The estate administration process involves the management and disbursement of an individual’s real and personal property after they’ve died.
When a loved one passes away, the last thing you want to have to worry about are back taxes or squabbling heirs. By focusing on the estate administration process beforehand, the family can ensure a smooth transition of all assets with minimal fees and taxes while helping to maintain existing relationships among family and friends.
What Is the Probate Court?
First, it’s important to understand probate court, officially known as Orphans’ Court in Maryland for historical reasons. Orphans’ Court is an essential part of the estate administration process for Marylanders. Its job is to ensure that the decedent’s…
- Last Will and Testament is authentic and up to date.
- Assets are protected.
- Bill, debts, fees, and taxes are paid.
- Remaining property and funds are properly distributed to relevant beneficiaries.
Most estates in Maryland will have to go through the probate process. It is sometimes possible to avoid probate for designated assets if sets up a revocable living trust with a designated successor trustee, and transfer ownership of those assets to the trust. The successor trustee can then distribute such property to family members (or any other named beneficiary) without going through probate.
What Are the Steps Involved in the Estate Administration Process?
Generally speaking, the goal of the estate administration process is to transfer assets from the deceased to their beneficiaries while paying all the outstanding bills and resolving any tax returns and liabilities.
Typically, estate administration involves several critical steps and can take up to a year (or even longer in some cases) before it is fully complete. Let’s examine the steps involved from start to finish to give you a full understanding of what’s to come after a loved one dies.
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1. Apply for Probate of Will
You’ll have to complete an Application for Administration or Probate of Will and attach the original will as well. From there, the court will set a hearing to review and accept the will and also appoint the estate personal representative, sometimes also know as the executor. (This person will generally be identified in the will, but will otherwise be appointed by the court if there is no will.)
The court will provide the appointed executor with a certificate recognizing their authority to represent the estate. In some cases, the court will waive the hearing altogether to expedite the process.
2. Provide the Certificate for Land Records
If the decedent owned real estate, the court will give the personal representative the Certificate for Land Records to show that the previous owner has died and that the new owner has taken possession.
3. File an Estate Asset Inventory
Within two months of the personal representative’s appointment, he or she must file an estate asset inventory with the probate court. The inventory should include all the assets solely owned by the decedent to establish what is under the court’s jurisdiction.
Assets that are payable by a beneficiary are not subject to probate, as these assets can be transferred without the court’s oversight. Assets that are jointly owned are automatically passed to the surviving account holders.
4. Resolve Outstanding Bills
Within five months of the personal representative’s appointment, they are responsible for determining which bills remain outstanding (such as mortgages, taxes, and medical bills) and then filing a Return and List of Claims with the probate court.
5. File Tax Returns on Behalf of the Decedent
The next step is for the executor to file estate and inheritance taxes. These include:
- Maryland and Federal Estate Taxes: Taxes on the transfer of assets.
- Maryland and Federal Income Taxes: Taxes on income generated by assets (stocks, bonds, mutual funds, etc.).
- Inheritance Taxes: Maryland inheritance is taxed at 10% of the gift and is currently only imposed on “collateral heirs,” such as family friends or grandchildren.
After the tax authorities have reviewed and assessed these tax returns and verified payment, they will provide the personal representative of the estate with a certificate verifying that all of the decedent’s tax liabilities have been resolved. Failing to resolve these tax debts could potentially result in a line against the estate and trust assets.
Lastly, and most importantly, please note that the estate is responsible for all back taxes and debts after the decedent’s passing — not the beneficiaries or heirs, making it all the more important to conduct a timely and accurate accounting.
6. Filing the Final Accounting and Proposed Distribution
At this final stage, the executor is responsible for completing and filing a Final Accounting and Proposed Distribution of the estate that shows all estate activity that has occurred since the initial estate asset inventory was filed.
Using the Final Accounting and Proposed Distribution, the court will hold a hearing to determine whether to accept the figures and asset distribution. Upon the probate court’s approval, the executor can begin distributing assets to the decedent’s beneficiaries.
Contact S.H. Block Tax Services for Help With All Your Estate Administration Needs
Estate administration can be a complex and stressful process for friends, family, and other loved ones, which is why it’s so important to enlist the services of a skilled and experienced tax attorney.
At. S.H. Block Tax Services, we help to minimize this complexity and alleviate related stress through sound and comprehensive estate administration services. Our law firm has helped thousands of families develop and execute estate plans that protect the estate’s assets, prevent additional bills and fees, resolve potentially burdensome taxes, and distribute estate assets in a timely and orderly fashion — all while keeping the lines of communication open and preserving healthy relationships among everyone involved.
The content provided here is for informational purposes only and should not be construed as legal advice on any subject.