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.