A living trust in Maryland is an estate planning tool that holds your assets in trust but allows you complete use of them and then passes them to your beneficiaries. A revocable living trust (sometimes referred to as an inter vivos trust) provides a variety of benefits.
Living Trusts in Maryland
A Maryland living trust is opened by the grantor. As grantor, you place your assets in the trust. A trustee is named who manages the assets for your benefit. Most people select themselves as trustee. You then also name a successor trustee who steps in after your death to manage the trust and distribute the assets to your named beneficiaries. Your revocable living trust is completely alterable during your life. You can even completely cancel it. An irrevocable living trust on the other hand is not alterable once it is signed.
One of the benefits of a Maryland living trust is that the trust assets do not need to go through probate. Probate is a court procedure that approves and enacts a will. Probate takes months to complete and creates the expense of an executor and attorney, as well as court fees. If you own property in more than one state, a trust allows you to avoid multiple probate proceedings in all the states as well.
Maryland has enacted the Uniform Probate Code, which has somewhat simplified its processes. An estate of $30,000 or less can go through a small estate proceeding that is much less burdensome. In addition, the Maryland Modified Probate Procedure is available if the residuary beneficiaries of a will (the person or people who get everything that’s left after specific bequests) are the spouse or children. In these situations, a trust may cost more than probate. However, even the modified procedure is not immediate and has a maximum 9 month cap. A trust allows assets to be distributed immediately upon your death with no wait if you so wish.
In Maryland, income tax is applied to assets in a trust, but not to assets that pass via a will, so it is important to calculate how this cost would impact your assets.
Do I Need a Living Trust in Maryland?
Creating a living trust in Maryland has the benefit of giving you control over your assets during life and after death. During your life, you use, manage, spend, or give away any trust assets with no restrictions. After your death, the trust assets are managed by the trustee and distributed according to your instructions. You have the option of spacing out how those assets are distributed, setting dates or events as distribution markers. Wills transfer assets immediately upon probate. A living trust is also more difficult to contest, so it provides greater assurance your wishes will be carried out.
Living trusts create privacy for you and your family. The trust is not filed with a court as a will is. While Maryland requires that a schedule of the trust assets be filed with the Register of Wills which becomes public record, the trust document itself is never public nor are the beneficiaries or terms of the trust.
A revocable living trust protects you should you become mentally incapacitated. All of your assets are already controlled, owned, and managed by the trust and a conservatorship proceeding is likely unnecessary for you to have your financial life managed for your benefit.
Living Trusts and Estate Taxes in Maryland
Estate taxes are not avoided with revocable living trusts. Maryland has no inheritance tax if your assets go to lineal descendants, but the federal government applies estate tax to assets over $5 million. A special marital trust (sometimes known as an AB trust or QTIP trust) does prevent estate tax from applying when assets are passed from one spouse to a surviving spouse.
How to Create a Living Trust in Maryland
To create a living trust in Maryland you create a Declaration of Trust which is a written document. Oral trusts are valid in Maryland but are very difficult to enforce and manage. You sign the Declaration in front of a notary public. Assets are then transferred into the trust to fund the trust. A revocable living trust is an option to consider as part of your overall estate planning. Its benefits may be useful for you.
Ready to create a Maryland living trust? LegalZoom can help you create a living trust online in three simple steps. Begin by filling out a simple questionnaire. LegalZoom will review your answers and mail your living trust package to you.