Maryland Revocable Living Trust Lawyer

What are some advantages of creating a Maryland living trust?

• Your family can avoid probate
• Your estate’s assets and your distribution plans can remain private
• Your family receives a step up in basis on appreciated assets
• You remain able to control and receive trust funds while living
• You decide when your beneficiaries receive distributions
• If you own real estate outside Maryland, you can avoid a costly ancillary probate of those out-of-state properties
• If you become incapacitated through illness, it may avoid a guardianship
• Someone attempting to change your estate plan may have difficulty doing so

Who controls a revocable living trust?

Like all trusts, the trustee controls the trust’s assets. You will choose who will be the trustees during your lifetime and thereafter. Most appoint themselves as the original trustee so they maintain full control of the assets as long as they are alive. You must also name a successor trustee who will act as a trustee in your place when you die or if you become unable to while you are living.

How do revocable living trusts avoid probate?

For your family to be required to open your estate through probate with the Maryland Register of Wills there needs to be assets in your estate. Your family won’t need to open your estate if you transferred all of your assets to a living trust before your death. The register of wills considers the trust and its assets to be non-probate assets, making probate unnecessary.

Do I need a revocable living trust?

Not necessarily. Whether you need or should get a Maryland revocable living trust depends upon your circumstances. Most choose a revocable trust because of its ability to avoid probate and the delays probate causes.

Some value the privacy of using a revocable living trust. Unlike a last will and testament, you do not need to open probate and file the trust with the Register of Wills. You will not need to disclose the assets you owned at death or show the world the terms of your estate planning.

Business owners often use revocable trusts. It allows a smoother business transition following your death to the next generation or chosen management team. Including a business in your probate estate can lead to complications. Both the probate process and the control allowed the personal representative may not be something you’d intend.

An experienced Maryland estate attorney may suggest other techniques to accomplish your goals. So, while revocable living trusts can be great planning tools, you will still want your Maryland estate attorney to help guide you in your decision.

Can I keep control of my assets in the living trust?

A wonderful benefit from your forming a Maryland revocable living trust is that you can keep control of your assets. You can form it so you can continue to use and access the assets you contribute to provide for your personal and financial needs while alive. This may include paying for medical and living expenses, as well as providing for the individual’s children or other dependents.

As the trustee, you will be free to take an asset out of the trust or sell it altogether if you wise to pay for your financial needs or the needs of your family. You can also change the term of a revocable living trust or terminate the trust completely.

How do I form a Maryland revocable living trust?

While a Maryland estate attorney should guide you on forming a revocable living trust, you should still become familiar with the steps to form a trust.

You can gather some information to prepare, but do not get bogged down in the details before contacting an attorney. Your attorney should provide guidance tailored to your situation.

1. Determine what assets you should transfer to the trust.

Make a list of all your assets, including real estate, bank accounts, investments, and personal property. You also would want to list information about any life insurance policies or other death benefits. You can transfer assets to a living trust during your lifetime. But you can name the trust as beneficiary of non-probate assets, such as life insurance policies. Your estate can also transfer assets to the trust using a pour over will, discussed below.

2. Choose who will be beneficiaries of your trust.

You can then decide who will receive your assets after your death. The trust’s beneficiaries can be family members, friends, or even organizations. The beneficiaries can also follow in sequence. For example, you can leave the income from your assets to your spouse or minor children and then have the assets go to another person.

3. Determine who should be trustee.

You should keep in mind who you want to be trustee. Most choose a family member or friend to be the trustee of their trust, but in other cases, some choose a trusted attorney or other advisor.

You will obviously want someone you can rely upon to care for the trust’s assets. From my experience, you also want someone who will take an interest in the beneficiaries’ well-being. You will choose both the initial trustee and successor trustees.

4. Create the trust document.

Work with your attorney to draft a trust agreement. Your trust agreement should outline the trust’s terms, your asset distribution plan, and the trustee’s duties. This is likely the most complicated part of forming a trust, but an attorney should be able to make suggestions to accomplish your goals. Your part in this process should be to come up with a few primary goals for the trust.

5. Sign the trust agreement.

Your attorney will usually prepare all of your estate planning documents, including your trust, at the same time. This likely includes powers of attorney, medical documents, and a pour over. A pour over will is a last will and testament that typically accompanies a revocable living trust. Upon completion, the attorney usually has you sign your documents with a notary present.

6. Fund the trust.

After you have signed the trust agreement to form the living trust, you may have your attorney draft the documents needed to transfer assets to the trust. People often refer to this as funding the trust.

Sometimes third-parties, such as banks and investment companies, will provide the documents. Other times, you will need legal documents prepared. For instance, your attorney may prepare real property deeds or documents transferring your corporate or LLC interests to the trust.

7. Establish tax status if needed.

Sometimes, the living trust will need to get a tax ID number or EIN from the IRS. Whether you need one depends upon how your attorney drafted the trust, the assets held, and similar issues.

Other times, the trust may need to qualify with the IRS to hold other interests, such as stock you may own in an s-corporation. Your attorney and tax advisor likely will need to instruct you regarding the trust’s tax compliance.

8. Store the trust documents.

Your storing trust documents properly will be very important for your family. You must not only keep the trust agreement. You should keep the asset transfer documents as well. This may be less of an issue if the trust’s assets include only titled assets, such as bank accounts and real property. Third parties will keep track of those transfer documents to determine ownership.

Properly storing the documents becomes far more important when we try to determine whether the trust owns assets, such as an LLC. If your trustee or family cannot find the LLC’s membership assignment documents, then they have no proof you ever transferred it.

