Frequently Asked Questions

Maryland Real Estate Law

Properties that end up in the hands of family members often have title issues that go back many years. These can be difficult unless handled properly. Seek help from experienced counsel before you do anything or your matter may be compromised. These may take some time but can generally be solved with the application of proper analysis and court filings.

Real estate is often used as collateral for private mortgage loans in Maryland (private loans are loans not involving banks / credit unions). Recent legislation has restricted this to:

 

  1. Family members for residential loans
  2. All others but strictly for business purposes, properly documented

 

Real estate loans for investment / rehab properties aka hard money lending have become more common in Maryland. These can be difficult unless handled properly. Seek help from experienced counsel before proceeding.

Special Exceptions, Special Hearings and Variances.   These are all variations of zoning / development relief and generally require a hearing. These can be difficult unless handled properly. Seek help from experienced counsel before you do anything or your matter may be compromised.

Disputes over property ownership and lot lines often involve issues of adverse possession or prescriptive easement, sometimes called squatters rights. Each state has a particular body of law on this issue and involves a court hearing to establish the Maryland required twenty (20) years of open, notorious, exclusive, hostile and under claim of right adverse use, without permission.

These matters can be difficult. Seek help from experienced counsel before you do anything or your matter may be compromised.

Attorney Title Certifications are part of the Baltimore County development process and are a specialty area.

Mr. Burgess has spoken to his fellow professionals on this topic – Attorney Certifications

Residential Contracts and Lease customary in Maryland are based on Board forms.  These are licensed forms used by realtors and recognized by the courts and lenders for their common language and yearly updates.

 

Burgess Law recommends an interdisciplinary approach where you work with realtors to conduct transactions using these forms as a base for your transactions. For issues or review or disputes, seek legal counsel.

Commercial Leases, customary to the Maryland area typically involve parties with varying bargaining power and for different types of uses.  Use of a Lease Review Checklist is advised.

Maryland Commercial Contracts typically:

1. provide for an agreed price that is paid at the closing/ settlement,

2. A Study or Feasibility Period, and

3. Closing/ settlement which is conducted at a set period, say thirty (30) days after a Study or Feasibility Period.

Matters that arise to the level of a dispute require a detailed and knowledgeable assembly and review of the underlying documents. Counsel is advised for legal review, research and strategy to fashion a remedy.

Maryland Commercial Contracts and Leases are customarily negotiated using a Letter of Intent.

Maryland Business Law

Matters that arise to the level of a dispute require a detailed and knowledgeable assembly and review of the underlying documents. Counsel is advised for legal review, research and strategy to fashion a remedy.

Maryland is one or the more difficult states for what is often one of a restaurant’s most valuable commodity, a liquor license.

Often supplies of licenses are limited and applications / transfers / and license hearings require professional assistance.

Modern techniques of business control and succession often demand a buy sell agreement which restricts and values the interests of the owners of the business and ensure business continuity.

Recent trends have shifted new business owners into Limited Liability Companies (LLCs) and S Corporations. Paperwork both at the attorney and accountant level are critical for business continuity and success, especially when there are business partners, lenders, subcontractors and employees involved.

 

At the most basic level, small business should not ignore:

 

Articles of Organization/ Incorporation

Operating Agreement / By Laws

Minutes / Resolutions

Income Expense Statements

Balance Sheet

Capital Account

Small businesses in Maryland are customarily bought and sold with asset purchase agreements. Some recent engagements by Burgess Law include sale / purchase of professional offices, gyms, restaurants and liquor stores. These tend to be a buyer beware type of transaction. Burgess Law uses a team approach to work with Sellers / Buyers and their Accountants to ensure compliance.

Maryland Wills and Trusts

Often the nature of wills and trusts are such that competing interests arise. A careful look at the issues is suggested, and by experienced counsel. Matters that arise to the level of a dispute require a detailed and knowledgeable assembly and review of the underlying documents. Counsel is advised for legal review, research and strategy to fashion a remedy.

A ‘how to folder or binder’ for our survivors helps those of us who survive and is the greatest gift to our families and friends.   Various forms of these “what to do in case of my death or disability” forms are around. Some or most are very detailed and complicated and in today’s society tend to be worthwhile goals but often not completed.

 

Often Burgess Law advises clients begin with the following and build from there:

 

  • Annual Statements and Last Year’s Tax Return
    • Bank Accts, IRAS, 401ks, pensions, investment accounts
    • Statements can be net worth // income expense from Quicken

 

  • Passwords for digital assets and social media

 

  • Contact Numbers for Advisors, both Financial and Health and others, etc.

