Which Assets Are Exempt from Probate in Maryland Estate Planning?

Probate can be a time-consuming process, but there are ways to legally avoid it. In Rockville, MD, one solution is to hire an estate attorney to set up a living trust. This can make it easier to distribute assets and prevent the delays that are common with probate. A living trust is a way of arranging assets that can be put in place before you die. There are two different types of living trusts: revocable and irrevocable. The former allows you to retain control during your lifetime and can be canceled. An irrevocable living trust cannot be canceled, and all control of the assets is handed to the trust. Many individuals prefer the flexibility of a revocable living trust as it's much simpler to manage. Although it's possible to add to an irrevocable trust, the options are more limited and some transactions may require court approval. A revocable living trust allows the arrangements to be altered by a lawyer in response to changing living circumstances without any difficulty. What Are the Benefits of a Living Trust? The main benefit of a living trust is that it removes the named assets from the probate process. With a revocable living trust, it's possible to retain full control during your lifetime while also appointing trustees to manage the assets after your death. It also has the potential to minimize estate taxes by strategically distributing assets to take full advantage of exemptions. If you become incapacitated, the named trustees can use the trust to manage your affairs without needing to go to court. This is an additional benefit that provides peace of mind. How Does a Living Trust Differ from a Will? A will can also be used to distribute assets after death, but it is not automatically exempt from probate. This means there may be delays in distributing the estate. It is not possible to use a will to manage assets prior to death, even in the event of incapacity. This doesn't mean that a will has no value. Many individuals set up a "pour-over will" which works in tandem with the trust. Although the assets aren't exempt from probate, they can be added to the living trust for easy management and distribution. This can be helpful to scoop up any assets that were inadvertently missed from the trust. Seek Advice From an Experienced Estate Attorney The legalities around using a living trust and will for maximum benefit can be complex, so it's essential to seek professional advice. A skilled lawyer can help you structure your finances in a way that avoids probate and makes use of all available allowances. It's advisable to review the arrangements with a lawyer regularly to ensure any changes are incorporated into the arrangements. We deliver customized estate planning and are proud to serve clients in Central Maryland, the Eastern Shore, and the Washington Metro area. Contact Elville & Associates in Columbia, MD for professional advice you can trust. We also have offices in Rockville, MD and Annapolis, MD for convenient appointments.

In the world of estate planning, the words “probate assets” and “non-probate assets” are used often, though in most cases in my experience, the client does not understand the difference. Simply put, probate assets are assets that pass to a beneficiary through a Last Will and Testament, while non-probate assets are assets that pass to a beneficiary through any means other than a Last Will and Testament. That is a practical definition of the two assets, but not very helpful in assisting you to determine what a probate asset is and what is non-probate. Probate assets are assets owned by an individual, without any co-owners or beneficiary designations in place for that asset. Examples of probate assets are solely-owned vehicles, individually-owned bank accounts, etc. Non-probate assets are assets owned jointly with others or have some type of post-death designation in place. Examples of non-probate assets are: jointly-owned property (car, home, bank accounts, etc.), 401(k)s, life insurance, Transfer on Death accounts, and life estate properties. Understanding what assets of yours constitute probate and non-probate assets is critical when structuring your estate plan. For example, let’s say you want your children to receive equal shares of your estate. In order to carry out this wish, you prepared a simple Will leaving your estate to your children in equal shares. One of your primary assets is a savings account with $20,000. If you own that account individually, that $20,000 would pass to your children equally, under your Last Will and Testament as you wanted. However, let’s say you added one of your children as a joint owner on that savings account so the child could help pay your bills, etc. (as is very common). Adding your child as a joint owner has now converted that bank account from a probate asset to a non-probate asset, which means the $20,000 will NOT pass under your Will. Instead, upon your death, under the laws of Maryland, the entire balance of that account will become the property of the child who is listed as the joint owner. Perhaps that child will then divide the account among his or her siblings, but then again, maybe not. The importance of identifying your probate assets v. non-probate assets is central to building your estate plan. Take some time to review your assets and make sure your non-probate arrangements are in concert with your estate plan. For more information, please call 443-393-7696 or complete the form below.