In discussions about estate planning and estate administration, a basic question that many people ask is whether every Maryland estate must go through probate. Answering the question provides the opportunity to explain two commonly-used terms that often cause confusion — probate and estate administration. While many people (including lawyers) use these two terms interchangeably, there are important differences.
Estate administration is the process of settling the estate of an individual who passed away. The process for a specific estate depends entirely on the nature and extent of the estate. Small estates (under a specified threshold) go through a simpler process. Larger estates generally require a more complex process.
The person who administers an estate is the personal representative of the estate. A personal representative may be an executor named in a decedent’s will or a person who applies under Maryland law to be appointed as the personal representative (if there is no will or a named executor cannot or does not wish to serve). A personal representative appointed by the court is sometimes referred to as the administrator of the estate.
The personal representative has significant legal responsibilities in administering an estate and may even be legally liable for mistakes made during estate administration or probate. Consulting with an experienced Maryland probate lawyer is the best way for a personal representative to ensure compliance with all legal requirements.
Probate is a more confusing and complex term. Some of the confusion occurs because people use the term in different ways and to mean different things. The term can be used as a verb (“probate an estate”), an adjective (“probate assets”), or a noun (“avoiding probate”), which contributes to the puzzle.
Although people use the terms probate and estate administration interchangeably, the two terms are not synonymous. Probate should be used only to refer to the formal court-supervised legal process required for some estates and some assets. Estate administration is not necessarily a court-supervised process, unless the circumstances of the estate require it to go through the formal probate process.
Some assets and property of a deceased individual do not go through probate. These are referred to as non-probate assets. Similarly, property and assets that are required to go through probate are referred to as probate assets.
Generally, property that passes to beneficiaries in a will or by the laws of intestate succession is required to go through probate. (Information about intestate succession is provided in our blog post, What Happens If You Die Without a Will in Maryland?) Probate property primarily includes any assets that are solely owned by the decedent. Assets that are jointly-owned or have a named beneficiary (like insurance policies and retirement accounts) do not go through probate.
Through careful estate planning, an estate usually can be structured to avoid probate entirely. In most cases, this goal is accomplished by including a trust in the estate plan as the means of distributing property to the beneficiaries. There are many types of trusts, but one used in many Maryland estate plans is a revocable living trust.
Generally, property that passes to beneficiaries under a will goes through the formal probate process. In contrast, property distributed through a trust usually does not go through probate. By avoiding probate, an estate with a trust maintains financial privacy of the decedent and family. Property and assets also often reach the trust beneficiaries sooner than property left in a will.
One of the most significant advantages of a trust is that it gives the person making the trust (called the grantor or settlor) control over how assets are distributed to beneficiaries. Any property that passes under a will goes outright to the beneficiaries. A trust can provide for managed distribution to the beneficiaries by the trustee over time.
The answer to our initial question, “Does every Maryland estate go through probate?” is implicit in the preceding discussion. As long as the term probate refers to the formal court-supervised process applicable to some estates and some assets (rather than being used as synonymous with estate administration), the answer is that every Maryland estate does not necessarily go through the probate process. However, virtually every estate will go through some form of estate administration, which is necessary to settle an estate even if it does not go through formal probate.
Additional detailed information on this subject is provided in our blog post, Probate and Estate Administration in Montgomery County, Maryland.
Attorney Henry Nash has extensive experience in estate planning and in probate and estate administration. If you are creating your first estate plan, updating an existing plan, or need assistance settling a loved one’s estate, we are here to help.
At The Law Office of Henry Nash, we work with clients in Rockville, throughout Montgomery County, and elsewhere in Maryland. We also assist out-of-state clients who have loved ones residing in the state. If you have any questions or concerns about any issues relating to any of our services, we welcome you to call us at (301) 998-6111 or contact us through our online form.