 

  • Estate Planning Documents include wills, trusts, powers of attorney, and health care directives

 

  • Checklist for Disability / Death to-dos:
    • Disability care plan and alternatives / Caregiver Agreement – relatives
    • Funeral memorial gathering plan
    • Contact list for memorial gathering
    • Photo thumb drive for memorial gathering
    • Adult child on funeral account or prepay funeral

 

  • Final to-do……………………….sell the baseball and stamp collection and Florida or West Virginia lot or time share now

 

Probate or estate administration fees vary from state to state. It is not unusual for persons in high probate fee states to use account designations or trusts, as will alternatives to avoid or limit these fees.   Maryland tends to have lower probate or estate administration fees, thus freeing up choices for professionals regarding planning techniques.

Burgess Law encourages a multidisciplinary approach and advises clients to work with financial planners. Their work is very valuable and underlies the drafting and administration of the trusts and wills that we draw and help administer.

  • Estate and Gift Tax. With the new high exemptions, most people will no longer be subject to the federal estate tax, but this fact should not be interpreted to mean that planning is not necessary. Federal estate, gift and GST taxes are but one component of the myriad of issues addressed in the estate planning process Estate Planning. In addition, many states including Maryland now impose state estate tax, and the state estate tax exemption, if any, may be much lower than the federal exemption. The most common state estate taxes are based on a specified percentage of the federal estate tax. Many practitioners have shifted their planning focus to Capital gains tax on assets held within an estate or trust.

 

  • The gift, estate, and GST tax exemptions were set at $5 million in 2011. The exemptions are indexed for inflation, resulting in exemptions of $5.49 million for 2017. An individual can transfer property with value up to the exemption amount either during lifetime or at death without paying any transfer tax. In other words, any portion of the exemption used during lifetime reduces the amount of exemption available at death for estate tax purposes. For example, if you made a lifetime taxable gift of $2 million in 2013, your remaining exemption amount that could be used by your estate at your death would be $3.49 million ($5.49 million 2017 inflation adjusted exemption, less the $2 million lifetime gift). The GST exemption essentially allows the earmarking of transfers, made during lifetime or at death, that either skip a generation or are made in trust for multiple generations. Certain gifts are not applied toward the exemption, such as “annual exclusion” gifts and direct payments to medical or education providers, and can be made completely tax-free.
    • Transfers between spouses and to certain trusts for spouses, made during lifetime or at death, may be made without the imposition of any tax. These transfers also do not use any exemption. This is known as the “unlimited marital deduction.”
    • The $5 million inflation adjusted estate tax exemption is “portable” between spouses beginning 2011 so that a surviving spouse may take advantage of a deceased spouse’s unused exemption (DSUE) through lifetime gifts by the surviving spouse, or at the surviving spouse’s later death.
    • This means that no transfer tax is assessed on estates up to $5.49 million for individuals and $10.98 million for married couples, assuming no lifetime gifts other than annual exclusion gifts or certain transfers for educational or medical expenses were previously made.

 

  • Inheritance This type of tax on the right to inherit a bequest has largely been phased out throughout the country. However, Maryland is a state that still has a tax but there are many exemptions including those for close relatives and charities. For example, nieces and nephews are subject to the tax so a bequest or gift to an adult sister or brother should be considered.
  • Income taxes are important issues and must be dealt with from both: 1. a planning perspective, often with focus on capital gains, and   2.   A bookkeeping and reporting focus with fiduciaries such as personal representatives and trustees being responsible for tax reporting issues. Estates have two levels of income tax returns on the last year of death, and they result in an income tax filing related to the time period from January 1 to date of death and a separate fiduciary income tax filing for the time period date of death forward.

Asset protection trusts are typically established by individuals in high risk occupations (i.e., doctors and real estate developers) and very wealthy individuals that realize they are targets for creditors due to their net worth. Asset protection trusts can also be used in lieu of a prenuptial agreement.

Modern blended family situations are sometimes handled by trusts and sometimes by pre and post nuptial agreements or a combination of both.

These persons are fiduciaries who are held to a standard under State law regarding their actions. Fiduciaries are encouraged to seek professional help with their duties. Often interdisciplinary help is recommended and includes a financial advisor / planner, attorney and accountant. The trust or estate will be responsible for reasonable professional fees related to professional advice and assistance for the fiduciary.

There are any number of circumstances under which a beneficiary is wise to say “no thanks” to a gift. And many reasons why a decedent might want to still exercise post-mortem control over that gift once refused

Trusts

Trusts are legal agreements that govern the disposition of assets put into them. Trusts are administered by Trustees who are fiduciaries in a similar manner as executors or personal representatives of estates. Trusts are designed to distinguish between income and principal. Many trusts, especially older ones, provide for income to be distributed to one person at one time and principal to be distributed to that same person a different time or to another person.

