Introduction to Estate Management
In Maryland, the process of distributing a deceased person’s (“the decedent”) physical and non-physical assets (such as retirement plan accounts, cryptocurrency, etc.) is called “estate administration”. Whether or not the decedent left a valid will, the original document must be filed with the Register of Wills in the county where they lived at the time of death.
Read the Law: Md. Code, Estates & Trusts § 4-203(b)-(c))
A will has no power until it has been admitted into probate, and even then, it only controls assets that were owned solely by the deceased. It does not cover assets with designated beneficiaries or joint owners (like retirement accounts or joint bank accounts), those assets pass in accordance with the guidelines of the financial institutions where the accounts are held.
For example: A car or house owned solely by the decedent is part of the probate estate and follows the will. However, a retirement account with a named beneficiary bypasses the will entirely.
In Maryland, there are two kinds of probate – administrative and judicial.
- Administrative probate is for uncontested wills and is handled by the county Register of Wills.
- Judicial probate is, generally, for contested wills or other complicated administration (such as an original will that’s missing essential provisions) and is handled by the county Orphan’s Courts.
Read the Law: Md. Code, Estates & Trusts, §§ 4-202 and 5-102
Under Maryland Law, If the decedent passes away without a valid will, they are said to have died “intestate.” Maryland intestacy law is, essentially, the process of estate administration for the decedent’s probate estate in the absence of a will. Intestacy law establishes a hierarchy that determines the order of inheritance and the corresponding percentage of the decedent's estate that each “heir” (eligible person) is entitled to receive.
There are several steps in managing an estate. The articles in this series will explain each step in more detail.
Opening the Estate
To open an estate, the person responsible for managing the decedent’s affairs must file the required documents with the Register of Wills office in the county where the deceased lived permanently (their “domicile).” The individual in charge of this process is called the “Personal Representative.” While most other states use the term “Executor”, Maryland uses “Personal Representative.”
The will should indicate who serves as Personal Representative. A will can appoint more than one person to serve in this role simultaneously. A will can also state a list of alternatives in priority order. If the will does designate a Personal Representative, the named person is deceased, or if the there is no will, Maryland law provides an order for the appointment of a Personal Representative and indicates who has priority based on their relationship to the decedent.
Read the Law: Md. Code, Estates & Trusts § 5-104
Once the Register of Wills, or the Orphans Court, appoints a Personal Representative, they issue Letters of Administration. Letters of Administration grant the Representative the authority to manage the estate, which includes:
- selling assets,
- hiring professionals,
- paying taxes,
- and distributing property
The Personal Representative pays debts, distributes assets of the Estate, reports to the court what they did, and formally closes the Estate. The court rules for estates administration are found in Title 6 of the Maryland Court Rules.
Read the Law: Md. Code, Estates & Trusts, § 10-101, Title 6 of the Maryland Rules
Assets of the estate are generally distributed after payment of taxes (such as income taxes, inheritances, and/or estate taxes), and other validly owed debts of the decedent (such as funeral and burial expenses). If there isn’t a will, Maryland intestacy laws dictate who inherits the remaining assets and what percentage they receive.
Read the Law: Md. Code, Estates & Trusts, §§ 3-101 through 3-112
There are two types of estate administration: one for “regular estates” and one for “small estates.” Small estates are governed by a simpler set of rules than regular estates. The third article in this series can help you determine whether an estate qualifies as a small estate or regular estate.
Fees
Opening an estate involves fees. A probate fee may be charged for the administrative processing of the estate and would be calculated based on the estate’s total value before taxes and expenses have been deducted. In addition, fees may be associated with legal fees or a Personal Representative’s bond. Learn more on the Maryland Register of Wills website.
The Register of Wills must waive the probate fee if both of the following conditions are met:
- Property Status: The decedent’s real property, that is part of the probate estate, is to be transferred to the decedent’s heir that resides on the property OR the real property is encumbered by a lien and subject to a tax sale; AND
- Financial Hardship: The estate is unable to pay the fees due to “poverty.”
- For the estate to qualify as experiencing “poverty”, the deceased's household income must have been less than 50% of Maryland's median income at the time of death. Alternatively, the Personal Representative qualifies if they are represented by an attorney from the Maryland Legal Services Corporation.
Read the law: Md. Code, Estates and Trusts § 2-206
The next article in this series describes what to do with the will and the appointment of the Personal Representative.