What is a pour over will for a living trust?

Your attorney will probably include a pour over will to accompany your revocable living trust. This type of last will and testament names the trust as the beneficiary of assets you may not have put into your trust. The pour over will may also address some matters that you legally need to include in a last will and testament, rather than in a trust.

Putting all of your known assets into a revocable trust may not always avoid probate. There can still be situations where an asset doesn’t make it into your trust and makes probate necessary.

You may miss transferring an asset to the trust for many reasons. Sometimes people omit assets because of simple error. Sometimes people don’t even know the asset existed, such as a surprise inheritance. Other times, maybe the asset itself didn’t exist while you were alive.

For example, if a vehicle accident causes your death, then you may have a legal claim that was not created until your death. A pour over will transfers probate assets to your trust to be distributed as you choose.

Finally, the pour over can also address things Maryland law states you must include in a last will and testament, such as guardianship of any minor children.

Can a revocable living trust help avoid a guardianship?

If you become incapacitated, then the successor trustee of your revocable trust can step in to help. While you typically keep control of all assets in the trust while live, you can include in the trust agreement that you want to be removed as trustee if you become incapable of caring for yourself.

Families prefer to avoid guardianships, which is a costly, time-consuming, and painful process. A revocable trust can allow the successor trustee to care for them, protect the assets, and can prevent the need for a guardianship.

Rules for a valid trust in Maryland

Though Maryland allows a huge amount of discretion in the trust’s terms, your trust must follow certain rules under Maryland law. Some of those rules include that the settlor must have the mental capacity to form the trust and have intended to do so. Also, the trust must have a beneficiary that is ascertainable unless it’s a charitable trust or a trust for pets.

Your trust can name specific people, a class of people (such as your grandchildren), or allow the trustee to decide who will be beneficiaries. Maryland law considers each of those an ascertainable beneficiary.

Other Maryland rules, particularly those in the Maryland Trust Act, govern how trusts must function and the rights and obligations of settlors, trustees, and beneficiaries.

Common Questions about Maryland Revocable Living Trusts:

How does a revocable living trust provide privacy to my family?

A revocable living trust will provide privacy to your family because it will be a private document. Only those allowed either by the trust agreement or by law can access the trust’s details.

More important, your family will not have to send the trust agreement to the Register of Wills to open an estate. Therefore, it will not become a public record like a last will and testament at the time of your death. 

During the probate process, your family will need to file the last will and testament and information regarding your assets. The public could discover the persons you named or didn’t name in your last will and testament. They can also see sensitive information both about your assets and your family. A living trust completely avoids this issue.

What are the disadvantages of a revocable trust?

There are many advantages to having a revocable trust, such as flexibility and the ability to change it if desire, but there are some drawbacks to consider. First, there will be no income or estate tax benefits compared to just continuing to own the assets in your name. Since you keep your access to the assets, it will not provide the same level of protection against potential creditors as an irrevocable trust. Finally, setting up and maintaining a revocable trust can be expensive and time-consuming.

Some disadvantages definitely exist. Any honest estate planning attorney will share that information and alternatives, even if cheaper.

Who owns the property in a revocable trust? 

If you contribute property to a revocable trust, the trust is the owner of the property for legal purposes. This does not mean that you cannot lose control of the property. As a revocable trust, you can name yourself as the initial trustee and keep rights as the settlor to withdraw property from the trust. 

A Maryland estate planning attorney often drafts the trust agreement so the IRS continues to treat you as the assets’ owner. Doing so avoids the higher tax rates that apply to income earned by a trust. 

How is a living trust different from a will?

There are substantial differences between living trusts and a last will. Usually you transfer your assets to a living trust during your lifetime, while a last will transfers assets you still held at death.

Unlike a will, a living trust does not require probate, which is the process of obtaining court approval for a person’s estate to be distributed to heirs. The transfer of assets to the heirs is usually quicker and less expensive when using a living trust compared to a will. Additionally, living trusts offer more privacy and flexibility than a will as they are not public documents.

Will I lose any control over my property if I create a Revocable Living Trust?

No, you will not lose control over your property if you create a revocable living trust. The revocable living trust allows you to maintain full control over your assets while you are alive. If you become incapacitated, the Trustee can manage the assets for you.

So, let’s say you own a home in Glen Arm and a cabin outside Smithsburg. If you later decide you want to sell your Glen Arm home and use the funds to retire in Smithsburg, then you will be free to do so. That is one benefit of a revocable living trust.

Is a revocable living trust or power of attorney better for avoiding a guardianship?

A Maryland power of attorney will allow another to manage your finances and your assets. However, a power of attorney cannot stop others from taking advantage of you as well as a trust. For instance, a power of attorney does not prevent you from continuing to send money to a dishonest caregiver.

You can stop con artists in their greedy tracks by placing your assets int your trust and requesting your trust agreement revoke your trustee rights if diagnosed with Alzheimer’s, dementia, or similar illnesses.

Do I have to transfer all my assets to my living trust?

You are not required to transfer all your assets to your living trust. Depending upon the type of assets you own, whether they will be transferred by beneficiary designation, you will foresee selling that asset shortly, or other similar circumstances, transferring it may not be worth the effort or in your best interests. 

However, in some circumstance you may want to do so. If your life expectancy is not very long, if you expect to own the asset until death, or if you otherwise have no estate planning in place for that asset, then it may be best to transfer it.

You should rely upon the advice of a good Maryland Trust Attorney to assist you because of such complexity. Getting the trust agreement is just the first step in trust-based estate planning.