Maryland Elder Law

October Brings New Laws Affecting Probate in Maryland

There are several new laws affecting probate in Maryland that became effective October 1, 2012. This article will address those statutory changes.

New Small Estate Limits

When someone dies owning property, unless such property passes to a beneficiary through a beneficiary designation, joint account designation, Pay on Death account designation, life estate deed, or by some other means, then a probate estate must be opened to administer that property and pass it to the appropriate beneficiaries. Maryland allows for a simplified Small Estate procedure if the assets are below a certain value. Effective October 1, 2012, the threshold for a Small Estate is $100,000 if the spouse is the sole beneficiary, and $50,000 if there are other beneficiaries besides the spouse.

As long as the deceased person’s assets subject to probate (not including any assets that pass outside of probate as discussed above) are equal to or less than the October 1 limits, one may utilize the simplified Small Estate procedure. If, however, the person died before October 1, then a Small Estate may be used only if the value of the assets are $30,000 or less ($50,000 or less if the spouse is the only beneficiary).

Birth by Artificial Insemination

In Maryland, creditors have 6 months from the date of death to make a claim against the deceased person’s assets (6 months from the date a Personal Representative is appointed for any state Medical Assistance claims). It is typical, but not always necessary, to wait for six months before distributing estate property to the beneficiaries of the estate. However, due to a new statutory change, effective October 1, some Personal Representatives (a Personal Representative is the person who administers the estate) may risk personal liability if they distribute property after 6 months but before 2 years following the decedent’s death.

The risk arises out of several statutory changes that allow for the use of a decedent’s genetic material (e.g. medically preserved sperm or eggs) after the death of the donor, and which statutory provisions deem that the individual who is born through the use of such genetic material after the donor’s death, in certain circumstances, be considered the deceased person’s “child” under the law governing probate estates, provided that such child is born within two years of the donor’s death.

For example, if you have a son or daughter who deploys to Afghanistan for military service, and that child of yours preserved his or her genetic material to be used by your child’s spouse to create a baby should your son or daughter be killed, the following possibility might arise. Your son or daughter may predecease you and you may not have been informed about the arrangement your child had with his or her spouse.

You also may have prepared a Will that divides your property among your children, but if one of your children predeceases you, then that child’s share would be distributed to his offspring. If such predeceased child had no offspring, however, then your estate would be divided among your surviving children.

In that event, under the example set forth above, suppose that you die, and your child who deployed overseas had predeceased leaving no living children. Suppose also that you have no living spouse and only one other son, who is the Personal Representative under your will.

The usual practice would be for your Personal Representative to wait out the 6 month creditor’s claims period before distributing the estate to the beneficiaries. In this instance, by all appearances, your Personal Representative ascertains that he is the only beneficiary of your estate because your other child died with no offspring.

Suppose also that your surviving child had lost his job and is in arrears on his mortgage. So, after 6 months following your death, he, as Personal Representative distributes the entire estate to himself as sole beneficiary and uses the funds to bring his mortgage current. By doing so, he has none of the inherited funds left over.

For a death prior to October 1, 2012, this would not have been a problem for your surviving son. Now, however, there is a risk. Suppose, in the example above, that the spouse of your predeceased child decides to use the medically preserved genetic material to become pregnant and give birth. If such event occurred more than six months following your death, your Personal Representative would not have known about the situation when he distributed the estate to himself. But if such birth occurs within two years following your death, then, under your will, and through the application of the new statutory provisions, there now exists a grandchild who is entitled to share in your estate.

Unfortunately, because your surviving son distributed the entire estate to himself (as was proper and prudent under pre-October 1 law), he now stands personally liable to pay the share of your estate that your new grandchild is entitled to receive. In the example above, however, your surviving son used the entire inheritance to bring his mortgage current and has insufficient assets to pay the bequest to the new grandchild. This is a problem.

This new statute injects uncertainty into the process of closing out a probate estate in a timely manner. William M. Gatesman has been working with other Maryland lawyers to urge the state legislature to revise this new law to require that any person who might use such genetic material provide notice to the Personal Representative of an estate within 6 months of the date of death, and in the absence of such notice, any child born from such genetic material after such 6 month period would not be an eligible beneficiary of the estate.

