If you are thinking about estate planning, there are a lot of options available for ensuring your assets are protected and your family is taken care of once you’ve died. One of these options is to store your assets in a living trust. This article will provide information for anyone considering forming a living trust in Maryland, with a step-by-step guide to the process and a look at why you may or may not want to create a living trust. If you are starting the estate planning process, you might want to find a financial advisor who can help you.
How to Create a Living Trust in Maryland
Here’s how you’ll go about creating a living trust in the Old Line State:
- Choose the type of trust you want: If you are single, it’s likely that a single trust will be the best option for you. If you’re married, though, a joint trust is probably best. Joint trusts can store property individually and jointly owned by you and your partner.
- Take inventory of your property: You can store most of what you own, including physical property, cash, stocks and bonds, in your living trust. Also gather relevant documents like certificates of stock ownership and housing deeds.
- Decide who will be your trustee: You can serve as trustee, or you can name someone else. If you name yourself, you’ll need to pick a successor trustee who will take over management of your trust once you die and ensure your property is distributed to your named beneficiaries.
- Create the trust document: You can do this either by yourself using an online program or with the assistance of a lawyer.
- Get the document notarized: Sign the trust in front of a notary public.
- Fund the trust by transferring your property into it: Again, you can do this yourself but the paperwork can be tricky, so you might want to get a lawyer to help you.
What Is a Living Trust?
A living trust is simply a legal framework into which you transfer your property and assets into. It is established by a document. A trust has a trustee who is in charge of managing the trust and distributing assets to its beneficiaries according to its instructions. You can name yourself as trustee or pick someone else, oftentimes a child or trusted relative.
One type of living trust is an irrevocable living trust. This type of living trust is permanent. Once it’s established, the person who created the trust cannot remove property or modify the trust without getting permission from everyone named in the trust. The trust assumes ownership of the property placed in it. Thus, you pay taxes through the trust.
Another type of living trust is a revocable living trust. This type of trust is more flexible, as the person who creates the trust can modify it as he or she desires. The grantor maintains ownership of the property and pays any relevant taxes as usual.
How Much Does It Cost to Create a Living Trust in Maryland?
The amount you’ll spend to create a living trust in Maryland depends on the method you use to create it. If you do it yourself with the help of an online program, you’ll probably spend a few hundred dollars or so. If you hire an attorney, the total cost will probably be more than $1,000. Of course, the exact cost will depend on your attorney’s fees and the complexity of your estate.
Though it’s cheaper to go it alone, there are some risks to DIY estate planning. It is detail-heavy work and requires a lot of precise research to nail down. If you don’t feel up to that challenge, getting a lawyer is probably the right call. Make sure the lawyer you hire is a trust specialist, not just an estate planner, and discuss your lawyer’s fees upfront so you are not surprised.
Why Get a Living Trust in Maryland?
The reason most people create a living trust in their estate planning process is so that their family doesn’t have to go through the probate process. The probate process, a judicial process in which a will is officially proven, can take a lot of time and be an invasion of privacy as private matters become public record. Maryland is not one of the states that utilizes the Uniform Probate Code, which in some states simplifies the probate process. For this reason, a living trust in Maryland may be an especially good idea.
Another reason to get a living trust is to make it easier to control when you leave property to a minor. With a living trust, you can leave the property in the trust under the trustee’s supervision until the child reaches a certain age. Another reason to get a living trust is that it can help you avoid conservatorship if you become incapacitated. That’s because you’ll have already named a trustee when creating your trust.
Who Should Get a Living Trust in Maryland?
Contrary to popular opinion, living trusts are not only for the wealthy. Because Maryland does not use the Uniform Probate Code, a living trust can be useful even for relatively small estates. However, there is a simplified probate process in Maryland for estates that are worth $50,000 or less ($100,000 or less if the spouse is the only beneficiary). These estates likely won’t need a living trust.
Living trusts can be more expensive and time-consuming to set up than just writing a will. They also leave a longer opening for legal challenges after you’ve died. Take these downsides into account when weighing whether to get a living trust. And remember: even if you don’t get a living trust you’ll still need an estate plan.
Living Trusts vs. Wills
You’ll likely need a will even if you form a living trust. With a will, you can leave instructions for property that’s not in your trust. Additionally, a will can:
- Name an executor
- Provide instructions on how to pay taxes and debts
- Establish guardianship for children who are minors
- Select managers for children’s property
A living trust is also distinct from a living will, which deals with if you become incapacitated. This chart compares living trusts and wills to give you a better understanding of the capabilities of both estate planning documents:
|Living Trusts vs. Wills|
|Names a property beneficiary||Yes||Yes|
|Allows revisions to be made||Depends on type||Yes|
|Avoids probate court||Yes||No|
|Requires a notary||Yes||No|
|Names guardians for children||No||Yes|
|Names an executor||No||Yes|
Living Trusts and Taxes in Maryland
There is an estate tax in Maryland. As of 2019, it applies to estates worth more than $5 million, and tax rates range from 0.8% to 16%. The federal estate tax may also apply. However, it’s exemption is much higher at $12.06 million, or $24.12 million for couples.
Maryland also has an inheritance tax. It does not apply to the following relations ofthe decedent: a child or direct descendent, the spouse of a child or direct descendent, a spouse, parent, grandparent, sibling, stepchild or stepparent. People related to the deceased in any other way will pay a tax rate of 10%.
A living trust in Maryland can be useful, because the state does not use the Uniform Probate Code. Let’s say you want to make a living trust part of your estate plan on your own. Make sure you’re ready to focus on all of the details and do plenty of research. If not, you might want to hire a lawyer.
Estate Planning Tips
- Estate planning, like any other form of financial planning, isn’t easy. Whether you’re in Maryland, Louisiana or South Carolina, it sometimes helps to find someone to guide you, such as a financial advisor. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Don’t think you’re too young to start planning your estate. Even if you plan on being on this Earth for a long time, you never know when something could happen. You want to make sure that in the event of a tragedy your family can avoid stress. In other words, don’t make the estate planning mistake of waiting until you’re older to start planning.
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