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A humorist, Will Rogers, in the 1930s took aim at a couple of his favorite topics saying:

“the only difference between death and taxes is that death
doesn’t get worse every time that Congress meets.”

For decades, I have joked about my idea for an advertising campaign:

“One hundred percent of my clients die.
Wouldn’t you love to be my client?”

Joke about it, ignore it, whistle as you walk past the graveyard, or procrastinate rather than do anything about it. Sooner or later it overtakes us all and, as is common to man, we will all “shuffle off this mortal coil ”.

What is probate?

Probate is a formal legal process of proving that a Will is valid (if the person had a Will), appointing someone to carry out the deceased person’s (decedent) wishes (known as a personal representative), and supervising the distribution of the decedent’s money and property.

When a person dies, what happens next depends on whether the decedent had any foundational estate planning documents such as a last will and testament (otherwise known as a Will) or trust, who the living relatives are, and their relationship to the person who died.

A decedent having a Will is said to have died “testate”. If they died “intestate”, there was no valid Will and any probate property will be administered according to the laws of intestacy – the statutory provisions which effectively provide a default Will to every decedent.

What are probate assets?

Accounts and property in the decedent’s sole name must be reported to the probate court and administered according to the valid provisions of the Will or according to the laws of intestacy.

What are non-probate assets?

Those assets which pass outside of the probate estate and include, but are not limited to, jointly held assets, life estate or remainder interests in a trust or deed, trusts in which the decedent had an interest, payable on death (POD) assets, and assets transferred by virtue of a beneficiary designation.

Death taxes-estate tax – a tax on the right to give an inheritance

Estate taxes are levied on the basis of the “privilege to transfer” and there are both State and Federal estate taxes. There is a Maryland estate tax exemption of $5 million and a federal lifetime exclusion of $12.92 million as of 2023. The Maryland estate tax rate can be as high as 16% on assets subject to the tax and the Federal rate is between 18% and 40% on taxable assets. The federal exemption law will increase that amount in 2024 and then the law will sunset in 2025 reverting back to a much lower lifetime exclusion in 2026. We have seen these tax-cliffs looming in years past, but Congress has managed to stave off some of the more excessive tax increases (exemption reductions). Depending on how much you trust Congress, much can be done to ease the estate tax burdens, or at least maximize the effect of the current exemptions, but it requires the use of trusts and significant estate planning. One nice thing is that, if you want to engage in using the current large tax benefits, the IRS has signaled that it will not retroactively disallow your formalized gifts and transferred assets (“clawback”) when and if the exemptions are reduced.

Death taxes-inheritance tax – a tax on the right to receive an inheritance

Regardless of whether an asset is considered a probate asset or a non-probate asset, the inheritance tax will be assessed based on who is receiving the asset. Maryland has exempted close relations, lineal descendents of the decedent, and charities from the inheritance tax. All others are levied at the rate of 10% of the property passing.

We Are Here to Help

Dying isn’t easy and to make matters worse the state and federal governments have ensconced the process in laws, rules, and regulations. We understand that this can be overwhelming for many people.

We can help you plan ahead for a better ultimate result for those you leave behind. We can also assist those who find themselves entangled in the administrative processes surrounding the passing of a loved one.

If you would like to learn more about the probate process and what is involved, please give us a call.