How a living trust can provide peace of mind in Maryland

What is a living trust?

A "living" trust—also known as an "inter vivos" trust—is established while the grantor is still present. After your death, the assets in the trust are given to the beneficiaries you specify in your living trust. You might also use a will, but wills must go through the probate process, which is the legal procedure that controls how your assets are distributed to your beneficiaries.

Two types of living trusts are used as estate planning tools. Revocable living trusts are subject to change or revocation at any time. As the "trustee" of your trust, the trust and its assets remain under your control as long as you are alive. After your passing, you will appoint a "successor trustee" in your trust agreement to manage the trust (and distribute your assets). If you set up a shared living trust, which spouses frequently do, your successor trustee would take over when both spouses pass away.

On the other hand, irrevocable trusts cannot be changed or canceled once established. Irrevocable trusts are valuable tools that may help you achieve specific objectives, such as lowering taxes.

Living trusts vs. Testamentary trusts

The trust is typically established as a will provision before a person dies; it is not immediately constituted upon death. Trusts come in two categories - Testamentary and Living.

Property is only transferred into a trust under a testamentary trust after the grantor has passed away. The grantor may designate that property or payments be distributed over an extended period or in a single lump sum payment. The trust enables the grantor to impose certain conditions on the property they desire to leave another person.

A living trust, a.k.a an "inter vivos" trust, is established while the grantor is still alive. If the assets are transferred into the trust before the grantor's passing, creating such a trust may prevent probate for an estate.

A revocable trust can be revoked at any time by its grantor, whereas an irrevocable trust's rules cannot be changed after establishing it.

Living trusts in Maryland

The grantor creates a living trust in Maryland. As the grantor, you fund the trust with your property. The assets are managed for your benefit by a trustee. You select a successor trustee who will run the trust and give the assets to the beneficiaries after your death. During your lifetime, you have complete control over your revocable living trust. On the other hand, once it has been signed, you can not change or modify an irrevocable living trust.

Maryland living trust assets are exempt from probate. A will is approved and implemented via a legal process known as probate. An executor, an attorney, and court costs must be paid during the probate process. With a trust, you can avoid going through several probate processes in multiple states where you might have properties.

The Uniform Probate Code was adopted by Maryland, which slightly streamlined its procedures. A small estate proceeding can be used for estates worth less than $30,000. If the residuary beneficiaries of a will are the spouse or children, the Maryland Modified Probate Procedure is also an option for them. A trust might be more expensive in these circumstances than probate. The modified process may take a maximum 9-month to be affected. If you like, a trust enables assets to be distributed immediately after passing.

Determining how this expense will affect your assets is crucial. In Maryland, assets that pass via a will do not incur income tax.

Do you require a living trust in Maryland?

Living trusts give you and your family complete privacy. In contrast to a will, the trust is not filed with the court. The trust agreement, its beneficiaries, and terms are never publicized as a public record in Maryland. However, a schedule of the trust's assets might be required to be filed with the Register of Wills.

You can control your assets during and after your death by setting up a living trust in Maryland. You can utilize, administer, spend, and donate any trust assets anytime during your lifetime. The trustee will handle the trust funds after your passing and distribute them as you specify. You can stagger the release of those assets by using dates or events as distribution milestones. A living trust offers additional assurance that your desires will be carried out because it is also harder to contest.

Your loved ones may be able to save time, trouble, and money by creating a living trust after your passing. Property left in a will (as opposed to a living trust) may be held in probate court for months or even years, resulting in high court and attorney fees. In contrast, assets left in a trust can frequently be given to your beneficiaries immediately without legal counsel.

Regrettably, Maryland is not one of the states that have adopted the Uniform Probate Code to speed up the probate procedure. For "small" estates, Maryland does provide a streamlined probate process. Your estate may be eligible for this expedited probate process if:

• The total value of your probate-eligible property is $50,000 or less,
• The total value of your probate-eligible property is $100,000 or less, and your surviving spouse is the only beneficiary.

Not all of your possessions are subject to probate. Making a living trust simply to avoid probate may not be necessary. You may skip this process if you believe your estate will be eligible.

Do I still need a will if I have a living trust in Maryland?

You will indeed require a will. This may be confusing as the purpose of a living trust is to do away with the requirement for a will. However, you should still create one for the reasons listed below.

• You may need to assign a guardian for minor children. But, you cannot designate a guardian through a trust. If you have little children, you should make a will to appoint a guardian who can manage their trust property in a legally recognized manner.
• You need the will to manage assets you haven't yet given your trust. People frequently create trusts but fail to transfer ownership of all their assets to the trust formally. Or, after creating their trust, people acquire or inherit property and forget or are unaware that they should also include that in their trust. In either case, the assets won't be allocated under the trust's rules. You need a will as a backup to specify how property not in the trust should be divided.
• Additionally, you can pass away unexpectedly before transferring property or ownership of several valuables. So, creating a will transfer any assets subject to probate into your living trust. It ensures that beneficiaries receive their entire inheritance. If you don't make a will, Maryland state law will determine which of your closest relatives will inherit any property that isn't transferred via your living trust or another means (such as joint tenancy).

