Navigating the Probate Process
Probate is the legal process by which the property in a deceased person’s estate is distributed to their beneficiaries and/or heirs. This property shall be distributed in accordance with the wishes of the decedent, if he/she had a valid will at the time of their passing. If the decedent passed without a valid will in place, then his/her property will pass according to state laws, which generally limit inheritance to a spouse or blood relatives. This is known as “intestate succession.”
Petition for Administration of Estate
Whether or not the decedent had a valid will at the time of their death or not, the probate process starts with the filing of a Petition for Administration of Estate with the Register of Wills. This petition should be filed along with the last will and testament of the decent (if any) and other applicable forms, such as an Information Report, List of Interested Persons and Notice to Creditors. The Petition for Administration of Estate must be filed with the Register of Wills in the county that the decedent resided in at the time of their death. Under certain circumstances, the estate is able to request that it be allowed to conduct a Modified Administration, a slightly less paper-work intense form of administration.
Appointing a Personal Representative
In order to determine who shall administer the decedent’s estate, it is important to locate the decedent’s will, if any. If the decedent has named a personal representative in their last will and testament, then most likely, the wishes of the deceased will be honored and the person named in the will serves as the personal representative. If the decedent died without a will, the Register of Wills or the Orphans Court will appoint a personal representative to administer the estate. In either case, a personal representative will only be appointed after a petition for administration of estate is filed with the Register of Wills office.
Letters of Administration
After the personal representative has been appointed, the Register of Wills issues letters of administration. These letters are the official documents that empower the personal representative to act on behalf of the estate. Once in possession of the letters of administration, the personal representative is authorized to, among other things, collect the decedent’s assets, sell/transfer real estate and pay any valid debts, expenses and/or taxes.
As a condition of appointment, the Court may require the personal representative to post a bond. The amount of the bond is usually based on the value of the personal property in the estate, as well as any inheritance taxes and debts that might be due. This bond is for the benefit of interested persons and creditors in the event that estate matters are not properly taken care of, such as if the personal representative loses, mishandles or misappropriates the assets of the estate.
Notice of Appointment
Once appointed, the personal representative is required to provide notice to all interested persons and potential creditors of the estate. The law provides specific requirements as to how notice must be provided. First, notice is required to be mailed by to all of the interested persons of the estate. Additionally, a notice of appointment must be published in a newspaper in the county of appointment once a week for three (3) successive weeks, announcing the opening of the estate, identifying the personal representative, and notifying potential creditors of the estate to present any claims they may have.
Duties of the Personal Representative
In addition to the above-noted powers, the personal representative also has several responsibilities.
The personal representative owes a fiduciary duty to the estate and the heirs of the decedent. This fiduciary obligation requires the personal representative to carry out their functions in a timely fashion and accordance with the wishes in the decedent’s will and all applicable Maryland laws.
Collecting and Managing the Assets
Once the letters of administration have been issued, it is the personal representative’s responsibility to identify and take control over all assets belonging to the estate. With some respect to some personal property, such as motor vehicles and fine jewelry, the personal representative may need to take physical possession of items for safe keeping. Appropriate insurance should be maintained on the assets of the estate throughout the process.
Valuing the Assets
All assets belonging to the estate must be valued as of the date of the decedent’s death. Valuing accounts held at financial institutions (bank and brokerage accounts, certificates of deposit, etc.) is rather straightforward – the value is simply the balance in the account on the date of death plus any interest accrued on that amount since the date of death. The value of any real property may generally be determined by the most recent property tax assessment prior to the decedent’s passing. The value of motor vehicles may be determined by the average as set forth in National Automobile Dealers’ Association (NADA) official used car guide. For most other property, such as jewelry, household furniture and artwork, the personal representative must retain a professional appraiser to obtain an appraisal of the fair market value.
Filing an Inventory
After finding the decedent’s assets and valuing them, the personal representative is responsible for filing a formal inventory with the court. For each asset owned by the decedent at the time of his death, the inventory should provide a reasonably detailed description of the asset, its fair market value as of the date of decedent’s death, and amount of any lien or encumbrance on that asset. In Maryland, the personal representative must prepare and file an inventory within three (3) months of appointment.
Paying Valid Claims
The personal representative is to pay any valid claims filed against the estate during the 6 month creditor claim period. Valid claims and the decedent’s funeral expenses must be paid before the estate can be closed and the estate distributed. Any claims against the decedent’s estate that are not presented within the creditor claim period will be forever barred.
Filing Tax Returns
If the estate generates income, then the estate may need to file federal and state income tax returns. Further, the personal representative may need to file final income tax returns on behalf of the decedent.
Personal representatives also have an obligation to prepare and submit written accounts regarding the management and distribution of the estate’s property. The purpose of these accountings is to report all financial activities of the estate from the date of the decedent’s death to both the court, as well as the interested persons of the estate (unless they have filed a waiver of notice).While these accounting are not required to be in any specific form, the accountings must include:
- The value of the assets owned by the decedent as of the date of death
- All income earned on estate assets during the administration process (including the source, date and amount of each such receipt).
- Changes in assets, including sales, redemptions, transfers or purchases. Any gain or loss realized from a transaction must also be reflected on the accounting.
- Allowable expenses incurred, such as reasonable costs for a funeral, payments made to creditors, income taxes, transaction fees incurred from a sale, necessary maintenance expenses for real property, etc.
- Distributions and proposed distributions of the assets or funds in the estate to the beneficiaries or heirs.
The first of these accountings – the interim accounting – must be filed by the personal representative no later than nine (9) months after appointment. Subsequently, accountings must be filed every six (6) months thereafter until the estate closes. In some instances, where the estate has been handled efficiently, the personal representative can file what is known as a “First and Final Accounting”. In such case, it is only necessary to submit one accounting, which reports as to all of the aforementioned financial activities of the estate, including distributions to be made to the beneficiaries/heirs.
Closing the Estate
After the final accounting is audited by the Register of Wills, it is presented to the court for approval. If approved by the court, and there are no written objections to the final accounting filed within 20 days, the court’s approval order becomes final. After that 20 day period, approval of the final account automatically closes the estate.