It is likely that such revision of the law will be made within the coming year. In the meantime, however, estate planning lawyers must consider whether to add a clause to the Wills they draft for clients specifically excluding those persons born of a deceased person’s genetic material more than 6 months after death as beneficiaries in the estate. And probate lawyers must exercise caution when advising Personal Representatives about making distributions to beneficiaries within the two years following the decedent’s death.

William M. Gatesman stands ready to assist clients as they attempt to navigate the potential minefield imposed by the new genetic materials law.

May a Personal Representative Represent an Estate in Court Without a Lawyer?

Several lawyers have been pondering whether it is illegal for a Personal Representative to bring a legal action without a lawyer because doing so would be considered the unauthorized practice of law.

This office was involved in a case a few years ago in which the Maryland Court of Special Appeals ruled that a Personal Representative (who was not also an estate beneficiary) may not pursue a legal action in Circuit Court without a lawyer. The Appellate Court ruled that doing so constitutes the unauthorized practice of law. The Court ruled also that an estate is not a person who can pursue a legal action “pro se”.

When an individual goes to court without a lawyer, such person is said to be acting “pro se”. Only individuals are allowed to pursue legal actions in court on a pro se basis. Parties who are not individuals, such as corporations, may not do this, but rather, must be represented by a lawyer.

According to the Court of Special Appeals in this unpublished opinion, an estate likewise must have a lawyer to pursue a legal action in Circuit Court.

You may click here to read the case.

Probate to Remove a Cloud on Title

William M. Gatesman and the Michael G. Day Law Office recently assisted a client in the following situation. During her husband’s lifetime, the client and her husband transferred their real estate to various trusts using deeds that identified the trust as the recipient or grantee of the property, specifically using the name of the trust without including the name of the trustee.

Deed to Trust Must Name Trustee
Under current Maryland law, such a deed would be effective to convey the property to the trust. However, at the time the deed was signed, Maryland law required that the trustee of the trust (i.e. an actual person) be listed as the grantee in order for the deed to be effective. Listing the trust itself as grantee without also listing the trustee by name was ineffectual. Consequently the client’s deeds were not effective and there was a “cloud on title”, meaning that the property could not be sold until the problem was resolved.

In this case, because the original deeds to the trusts were not effective, we needed husband and wife to sign confirmatory deeds that included the name of the trustee as grantee. However, because husband had died, he could no longer sign a confirmatory deed. And even though his wife held his power of attorney, a power of attorney is no longer effective when the principal dies.

Ancillary Probate
To complicate matters further, while the real property is located in Maryland, the couple had since moved to another state. Since all of their other property had effectively been conveyed to the trusts, no probate proceeding was necessary in such other state even though their wills were on file with the court in that state.

Typically, in cases were an individual is domiciled in another state and dies owning real property in Maryland, one first opens an estate in the state of residence and then undertakes a streamlined “ancillary administration” in the Maryland probate court.

No Clear Procedure
While our office resolved this matter some time ago, it is evident from inquiries by other probate lawyers in an email discussion forum that some lawyers wonder whether a Maryland probate can be opened to address such an issue if there is no probate in the state of domicile.

In fact, Maryland’s rules of procedure and the statutes addressing the jurisdiction of Maryland’s probate court do allow a family member to open a probate estate in Maryland in such circumstance. On that basis, we were able to have a Personal Representative appointed in Maryland for husband’s estate for the sole purpose of executing the confirmatory deed which wife also signed. In this way, we were able to remove the cloud on title that affected the marketability of the properties.

This is one example of the type of complex situation we are called upon to resolve on behalf of our clients on a day to day basis.

Can a guardian be paid for services after the ward has died?

Battley v. Banks (Md. App. December 20, 2007)

The Gatesman Law Office assists clients in the appointment of a guardian for persons who become incapacitated and cannot make personal or financial decisions for themselves. Guardians are entitled to be compensated for their services, but they must petition the guardianship court for approval of such compensation.

When the disabled person, called the “ward” of the court, dies, the guardian must prepare a final account of the ward’s assets. That account should include the guardian’s final request for compensation.

Whether the guardian may pay such compensation to himself out of the guardianship assets before the ward’s assets are turned over the personal representative of the ward’s probate estate depended on the county in which the ward resided. The courts in different counties applied different rules.

Now, however, the rule is clear. Read the rest…