Many people are advised to “avoid probate” without being told the reason why. Probate is the process of administering a will or an intestate estate and may be very expensive and very time consuming depending on the decedent’s state of residency. Maryland, however, is not one of those states that make the probate process onerous to the point where that alone is a sufficient reason to avoid it.
However, there may be other reasons a client may wish to avoid probate—or at least have certain assets avoid probate. For instance, a will becomes public record upon your death, and for privacy reasons, you may wish to have other non-probate documents contain the dispositive provisions for your estate. In addition, certain assets may have tax reasons for avoiding probate. Like retirement accounts that provide your beneficiaries with greater income tax savings if they are named on the account’s beneficiary designation form, rather than receiving these assets from the estate.
There are valid reasons to move your assets out of the probate arena into the non-probate arena – but this is not appropriate for all situations.
Valid reasons to elect a transfer of assets to the non-probate arena may include:
- Privacy: In Maryland, the value and non-probate beneficiary assets are not reported to the Register of Wills unless distributions to the beneficiaries are subject to inheritance tax.
- Probate Fee: In some jurisdictions, the cost of probating a will is onerous. Maryland does not tend to be such a jurisdiction.
- Time Saving: In certain situations, disbursements to beneficiaries may occur soon after death.
- Disability Planning: Living or revocable trusts are often used as a tool for disability planning.
- Asset Protection: Some non-probate assets are good asset protection mechanisms (i.e., entireties property, retirement accounts).