proposal for the distribution of assets based on the Intestate Laws.
Once this Accounting of the Estate is approved and you receive the Court Order, then there is a 23 day waiting period for any interested person to challenge the Filed Accounting. After this period, the final distributions may be paid from the Estate Checking Account.
A Petition for the Probate of an Estate with a Will is approved by the Orphans Court and the original Last Will and Testament is filed, the Personal Representative named in the Will is declared with a Letter of Administration. This along with a Death Certificate can then authorize this Personal Representative the ability to enter your home, establish a Tax ID (EIN), open an Estate Checking Account, hire an appraiser, secure a bond for their representation, give public notice of the Probate process, contact financial institutions for estimate amounts, and prepare an Inventory filing and Information Report for the estimation of Inheritance Taxes.
Once the Probate Court approves the Inventory Filing and the 6 month creditor period expires, an accounting of the Estate Gains and Losses, Misc. Principal Income, Regular Income, and Expenses can then be submitted to the Probate Court along with a proposal for the distribution of assets based on the reading of the Last Will and Testament.
Once this Accounting of the Estate is approved and you receive the Court Order, then there is a 23 day waiting period for any interested person to challenge the Filed Accounting. After this period, the final distributions may be paid from the Estate Checking Account.
If the Trust is properly funded, the Trustee will file a Will of No Estate using the original Pour-Over Will with the Probate Court and distribute public notice in a local newspapers for the purpose of potential creditors.
The Trustee will then look to the Estate Summary in the decedent's Estate Planning Documents and begin the process of safely consolidating any assets into the main Trust Checking Account.
Once creditor period has elapsed and the instructions of the Trust other than the final distribution have been completed, the Trustee should produce a Fiduciary Accounting of all activity.
Lastly, once the creditor period has passed the Trustee will then make all final distributions and close the Estate.
1. Holding a Family Meeting before death can help to reduce unwanted litigation among your family.
2. Asking your Kids What they Want takes out uncertainty over sentimental items like the Autographed Elvis Dinner Plate that you might be happy to either give them now, or leave to them specifically in your documents.
3. Make a Clear List of Who Gets What to give your Trustee specific instructions and to take the guesswork out of the administration process.
4. Include Sentimental Items in Your Estate Planning because so many times, these are the items most fought over and can be included easily into documents such as your Personal Property Memorandum at anytime and without the need to amend any other documents.
5. Remember to Plan around Taxes such as Income Taxes, Estate Taxes, Inheritance Taxes, or other fees related to things like the early distribution of a Individual Retirement Account.
6. Ensure Solvency for Distributions by checking that the specific bequests don't preclude your intended heirs. If for example you leave $10,000 to 3 charities, and $50,000 to a friend, your kids may only have a small amount if anything left to inherit well after you have lived into retirement or paid for long-term care services.
7. Use a Lawyer to make sure that your documents are both read as intended and carried out appropriately. An Attorney has an obligation to represent your Estate responsibly.
8. Update your Estate Planning Documents if you have life events or priorities change since your last documents were drafted. Also, Maryland Law is always changing as it relates to Estates and Trusts. Updated documents can help to ensure that they stay in compliance with the most current Statutes.