A living will and advance directives can serve various end-of-life purposes if you become mentally incapacitated. Using a power of attorney, you may designate an agent. He/she can make any financial or healthcare decisions and specify the type of palliative care you want to receive. So, it is wise to create a living trust and draft a will in Maryland.

How much may it cost to create a living trust in Maryland?

The process you use to create a living trust in Maryland will determine the overall costs. You'll likely spend between a few hundred to a few thousand dollars if you do it yourself using online tools. The overall cost of hiring an attorney may exceed $1,000. The exact cost may vary depending on your attorney's fees and how complicated your estate is.

Creating an estate plan and drafting a living trust alone may be dangerous. Even though it is less expensive, DIY estate planning needs extensive, accurate study of federal and local estate planning laws. If you don't feel up to the task, hiring an attorney is definitely the best course of action. Make sure the attorney you choose specializes in trust law and estate planning. Talk about fees upfront so you are not caught off guard.

How to set up a living trust in Maryland

Living trusts are amendable and revocable during the grantor's lifetime. Assets transferred into the trust may include the following:

• Personal bank accounts
• Real estate investments
• Investment in stocks & bonds
• Personal properties
• Business ownership
• Cryptocurrency

Whether revocable living trusts or irrevocable living trusts, all trusts avoid the Maryland probate process. Only the trustee may alter an irrevocable living trust after the settlor establishes and funds it.

After the grantor's death, a revocable living trust becomes irrevocable. No one else may change it but the trustee, who distributes trust assets to beneficiaries per the trust's terms.

The process of setting up a living trust in Maryland is as follows:

Select the kind of trust you desire

A single trust is probably the best choice for you if you are single. However, a joint trust is generally the wisest option for the married couple. The property you and your partner own may be held under joint trusts.

Make a list of your possessions

Most of them, including real estate, money, stocks, and bonds, can be kept in your living trust. Additionally, obtain pertinent documents like stock ownership certificates and real estate deeds.

Decide on your trustee

You have the option to act as a trustee or designate another person. If you want to be the trustee, you must choose a successor trustee to oversee the trust after your death and make sure the assets get to the designated beneficiaries.

Making the trust agreement

You have two options - Work independently using an online tool or with a lawyer's help.

The document should be notarized

You must sign the trust document before a notary public to make the trust valid per federal laws.

Transfer your property into the trust to fund it

You can do this independently, but the paperwork can be challenging, so you might want to hire a lawyer to assist you.

Can you lower your estate taxes in Maryland through a living trust?

Your estate taxes won't be affected by a living trust. In Maryland, the estate tax applies as of 2019 to estates with a value of more than $5 million, and the tax rate ranges from 0.8% to 16%. The federal estate tax might also be applied to your estate. However, it has a significantly greater exemption, $12.06 million for individuals and $24.12 million for married couples.

An inheritance tax is imposed in Maryland as well. However, the following relatives of the deceased are excluded - a child or direct descendent, a child's spouse, a parent, a grandparent, a sibling, a stepchild, or a stepparent. Any additional relatives of the dead will be subject to a 10% tax rate.

If you're concerned about the estate tax in your state, you might be able to utilize a more complex trust (such as an AB trust) to lower or avoid estate taxes, but you should first consult with a lawyer or take help from financial advisors.

Can you contest a living trust in Maryland?

A living trust, commonly called a revocable trust, facilitates the distribution of assets without going through the probate court system. If there is a suspicion of coercion, mistakes, or fraud, a possible heir may contest a trust in some circumstances.

For example - A living trust in Maryland will be considered invalid if it has allegations that an heir misrepresented to someone about other heirs to keep them out of the trust.

Apart from that, without the assistance of an experienced Maryland trust planning attorney, the trust might be accused of having been miswritten. The party disputing the revocable living trust may also claim that the creator signed the trust document under the influence of a third party.

How to

A person can initiate a will dispute by filling out a form and submitting it to the court. The Orphans Court will then hear the case. A lawsuit must be filed in the Circuit Court and attended by a Circuit Court Judge to oppose a trust.

Consequences

If the Maryland court rules that the trust is invalid, many possible outcomes could be based on specific allegations. A person who has been wronged may be compensated with particular trust assets. The named beneficiaries may also settle the disputes with the party mutually.

An invalid trust may also start further legal actions. Make an appointment with a knowledgeable and skilled Maryland trust attorney to maximize your chances of avoiding potential trust disputes and related litigation.

Disclaimer: This article is for informational purposes only and does not constitute legal advice. Please consult a qualified attorney for advice on your specific situation.