When planning for the future, many Maryland residents assume that a simple will is enough to ensure their loved ones are cared for. While wills are an essential part of estate planning, they do not always provide the structure and protection necessary for certain financial situations. That’s where testamentary trusts come in.

What Is a Testamentary Trust?

A testamentary trust is a trust that is created by the terms of your will and only goes into effect after you pass away. Unlike a living trust, which is established and operates while you’re alive, a testamentary trust becomes active only upon your death and after your will has been admitted to probate.

In Maryland, testamentary trusts are governed by both state probate laws and trust laws. They are particularly useful when you want to control how and when your beneficiaries receive their inheritance, rather than giving them a lump sum distribution.

Key Features of a Testamentary Trust:

• Created through the instructions in your will.
• Activated upon death, not during your lifetime.
• Requires probate court supervision.
• Managed by a trustee you appoint in your will.
• Can provide staged distributions (e.g., at certain ages or life milestones).

How Does a Testamentary Trust Work in Maryland?

After your passing, your will is submitted to the Orphans’ Court in the county where you lived. During probate, the court will oversee the administration of your estate, including the establishment of any testamentary trusts you created.

The trustee you named in your will takes control of the assets designated for the trust. It is then the trustee’s responsibility to manage and distribute the assets according to the terms you specified.

For example, you might create a testamentary trust that:

• Provides income for your spouse during their lifetime.
• Distributes funds to your children when they reach specific ages.
• Sets aside money for a grandchild’s education.
• Protects assets for a beneficiary with special needs without jeopardizing their eligibility for government assistance.

Maryland law gives you flexibility in structuring your testamentary trust to meet your family’s unique needs.

Benefits of Including a Testamentary Trust in Your Maryland Will

Testamentary trusts offer a range of advantages for Maryland families seeking financial security and estate control.

1. Control Over Asset Distribution

One of the primary reasons people choose a testamentary trust is to maintain control over how their assets are distributed. Instead of beneficiaries receiving a lump sum, you can create a structured distribution plan that helps prevent wasteful spending or mismanagement.

2. Protection for Minor Children

If you have minor children, a testamentary trust can ensure they are financially supported until they reach adulthood. Without a trust, their inheritance would typically be managed by a court-appointed guardian and distributed outright at age 18, which may not align with your wishes.

3. Care for Loved Ones With Special Needs

A testamentary trust can be carefully drafted to provide for a loved one with disabilities or special needs without affecting their eligibility for critical government benefits such as Supplemental Security Income (SSI) or Medicaid.

4. Tax Planning Opportunities

While Maryland does not have its own estate tax for smaller estates, larger estates may benefit from trust structures that help minimize estate and inheritance taxes. A qualified estate attorney can help you design a trust that takes tax efficiency into account.

5. Creditor Protection

Assets held in a properly structured testamentary trust may be protected from your beneficiaries’ creditors, lawsuits, or divorces, providing an extra layer of financial security for your family.

6. Flexibility for Changing Circumstances

Life is unpredictable. Testamentary trusts can include flexible provisions that allow your trustee to make decisions based on changing circumstances, such as unexpected financial needs or changes in family dynamics.

When Should You Consider a Testamentary Trust?

Not every estate requires a testamentary trust, but there are several situations where it can be highly beneficial:

• You have minor children or dependents.
• You want to delay or stagger distributions to young adult beneficiaries.
• You have a beneficiary with special needs.
• You wish to provide long-term support for a surviving spouse.
• You want to protect assets from creditors or divorce.
• You anticipate significant estate or inheritance taxes.

If any of these apply to your situation, it’s a good idea to consult with an experienced Maryland estate planning attorney to discuss your options.

How to Set Up a Testamentary Trust in Maryland

Creating a testamentary trust is not something to DIY. It requires careful legal drafting to ensure your intentions are clear and legally enforceable. Here’s a general overview of the process:

Step 1: Consult With an Estate Planning Attorney

At Blackford & Flohr, we start by understanding your family, your goals, and your financial situation to determine whether a testamentary trust is the right choice.

Step 2: Draft Your Will With Testamentary Trust Provisions

Your will must clearly outline the terms of the trust, including:

• The trustee’s name and powers.
• Who the beneficiaries are.
• What assets will fund the trust.
• How and when distributions will be made.

Step 3: Fund the Trust Through Your Estate

Since a testamentary trust is funded through your estate, you’ll need to ensure your assets are aligned with your estate plan.

Step 4: Probate and Trust Administration

After your passing, your estate will go through probate, and the trust will be established under the supervision of the Orphans’ Court. Your trustee will then manage the trust in accordance with your instructions.

Choosing the Right Trustee

The success of a testamentary trust often hinges on the trustee you appoint. Your trustee should be someone who is:

• Responsible and financially savvy.
• Trustworthy and impartial.
• Willing and able to manage the trust for as long as necessary.
• Comfortable working with attorneys, accountants, and the probate court.

Many people choose a trusted family member, a close friend, or a professional fiduciary such as an attorney or bank trust department.

Common Misconceptions About Testamentary Trusts

There are several myths surrounding testamentary trusts that can create confusion. Let’s clear them up:

Myth 1: “Testamentary trusts are only for wealthy families.”

Reality: While high-net-worth individuals often use trusts, Maryland families of all income levels can benefit from the control and protection that a testamentary trust offers.

Myth 2: “Creating a testamentary trust avoids probate.”

Reality: Unlike living trusts, testamentary trusts do not avoid probate. Because they are created through your will, probate is required to activate the trust.

Myth 3: “Testamentary trusts are too complicated.”

Reality: With the guidance of an experienced estate planning attorney, setting up a testamentary trust can be straightforward. Your attorney handles the legal drafting and ensures your intentions are clearly expressed.

Understanding the facts about testamentary trusts can help you make confident decisions about your estate plan.

Work With Blackford & Flohr for Testamentary Trust Planning in Maryland

A testamentary trust can provide peace of mind, knowing that your loved ones will be protected and your wishes carried out even after you’re gone. At Blackford & Flohr, we specialize in helping Maryland families create personalized estate plans that include testamentary trusts when appropriate.

Whether you’re just beginning to explore your estate planning options or you’re looking to update an existing will, our attorneys are here to guide you every step of the way.

Contact Blackford & Flohr today to schedule a consultation and learn how a testamentary trust can help ensure your family’s future financial security.