Maryland

Maryland splits the work between the Register of Wills — a county office that opens and
administers estates — and the Orphans' Court, which decides disputes. Most estates never see
the Orphans' Court.

Which track

• A small estate is one whose probate assets fall under the statutory threshold; it is much
  simpler and cheaper.
• A regular estate is anything above it, and requires a formal inventory and account.
• Modified administration is a streamlined version of a regular estate. It replaces the
  inventory and accounts with a single final report, and is available where the residuary
  beneficiaries are limited to the spouse and children or a trust for them, everyone consents,
  and the estate is solvent. It must be elected within a deadline. Where it fits, take it.

Confirm the current thresholds with the Register of Wills — they are statutory and have moved.

Maryland taxes estates twice

Maryland is the only state in the country that imposes both an estate tax and an inheritance
tax. Both can apply to the same estate.

• Inheritance tax — a flat 10% on property passing to beneficiaries who are not exempt.
  The exempt list is broad and includes the spouse, children and other lineal descendants,
  parents, grandparents, siblings, and the spouses of children. What is left is essentially
  nieces, nephews, cousins, friends and unmarried partners, and they pay 10%.
• Estate tax — payable where the estate exceeds the Maryland exemption, currently around
  $5 million. The Maryland exemption is not indexed the way the federal one is.

Confirm current rates and thresholds with the Comptroller and the Register before relying on
them.

Before distributing

The Register will not close the estate until the inheritance tax is settled, and financial
institutions frequently want confirmation before releasing assets.

A Maryland will must be in writing, signed by the testator (or by another at their
direction and in their presence), and attested and signed by two credible witnesses in the
testator's presence. The testator must be 18 or older and of sound mind.

Maryland does not accept ordinary holographic wills

A handwritten will with no witnesses is not valid in Maryland, with one narrow exception:
a will made by a person serving in the armed forces outside the United States may be valid
without witnesses, and even that expires a set period after they leave the service.

For everyone else, two witnesses. Maryland also now permits electronic wills executed to the
statutory standard, which is a better modern option than a handwritten one.

Draft around the 10% inheritance tax

This is where a Maryland will earns its fee. Because the exempt list covers the spouse,
children, parents, grandchildren and siblings, most family gifts pass free. But a gift to a
niece, nephew, cousin, godchild, friend or unmarried partner attracts a flat 10% from
the first dollar.

If that is your intention, make it an informed one — and decide expressly whether the tax comes
out of that gift or out of the residue. The will can direct it, and if it does not, the default
may surprise the family.

Consider modified administration

Estates that qualify for modified administration are far lighter to administer. Leaving the
residue to a spouse and children, or to a trust for them, is what keeps that option open.

Also

• Name an alternate personal representative and consider waiving bond.
• A surviving spouse has an elective share whatever the will says.
• Review after a marriage, divorce, birth or a move to Maryland.

Yes, and Maryland caps it precisely.

The statutory maximum

Under Estates and Trusts § 7-601 the commission allowed to the personal representative may not
exceed:

So the commission on the first $20,000 is capped at $1,800, and everything above that accrues
at 3.6%. Confirm the current figures against the statute.

It is a ceiling on the total

The important nuance: this is a limit on commissions, and the Orphans' Court looks at what
the estate is paying in total for administration. An estate paying substantial attorney's fees
as well may find the court unwilling to allow the full commission on top. Ask early how the two
will sit together rather than discovering it at the account.

How it is approved

Commission is requested from the Register of Wills or allowed by the Orphans' Court. In
a modified administration, where there is no formal account, the beneficiaries' consent is
doing the work — so agree the figure in writing before taking it.

If the will fixes the figure

A will provision governs where the personal representative accepts on those terms.

The tax angle, which cuts both ways

Commission is taxable income to the representative but a deductible administration
expense for the Maryland estate tax. Where the estate is over the roughly $5 million exemption,
taking a fee can reduce estate tax. Where it is not — and where the representative is an exempt
family beneficiary who would otherwise pay no inheritance tax at all — taking a commission
simply converts a tax-free inheritance into taxable income. Ask an accountant which case you are
in.

A Maryland personal representative is reimbursed from the estate for the reasonable expenses
of administration, separately from the statutory commission. Most are also deductible for the
Maryland estate tax, so careful records have a cash value on larger estates.

Normally claimable

• Funeral, burial or cremation, the headstone, and a reasonable reception.
• Register of Wills probate fees, which are scaled to the size of the estate, certified
  letters, and certified death certificates.
• Attorney's fees, and accountant's fees for the final Form 1040, any Form 1041, and the
  Maryland estate and inheritance tax filings.
• Appraisals of real property, vehicles, jewellery, art and collections.
• Carrying costs on estate property until sale: insurance, property tax, utilities, security,
  maintenance, lawn care and snow removal.
• Homeowners' or condominium association fees, which continue regardless.
• Ground rent, where the property is subject to it — a Maryland peculiarity, especially in
  Baltimore, and easy for an out-of-state representative to miss entirely.
• Cleaning, clearing, storing, moving and shipping contents, including a shore property.
• Travel on estate business at a reasonable rate.
• Bond premiums where bond was not waived.

Normally not claimable

• The representative's lost wages, meals near home, or personal spending.
• Costs run up for one beneficiary's convenience rather than the estate's.
• Improvements beyond preparing a property for sale as it stands.
• Anything without a receipt.

The rule that decides it

Open an estate bank account and run everything through it. Under modified administration
there is no inventory and no formal account — only a final report — so the discipline that
would otherwise be imposed on you has to be self-imposed.

Most Maryland estates are administered by a family member working with the Register of Wills. A
bank trust department or an attorney serving as personal representative earns its cost in
particular cases.

Consider a professional when

• Beneficiaries fall outside the inheritance tax exempt list — nieces, nephews, cousins,
  friends, an unmarried partner — and the flat 10% has to be planned for and apportioned
  correctly.
• The estate is near or above the roughly $5 million Maryland estate tax exemption, so both
  Maryland taxes and possibly the federal one are in play at once. Maryland is the only state
  where that particular three-way problem arises.
• The estate holds an operating business, farmland, or rental property, or ground rent
  interests that need untangling.
• There is conflict among the beneficiaries, which moves the matter to the Orphans' Court
  and forecloses modified administration, since that route needs everyone's consent.
• A beneficiary is a minor or incapacitated, so a trust runs for years.
• The named representative lives out of state and cannot readily attend a county Register of
  Wills office.

What it costs

Corporate fiduciaries charge a negotiated percentage, referenced to the § 7-601 cap, usually
with a minimum annual fee. Attorneys generally bill hourly — and remember the court looks at the
combined cost of commissions and legal fees, so ask how both will be justified together.

Middle ground

Appoint a family member, leave the residue in a way that preserves the modified administration
option, and let them retain a Maryland attorney and an accountant at the estate's expense.

A named representative who does not want the job can decline before appointment.