People are increasingly turning to living trusts because of the flexibility of these estate planning tools. Also known as inter vivos trusts, a living trust permits you to place your assets in the trust while still controlling the property during your lifetime. The trust owns any assets placed in it. However, you can name yourself as the trustee and make all decisions. These trusts are revocable, meaning you can change beneficiaries, buy and sell property, and otherwise treat the assets as you choose. Once you die, the trust becomes irrevocable. Assets placed in a living trust do not go through the probate process after death. Read on for more on creating a living trust in Maryland.
Declaration of Trust
Under the Maryland Discretionary Trust Act (MDTA), you may create a living trust by “transferring property in writing to another person if the document transfers property in a legally recognized manner.” For practical purposes, when creating such a trust, you are the “declarant,” also known as the “grantor.” Under state law, the trust document names the property recipient as the trustee. It must also identify the trust beneficiary. That’s the person or persons who will inherit the trust assets. Under the MDTA, the declarant and trustee are the same. You should name an alternate trustee – perhaps a close relative – to handle the assets after your death and ensure beneficiaries receive them. The trust states that property is transferred under the MDTA. The trust officially exists once property is transferred into it.
When you place any assets in a living trust, the ownership title must change. For example, if you want to place your brokerage account in a living trust, the title would change from Jane Jones to the Jane Jones Trust. When you make any future transactions in the account, such as buying stock, you can’t use your name. You must sign any documents relating to the account as Jane Jones, Trustee.
If you choose not to put certain assets in the trust or neglect to do so, those assets may go through probate, depending on how they are titled. Even if you place all known assets in a living trust, you still need a will. Without a will, any non-trust property goes to your closest relative, as per Maryland intestate succession laws.
Internal Revenue Service
A living trust is not a tool for tax avoidance. You must report income generated by the trust on your tax return. If you are the grantor and trustee, the IRS allows you to report such income on your tax return, rather than file a separate return for the trust.
Living Trust and Probate
Probate is the process in which the validity of the dead person’s – or decedent’s- will is determined as valid by the court. In Maryland, the Office of the Register of Wills in each county handles probate. While property placed in a living trust does avoid the probate process after the grantor’s death, for many estates, probate is a relatively straightforward matter. Compare the costs of setting up a living trust with the fees associated with probate. Although a living trust bypasses probate, it does not affect the payment of any inheritance or estate taxes. With a living trust, inheritance tax is due within three months of filing the information report by the estate’s personal representative. Inheritance tax on assets going through probate comes from the estate’s administration account. It is due within nine months of the personal representative’s appointment, according to the Register of Wills.
A living trust in Maryland is intended to protect your privacy. The assets in the trust do not generally become a matter of public record, as with a will.
Living trusts are advantageous for those owning real estate outside of Maryland. When such properties are placed in the trust, after your death the estate may not have to go through probate proceedings in those other states. The Register of Wills suggests placing assets in a living trust if you fear your will may be contested, on the grounds that trusts are harder to challenge for undue influence or incompetency.
Contact an Attorney for Living Trust in Maryland
It is possible to create a living trust in Maryland via a “living trust kit” available online. However, you are making decisions about the disposition of your property. It is always wise to contact an estate planning attorney well-versed in trust and estate matters. Here at Blackford & Flohr, we have helped many people create their own living trust. If you need help with your Maryland living trust, please contact us today to discuss your estate planning needs.