For example, many trusts for a surviving spouse provide that all income must be paid to the spouse, but provide for payments of principal (corpus) to the spouse only in limited circumstances, such as a medical emergency. At the surviving spouse’s death, the remaining principal may be paid to the decedent’s children, to charity, or to other beneficiaries. Income payments and principal distributions can be made in cash, or at the trustee’s discretion, by distributing securities as well as cash.

Never make assumptions, as the terms of every will and trust differ greatly. There is no such thing as a “standard” distribution provision.

 

Unless a fiduciary has financial experience, he or she should seek professional advice regarding the investment of trust assets. In addition to investing for good investment results, the fiduciary should invest within the applicable state’s prudent investor rule that governs the trust or estate and with careful consideration of the terms of the will or trust, which may modify the otherwise applicable state law rules. A skilled investment advisor can help the fiduciary decide how to invest, what assets to sell to produce cash for expenses, taxes or outright gifts of cash, and how to minimize income and capital gains taxes. Simply maintaining the investments that the decedent owned will not be a defense if an heir claims you did not invest wisely or violated the law governing trust investments. In all events, it is important to have a written investment policy statement stating what investment goals are being pursued.

 

During the period of administration, the fiduciary must provide an annual income tax statement (called a Schedule K-1) to each beneficiary who is taxable on any income earned by the trust. The fiduciary also must file an income tax return for the trust annually. The fiduciary can be held personally liable for interest and penalties if the income tax return is not filed and the tax paid by the due date, generally April 15th.

 

Trusts terminate when an event described in the document, such as the death of a beneficiary, or a date described in the document, such as the date the beneficiary attains a stated age, occurs. The fiduciary is given a reasonable time period thereafter to make the actual distributions. Some states require a petition to be filed in court before the assets are distributed and the trust closed. When such a formal proceeding is not required, it is nevertheless good practice to require all beneficiaries to sign a document, prepared by an attorney, in which they approve of your actions as fiduciary and acknowledge receipt of assets due them. This document protects the fiduciary from later claims by a beneficiary. These formalities are recommended even when the other heirs are relatives, as that alone is never an assurance that one of them will not have an issue and pursue a legal claim against you. Finally, a final income tax return must be filed and a reserve kept back for any due, but unpaid, taxes or trust expenses.

Real Property, meaning vacation homes or second homes, are governed by law of the state where held. Estate Administration / Probate in Maryland can be done together with ancillary administration in the other state.

Douglas L. Burgess is a member of a national organization of estate / probate attorneys and has and will work with families to handle out of state / ancillary administration issues.

Probate/ Estate Administration

Probate/ Estate Administration is the formal legal process that gives recognition to a will or intestate estate (person dying without a will) and appoints the executor or personal representative who will administer the estate and distribute assets to the intended beneficiaries.

The laws vary, so it is a good idea to consult an attorney to determine whether a probate proceeding is necessary, and what filings must be made and reports must be prepared.

In most states including Maryland, probate proceedings, compared to other methods of handling a deceased’s affairs, are not prolonged, which is contrary to the claims of many vendors selling living trusts and other products.

The basic job of administration and accounting for assets must be done whether the estate is handled by an executor in probate or whether probate is avoided because all assets were transferred to a living trust during lifetime or jointly owned. Many states have simplified or streamlined their probate processes over the years. In such states, there is now less reason to use probate avoidance techniques unless there are other valid reasons to continue to minimize probate. In planning your estate, more important than minimizing probate is minimizing the real issues that can make probate difficult, such as lawsuits by heirs.

Estates may be closed when the executor has paid all debts, expenses, and taxes, has received tax clearances from the IRS and the state, and has distributed all assets on hand. The fiduciary is given a reasonable period of time thereafter to make the actual distributions. Some states require a petition to be filed in court before the assets are distributed and the estate or trust closed. When such a formal proceeding is not required, it is nevertheless good practice to require all beneficiaries to sign a document, prepared by an attorney, in which they approve of your actions as fiduciary and acknowledge receipt of assets due them. This document protects the fiduciary from later claims by a beneficiary. These formalities are recommended even when the other heirs are relatives, as that alone is never an assurance that one of them will not have an issue and pursue a legal claim against you. Finally, a final income tax return must be filed and a reserve kept back for any due, but unpaid, taxes or estate expenses.

Loved ones often go to a bank, credit union or life insurance company to get access to the deceased’s funds to pay the bills of the deceased and find they cannot without a tax identification number for the estate. This cannot be issued without opening an estate and preparing and filing the appropriate papers with the IRS.

