CLIENT ALERT – New Maryland Probate and Estate Laws in October 2022

October 1 is the date when the majority of laws enacted by the Maryland legislature during the preceding session take effect.

While the 2022 legislative session wasn’t as busy of a legislative session as 2021 as far as the estate and trust world is concerned, there are a few new interesting Maryland laws which may impact our clients.

Elimination of Probate Fees for Small Estates

In Maryland, “small estate” proceedings are necessary where the value of the assets in probate are less than $50,000.00 ($100,000.00 if the surviving spouse is the sole beneficiary). We commonly see small estate proceedings required to transfer title to a vehicle or a forgotten small bank account owned by the Decedent.  The Maryland Register of Wills formerly charged a filing fee to open a small estate.  The filing fee for small estates is no more.  The Register of Wills will offset this decrease in revenue by…

Increase in Probate Fees for Larger Estates and Foreign Estates

… increasing the filing fee on a graduated basis for probate estates of more than $500,000.00.  The filing fee alone (not including related cost such as bond and publication fees) for probate estates valued at $500,000.00 or above will start at $1,000.00.  This is another reason why clients who make conscientious use of beneficiary designations, revocable trusts, and other probate-avoidance mechanisms can minimize the post-death costs to their family.

Additionally, a “foreign estate” or “ancillary estate” can be opened for a non-Maryland resident who dies, holding title to Maryland real estate.  This “foreign estate” proceeding is often necessary for the Decedent’s estate to convey title when they the estate sells the property.  Previously, the fee charged by the Register of Wills for a foreign estate proceeding was capped at $100.00.  The newly-increased fee is 1% of the value of the property in the “foreign estate”.  In other words, if a Decedent lives outside of Maryland and requires a Maryland “foreign estate” to sell property valued at $500,000.00, the filing fee alone is now $5,000.00.  Clients who own property in more than one state should absolutely consider a revocable trust or living trust to hold real estate to avoid what can be excessive filing fees for multiple probate proceedings.

Post-Death Transfers of LLC and Partnership Interests

Many of our probate clients have been frustrated to learn that, because their deceased loved one owned a partnership interest of an interest in a limited liability company, probate was now more complicated.  An expensive appraisal of the business was often necessary to value the Decedent’s interest.  Now, through deliberate planning, business owners can ensure the non-probate transfers of LLC and partnership interests upon death.  If corporate documents include provisions to permit the transfer upon death of an owner’s interest to a designated beneficiary, and if such a “TOD designation” is on the company’s books, the corporate interest passes outside of probate.  If you have an interest in an LLC or a partnership, consult with your corporate attorney to take advantage of this new law.

Attorney Fees and Personal Representative Compensation in Probate

Maryland law now guarantees that the attorneys fees and personal representative commission may be paid from an estate if all beneficiaries sign a consent and the total amount sought is less than:

$1,800 + 3.6% of the value of probate assets in excess of $20,000.00

If the total amount of attorneys fees exceeds this amount (or if not all beneficiaries can be reached to sign a consent), fees may still be paid from the Estate but a petition must be filed with the probate court so that the court may approve these fees as unreasonable.

This law arises from one county in Maryland which was notorious for having an Orphans Court which gave undue scrutiny to attorney’s fees and commissions, even those which are deemed per se reasonable by Maryland law.  The problem grew so great in this one county, and probate attorneys and clients were so unsettled by the uncertainty, that the legislature took the authority to review per se reasonable attorneys fees out of the hands of all Orphans Courts in Maryland to ensure this problem never repeats.

On the Horizon for 2023

Looking ahead to the 2023 legislative session, there are at least two areas of estate and trust law which will likely be studied:

• Maryland inheritance tax – this is a tax assessed against bequests to non-lineal descendants and non-blood relatives (i.e., nieces, nephews, and friends).  Most estate planning attorneys agree that inheritance tax has an oversized impact on the estate plans of same-sex couples.  Maryland is one of the few states to assess an inheritance tax.  A comprehensive review of this tax is expected.
• Forms of statutory financial powers of attorney – Maryland’s forms of financial power of attorney are reviewed every few years to determine whether any updates are in order.  The legislature looks at other states’ forms and hears from attorneys and citizens as far as suggested changes to the existing forms.  Please be assured, if Maryland does update its form financial powers of attorney, all prior financial powers of attorney on prior forms will still have the full force and effect of the law.

Is your estate planning in need of a review?  The estate planning attorneys at Bulman Dunie are here to help.  Contact Jeremy Rachlin at (301) 656-1177 x305 or jrachlin@bulmandunie.com if our estate planning team can be of assistance.