To put it simply, probate is a legal procedure which involves verifying the will of a deceased individual, assigning an executor or personal representative, assessing and paying off debts (if any), and distributing assets to the beneficiaries. If there is no will, the property is distributed according to state laws.
Why avoid probate? Probate may sound like a reliable way to ensure the last wishes of the deceased are properly fulfilled. However, the problem is that all of these procedures and requirements take months, and sometimes years, to complete, and the heirs and beneficiaries do not receive any property until then.
Why does probate take time? Because there is complexity involved. The procedures vary from one state to another based on factors like the family conditions, goals, and properties involved.
This is also an expensive process because you have to pay for all of those attorney fees, court fees, and other related expenses. For instance, in Maryland, the probate fee is calculated as on the gross size of the estate.
Maryland charges a probate fee when processing an estate based on the total value of the estate. The fee starts at $100 and goes up to $10,000 for estates worth between $7.5 million and $10 million. However, if the estate is worth more than $10 million, there’s a $10,000 base fee along with 0.02% of the amount over $10 million. For example, an estate worth $11 million might owe a probate fee of about $30,000.
So, how do you avoid probate? This is what we are going to talk about today.
How to Avoid Probate in Maryland?
The first question is, is probate really needed in Maryland? Yes, but only for those people who have assets listed in their names.
That means it is possible to avoid probate for some non-probate assets, e.g., retirement accounts, trusts, and life insurance policies.
Since most wills have to go through the probate process, you should know how to create an estate plan that protects your property from probate. Here are the best ways to go about it:
1. Create a Revocable Living Trust
The main difference between revocable or living trusts and irrevocable trusts is that revocable trusts can be modified once they are created, while the same cannot be done with irrevocable trusts.
Revocable trusts give you the opportunity to avoid probate for almost all of the assets you own, ranging from vehicles to bank accounts to real estate.
The process is simple. First, you have to create a trust, which is quite similar to making a will, and name someone as a successor trustee who will take it over after your demise. Then comes the most important step – you have to transfer the property ownership to yourself as trustee of the trust.
When the process is finished, your property will be controlled as per the terms of the living trust. And after your demise, the successor trustee will transfer the property to the beneficiaries without involving any probate proceedings.
2. Use Joint Ownership
This is when you share the ownership of a specific property with another or more individuals. With this legal status, when one owner dies, their share of the property is automatically passed down to the other surviving owner. This way, you can successfully bypass the time-consuming and costly probate process.
There are two types of joint ownership available in Maryland – joint tenancy and tenancy by the entirety. In joint tenancy, both owners have an equal share of the property and when one dies, another automatically inherits the whole property.
On the other hand, tenancy by the entirety is available to married couples only and has one added benefit compared to joint tenancy – the surviving owner is protected from creditors.
3. Designate a Beneficiary on Your Financial Accounts
This is another effective way to avoid probate in Maryland. You can designate certain insurance policies and financial accounts to a beneficiary so they can receive those when you are gone.
Some of the examples are:
a) Payable on Death (POD) Accounts
With a POD account, you can name a beneficiary who will easily inherit that account after your death. In Maryland, you just have to fill in a form provided by the bank to set it up. By bank accounts, we mean savings accounts and certificates of deposit (CDs).
However, it is important to remember that POD designations have the authority to override your will. For instance, if the beneficiary of your POD account is your son but your will says the savings will go to your daughter, it is your son who will ultimately inherit those funds.
b) Transfer on Death (TOD) Accounts for Securities
You can create these types of securities for brokerage accounts, stocks, and bonds. In fact, most people hold their brokerage accounts this way in Maryland and beyond. Since no probate proceeding is necessary, the beneficiary directly deals with the brokerage firm to transfer the account.
c) Transfer on Death Designations for Vehicles
Although transfer-on-death deeds for real estate are not allowed in the State of Maryland, vehicle owners can use TODs for their automobiles. That means you can avoid probate for your vehicles. You just have to register your vehicle with the Maryland Motor Vehicle Administration.
4. Gift Assets During Your Lifetime
In MD, you can gift a maximum of $18K to an unlimited number of recipients every year without having to incur federal taxes. This gives you the opportunity to reduce your taxable estate size while you are alive and keep those gifts away from probate. Another benefit is if your heirs and beneficiaries are going through financial hardship, they get immediate help with this arrangement.
5. Small Estate Probate in Maryland
Maryland residents have access to a special probate procedure called “Small Estate.” If your estate is valued at $50K or less, or $100K or less if your surviving spouse is the only heir. However, these limits are not applicable to real estate.
This is not part of our probate avoidance plan, though, since you still have to file a petition so the small estate is administered. But if eligible, you won’t have to face the complex probate process with relatively lesser legal fees and quicker court processing time.
6. Keep Reviewing Your Estate Plan
Things change over time, so do our life experiences and decisions. Keep reviewing and updating your estate plan as you reach new milestones in life. What’s most important is ensuring that your estate totally reflects your current circumstances and wishes.
How Colbert Law Firm Can Help
Many people do not know the fact that probate is not created in advance. Rather, this legal process occurs after your death when the time comes to distribute your property to the heirs and beneficiaries.
That’s why when you are creating your estate plan, you need an experienced and reliable probate attorney by your side. They will show you how to avoid probate in Maryland and keep your designated beneficiary away from confusion, hassle, dispute, and complexity when you are not there to support them.
With 20+ years of experience, our local estate and probate lawyers have become specialized in avoiding probate court and delays when administering an estate. The way we communicate client wishes with the court staff and resolve bottlenecks is like no other.
Over the years, we have also built special rapport with the local CPAs, appraisers, and realtors. This allows us to quickly connect our clients with these professionals and make the probate process as simple as possible.
For any legal help, call 301-576-6200 today and have a free consultation with one of our probate, wills, and estate lawyers in Maryland.
FAQs
1. How to avoid probate without a trust?
Ans. There are many ways to avoid probate without a trust, including creating a living trust, establishing joint ownership, and using TODs and PODs.
2. Does a will avoid probate?
Ans. Not really, because a will states the last wishes of the deceased person. Probate occurs after their death in court when the process starts to validate the will, settle all debts, and distribute the property.
3. Can probate be avoided?
Ans. Yes, probate can be avoided. Follow our guidelines above and you will be able to keep your heirs and beneficiaries safe from the hassle of the probate process.