Which Assets Must Go Through Probate?
When a loved one passes away, understanding which assets must go through probate is essential for managing their estate efficiently. In Maryland, the probate process involves the legal distribution of a deceased person’s assets according to their will or, if there’s no will, according to state law. In the blog, we’ll discuss how the probate process is usually handled, which assets must go through probate, and which assets may not need to.
Understanding the Probate Process
Probate is a legal process that takes place after someone dies. It involves validating the deceased person’s will, identifying and inventorying their assets, paying debts and taxes, and distributing the remaining assets to the rightful heirs. In Maryland, this process is overseen by the Orphans’ Court, which makes sure that the decedent’s wishes, as outlined in their will, are carried out properly.
Not all assets are subject to probate. Some assets can be passed directly to beneficiaries without court involvement. Understanding which assets must go through probate and which can bypass the process is crucial for estate planning and administration. This understanding helps minimize the time and costs associated with probate and can ease the burden on surviving family members during a difficult time.
Assets That Must Go Through Probate
Generally, assets that are solely owned by the deceased at the time of their death and don’t have a designated beneficiary must go through probate. This includes real estate owned solely by the deceased, personal property like jewelry and vehicles, and bank accounts that are in the deceased’s name alone without a payable-on-death (POD) designation.
Real estate is one of the most common assets to go through probate. If the deceased owned a home or other real property solely in their name, it can't be transferred to heirs until the probate process is complete. The court will make sure that all debts, including mortgages and taxes, are paid before the property is distributed according to the will. Personal property, such as jewelry, artwork, or vehicles, also typically goes through probate unless it’s specifically bequeathed to someone in the will.
Jointly Owned Assets and Probate
Assets that are jointly owned with the right of survivorship typically don’t go through probate. In Maryland, if two people own property together with rights of survivorship, the surviving owner automatically inherits the entire property when the other owner dies. This type of ownership is common among married couples for assets like homes, bank accounts, and investment accounts.
For example, if a married couple owns a home together as joint tenants with rights of survivorship, the surviving spouse will inherit the entire home immediately upon the death of the other spouse. There’s no need for probate in this situation because the ownership transfer happens automatically by law. However, if the property is owned as tenants in common, the deceased’s share of the property would need to go through probate before it can be distributed to heirs.
Beneficiary-Designated Assets
Certain assets are designed to pass directly to a named beneficiary without going through probate. These include life insurance policies, retirement accounts like IRAs and 401(k)s, and financial accounts with a POD or transfer-on-death (TOD) designation. The beneficiary named on these accounts inherits the asset directly, bypassing the probate process entirely.
It’s important to keep beneficiary designations up to date, especially after major life events like marriage, divorce, or the birth of a child. If the named beneficiary on a life insurance policy or retirement account has passed away or if no beneficiary is named, the asset may need to go through probate. Keeping these designations current is a critical aspect of estate planning and can significantly reduce the time and cost of settling an estate.
Small Estates and Simplified Probate Procedures
Maryland offers a simplified probate process for small estates, which can expedite the administration and reduce legal costs. A small estate in Maryland is defined as an estate with a total value of $50,000 or less or $100,000 or less if the sole heir is the surviving spouse. For these estates, the court process is less formal, and there’s often no need for a lengthy probate proceeding.
In a small estate, the personal representative can distribute assets more quickly, often without the need for a full court hearing. The simplified process includes filing a petition with the Orphans’ Court, providing an inventory of the estate’s assets, and obtaining approval for distribution. This can be a much faster and less burdensome option for families dealing with the loss of a loved one, especially when the estate is relatively modest.
Avoiding Probate Through Trusts
One of the most effective ways to avoid probate is by placing assets in a trust. A trust is a legal entity that holds assets on behalf of beneficiaries. When assets are placed in a trust, they’re no longer considered part of the deceased’s estate and, therefore, don’t go through probate. Instead, the trustee, who is appointed by the person who created the trust, distributes the assets according to the terms of the trust.
There are different types of trusts, including revocable living trusts, irrevocable trusts, and testamentary trusts. A revocable living trust is a popular option because it allows the person creating the trust to retain control of the assets during their lifetime and make changes as needed. Upon their death, the trust assets are distributed to beneficiaries without the need for probate, providing a smoother and more private way to manage and transfer wealth.
Debts and Probate
When a person passes away, their debts don’t disappear. During probate, the deceased’s debts must be paid before any assets can be distributed to heirs. This includes outstanding mortgages, credit card debts, medical bills, and taxes. In Maryland, creditors have a specific period to file claims against the estate. The personal representative is responsible for notifying creditors and settling all valid claims using the estate’s assets.
If the estate’s assets aren't sufficient to cover all debts, the probate court will determine the order in which debts are paid, and some creditors may receive only partial payment or none at all. This process underscores the importance of accurate estate planning and the need to manage debts effectively during one’s lifetime to prevent complications during probate.
The Role of the Personal Representative
The personal representative, also known as the executor, plays a crucial role in the probate process. This individual is responsible for managing the estate, including gathering assets, paying debts, filing tax returns, and distributing the remaining assets to heirs. In Maryland, the personal representative is typically named in the will, but if there’s no will, the court will appoint someone to serve in this role.
Serving as a personal representative can be a significant responsibility, especially when dealing with a large or complicated estate. It requires careful attention to detail and adherence to legal requirements. At Sanders & Sanders, Attorneys at Law, we’ve helped countless clients manage the responsibilities of being a personal representative, providing the guidance and support needed to carry out these duties effectively.
Address Your Questions With an Attorney
Understanding which assets must go through probate is essential for effective estate planning and administration. By knowing the types of assets subject to probate and those that can bypass the process, families can better manage the distribution of their loved one’s estate. At Sanders & Sanders, Attorneys at Law, we’re committed to helping our clients handle the probate process with clarity and compassion, making sure that their loved one’s wishes are honored and their legacy is preserved.
Our husband-and-wife legal team has more than 30 years of experience serving clients in Upper Marlboro, Clinton, Bowie, Fort Washington, and Largo, Maryland, along with Washington, D.C. If you have questions about probate or need assistance with estate planning, we’re here to help.