9 Steps to Effective Estate Administration in Maryland
The rules that govern estate administration vary from state to state. In Maryland, we have to comply with our state’s estate administration rules, state tax law, and federal tax law. When you get named as the administrator of an estate, you might find yourself overwhelmed with the volume of work your duties require.
You do not have to do the work yourself just because someone selected you as the administrator of their estate. You can hire a professional, like a Maryland estate administration attorney, to handle the many responsibilities of administering the estate. Whether you decide to handle the estate yourself or work with a professional, you need to know about the general process. To get you started, here are nine steps to effective estate administration:
Step 1 - Understand the Terminology
Legal terminology can be challenging to decipher. Here are some words that frequently get used during the estate administration process in Maryland:
“Administrative probate” is the process that starts with either contacting the Register of Wills to get appointed as the personal representative of the estate to handle probating the will or having the court decide if the decedent died intestate (without a valid will or trust document).
“Child” can be someone born of a marriage or certain children born outside of marriage, adopted children, or some children born from the genetic material of the decedent.
“Claimant” is a person, business, or another entity that files a claim with the court alleging that the decedent’s estate owes them money.
“Decedent” is the person who died and whose estate gets administered.
“Domicile” is where the decedent last lived and intended as his permanent home, or where he intended to return if he was not living there at the time of his death, for example, a person temporarily away at school or in the military.
“Estate administration” means collecting the property of the person who died, paying the estate debts and expenses, filing forms with the probate court, and distributing assets to the heirs or legatees of the estate.
“Intestacy” is a situation in which a person dies without a valid will. The assets get distributed according to state law, rather than what the decedent might have wished.
“Lineal descendant” means everyone in the direct line of the decedent; in other words, the decedent’s children, grandchildren, and great-grandchildren, but not nieces, nephews, or other non-lineal descendants.
“Personal representative” is the person the court appoints to handle the estate. Other terms include an administrator or executor.
“Residence” is where the decedent lived at the time of death, whether he considered that place as his permanent home or not.
“Small estate” in Maryland means an estate with a gross value of $50,000 or less. If the sole heir or legatee is the surviving spouse, the cutoff is $100,000.
“Testate” is a situation in which the deceased person had a valid will or trust at the time of death.
“Testator” is the person who creates a will to handle the administration of his estate.
Now that you understand some of the basic terminology used in Maryland estate administration, we can discuss the next steps for handling an estate.
Step 2 – How to “Open” the Estate
The estate administration must file the decedent’s last will and any codicils with the Register of Wills in the county of the decedent’s domicile. For example, if the decedent were in the military and stationed in Florida but his domicile was in Maryland, the county of his domicile in Maryland would have jurisdiction of the estate.
The person filing the will would complete a Petition for Administration explaining why the court should appoint them to handle the estate, and a Schedule A that provides an estimate of the estate’s assets and debts.
The person seeking permission to administer the estate must file a Notice of Appointment form with the Petition for Administration and Schedule A. If the judge appoints the person as the estate administrator, the Notice of Appointment must run in the approved newspaper for three weeks in a row. The Notice lets creditors know about their right to file claims against the estate and tells the public about the appointment and the right that someone might have to file objections to the appointment of the administrator or to the will.
Depending on the circumstances, the estate administrator or someone else might have to file:
A Bond of Personal Representative or Nominal Bond form
A List of Interested Persons form
The Appointment of Resident Agent form, if the person asking to handle the estate is not a resident of Maryland
Everyone with a higher priority to serve as the estate administrator must file a Consent to Appointment of Personal Representative form.
Waiver of Bond
Waiver of Notice
Some of these items get filed with the original Petition, while others must get filed soon after the Petition.
Step 3 – Early Days in the Administration of an Estate
When the Register of Wills approves of someone to serve as the administrator, it will issue the Letters of Administration. The administrator will receive a schedule of deadlines for taking certain actions and filing forms and documents.
Within the first few weeks, the estate administrator must:
Try to find the names and addresses of the decedent’s creditors.
Serve the creditors with a notice, either by delivery or mail.
Send the court enough copies of the newspaper’s notice of appointment for the court to send to everyone on the list of interested persons.
These steps start the process, but the administrator has many more tasks.
Step 4 – Handling Claims of Creditors
Creditors have only two months from the time they receive notice of the appointment of the estate representative or six months from the decedent’s death, whichever is shorter. The six-month rule usually applies when a creditor did not get notice of the appointment of the representative. Some claims by the State of Maryland have deadlines of two months after receiving notice of appointment or six months after the notice of appointment gets published in the newspaper.
Step 5 – Inventory and Information Report
Within the first three months, the administrator has two large forms to complete and file with the court, the Inventory, and the Information Report. Here are things you need to know about the Inventory:
The Inventory separates the decedent’s assets into the property the decedent owned solely, and assets the decedent owned with someone else.
Each item on the Inventory must contain a detailed description that includes the gross full market value as of the date of the decedent’s death and all loans, mortgages, and other encumbrances on the items.
The Inventory should include everything the decedent owned, including motor vehicles, real property, leased property, stocks and other securities, debts that other people or entities owed to the decedent, bank accounts, cash, retirement accounts and life insurance with no named beneficiary or that name the estate as the beneficiary, and other assets. The court will require a professional appraisal for some items.
The Information Report discloses details about items that will not pass-through intestacy or under the terms of the will. For instance, a life insurance policy that designated a beneficiary who is not the estate will pay benefits directly to the beneficiary. Also, all assets in which someone other than the decedent had a partial ownership interest, like jointly-owned property, must be described on the Information Report.
Step 6 – Taxes
The estate administrator might have to file state and federal income tax returns on behalf of the decedent and state and federal estate tax returns. If an estate stays open during more than one tax year, the administrator must file returns for each year until the estate closes.
Step 7 – The Account Report
The estate administrator has nine months to file an account with the court. Courts do not provide a form for these reports. The account report must include:
The value of the assets on the initial Inventory report filed at the beginning of the estate administration;
Income and other receipts the estate received during the administration process;
Changes in assets;
Payments to creditors and other disbursements;
Amounts to get distributed to heirs and legatees;
Taxes;
The value of any remaining assets, unless the account is the final account report. If the estate retains a balance, the amount must get disclosed and dealt with on future account reports.
The estate administrator must sign a verification of the Account report and serve the verification on all interested persons unless they filed a waiver of notice.
Step 8 – How the Personal Representative and Attorney Get Paid
Administering an estate is a massive amount of work. Maryland law provides that the personal representative and the estate’s attorney can get reasonable compensation for their services. The compensation is a percentage of the gross estate.
Persons wanted to get paid for their estate administration services need to file a petition with the court with details about the services rendered and the payment requested. All interested persons and claimants must receive notice of the request for payment. If the value of the gross estate is low enough, the estate administrator and attorney can file a Consent in lieu of court approval form that includes the written consent of all interested persons and all unpaid creditors.
Step 9 – Closing the Estate
After the Register audits the final account report and the court approves the account, the estate is “on hold” for 20 days to give people time to file exceptions (objections) to the account. If there are no timely exceptions, the court’s approval order becomes final.
The estate administrator can make approved distributions within 30 days of the approval order becoming final. When the approval order becomes final, there is nothing more to do to close the estate. The estate closes automatically at that point.
Small estates have a quicker, simplified procedure. A Maryland estate administration attorney can help you determine which process is appropriate in your situation and handle the administration of the estate on your behalf.
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