Loved ones often go to a bank, credit union or life insurance company to get funds, to pay the bills of the deceased and find they cannot without letters of administration, letters testamentary or letter of representation.

What are letters of administration / letters testamentary / letter or representation?

A document issued by the Register of Wills or Orphans Court that authorizes a personal representative / executor to administer an estate.   It cannot be issued with filing the will and estate administration or probate papers and involves an attorney to prepare the paperwork.

The purpose of and advance directive / living wills is to allow you to express your preferences concerning medical treatment in a medical situation when you cannot communicate, including at the end of your life. By expressing such preferences in a writing, you are ensuring that your preferences are made known. Physicians prefer these documents because they provide a writing from you as to your medical care and designate the person he / she should consult concerning unanswered medical questions. Rather than having to obtain a consensus answer from your family as to your treatment, the physician knows your preferences and knows who you want to provide decisions when you cannot do so. Also, providing such information and designating a health care proxy provides whose direction is to be followed in the event your family disagrees as to what medical treatment you would want.

If you do not have a power of attorney and become unable to manage your personal or business affairs because you are disabled, such as by stroke or dementia, it may become necessary for a court to appoint one or more people to act for you. People appointed in this manner are referred to as guardians. This involves a court hearing.

POA Definition

A power of attorney gives one or more persons the power to act on your behalf as your agent.

Statutory Power Attorney

Maryland, as have many states, have statutory powers of attorney. A statutory power of attorney or one substantially similar is given the full weight of the law.

Agent or Attorney-in-fact

The person named in a power of attorney to act on your behalf is commonly referred to as your “agent” or “attorney-in-fact.” With a valid power of attorney, your agent can take any action permitted in the document.

If you have real property in other states you should consult with counsel, and perhaps the simplest solution is an additional power of attorney on that state’s statutory power.

How to sign as Agent or Power of Attorney for Someone Else. Assume John Doe appoints his spouse, Sally Doe, as his agent in a written power of attorney. Sally, as agent, must sign as follows: John Doe, by Sally Doe under POA or Sally Doe, agent/ attorney-in-fact for John Doe.

Deeds are particular to each state and the particular transaction. Please seek professional advice. For examples of some types, see Deeds.

Revocable Trusts or Living Trust.

A trust created during lifetime may be revocable, which means it may be revoked or changed by the settlor (aka trust maker or grantor).

Irrevocable Trust

A trust may be irrevocable, which means it cannot be revoked or changed by the settlor.

 

Either type of trust may be designed to accomplish the purposes of property management, assistance to the settlor in the event of physical or mental incapacity, and disposition of property after the death of the settlor of the trust with the least involvement possible by the probate (orphan’s) court.

 

Trust Purposes include:

  • Children
  • Spouse
  • Asset Preservation
  • Spendthrift Prevention
  • Wealth Accumulation
  • Will Alternative
  • Tax Planning

Wills

are written directions regarding property distribution after death. A spouse and minor child may elect against a will to force certain distributions per the Maryland Code.

Beneficiary Designations and jointly owned property

Some assets, such as those covered by accounts or insurance policies with beneficiary designations and trusts, pass outside of a will.

Spousal Wills

These tend to be companion wills that mirror each other. Sometimes called “sweetheart wills”, these wills give everything to the surviving spouse. Families without wills ignore this critical planning technique at their own peril and when overlooked becomes problematic when there is no will and minor children.

Blended Family Spousal Wills.

These also tend to mirror each other but are often paired with trusts under the will or contractual will agreements to assure conformity after death.

Specific Bequests.

Designated items with designated beneficiaries. Careful drafting is needed to provide for issues that often arise such a pre-death gifting, loss of item prior to death or beneficiary predeceasing the will maker.

Residuary Bequest.

The balance after administration expenses, specific bequests. This bequest often carries the load as far as estate costs so a careful understanding of the will maker’s intent is needed.

Guardian.

You should name a guardian for your minor child(ren) in your will. Sophisticated will drafters will add provisions for visitation by grandparents.

Personal Representative or Executor.

You may designate an executor (personal representative) of your estate in your will, and eliminate their need for anything more than a nominal bond.

Disclaimer

The materials on this website are provided for informational purposes only, do not constitute legal advice, and do not necessarily reflect the opinions or views of the author. Transmission of the information is not intended to create, and receipt does not constitute, an attorney-client relationship between any attorney and any other person, group or entity. No representations or warranties whatsoever, express or implied, are given as to the accuracy or applicability of the information contained herein. No one should rely upon the information contained herein as constituting legal advice. The information may be modified or rendered incorrect by future legislative or judicial developments and may not be applicable to any individual reader’s facts and circumstances.