If you are in charge of administering a decedent’s estate, either because you were appointed in a Will or because you volunteered, you have an important job ahead of you. One of your first responsibilities as part of that job is to determine if the estate must go through formal probate or if an alternative for small estates is available.
What Is Probate and Why Is It Required?
Over the course of a lifetime, almost everyone acquires assets that comprise their estate at the time of their death. Some people amass a huge estate that includes complex and valuable assets while other people own little more than their personal possessions at the time of death. Regardless of the size and value of assets owned by a decedent, those assets must be identified, valued, and passed down to the new owners. That is the primary purpose of the legal process known as probate. Probate also serves to authenticate a Last Will and Testament purportedly executed by the decedent as well as litigate any challenges to that Will. In addition, creditors of the estate are notified and provided an opportunity to file claims against the estate during probate. Finally, all taxes, including federal gift and estate taxes, owed by the estate must be paid before the probate process can reach its conclusion.
Why Is Avoiding Formal Probate Desirable?
For most estates, some type of probate is required; however, if formal probate can be avoided, it should be. The reason for this is that formal probate is costly, both monetarily and in terms of time. Often, formal probate can take longer than a year. All the while, the probate assets remain unavailable to the intended beneficiaries. In addition, the longer it takes to probate an estate, the more expensive it is as a general rule because everyone involved (Executor, attorney, appraiser, and accountant) is entitled to a fee for their services.
Probate vs. Non-Probate Assets
Not all assets are considered probate assets. Therefore, before you can decide if an estate requires formal probate, you must first determine which assets are probate assets and which assets bypass probate altogether. For example, assets held in a trust do not go through probate nor do proceeds from a life insurance policy with a named beneficiary.
Small Estate Alternatives in Maryland
In the State of Maryland, when a decedent left behind $50,000 or less ($100,000 if the spouse is the sole legatee or heir) in assets it is considered a small estate. If the estate qualifies as a small estate, it can be administered using an alternative to formal probate by filing a Petition for Administration of Small Estate.
Contact an Annapolis Estates and Trusts Attorney
For more information, please join us for an upcoming FREE seminar. If you have additional questions or concerns about probate or trust administration, contact an experienced Annapolis Estates and Trusts attorney at Sinclair Prosser Gasior by calling (410) 573-4818 to schedule an appointment.