Living Trusts in Maryland
In Maryland, as in all other states, a living trust provides property and asset management before and after a person dies. Living trusts, which are also known as revocable living trusts and inter vivos trusts, are not meant to completely replace a last will and testament, but do eliminate the costs associated with the judicial procedure known as probate that normally occurs after a person dies.
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How a Living Trust Works
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The trustee holds legal title to the assets owned by another person, called the beneficiary of the living trust. The person who drafts the living trust can also appoint himself as trustee to control his own assets. In Maryland, assets that can be included in living trusts include real estate, money in bank accounts and investment accounts. Unlike a will, living trusts can be changed or terminated at any time. But living trusts can cost more to prepare, fund and manage than wills.
Probate in Maryland
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Wills must go through probate to determine their validity. Although in other states the probate process can be costly and time consuming, Maryland has a streamlined procedure for net estates of $30,000 or less or $50,000 or less if the spouse is the only beneficiary, according to the Maryland State Bar Association. Even for larger estates, the probate fees are a small percentage of the estate. For example, the fee is $750 for an estate of between $500,000 and $750,000. Multi-million-dollar estates may justify the cost of a living will, however, according to the Maryland Association of CPAs. For estates of more than $5 million, the probate fee in Maryland is $2,500 plus .02 percent of the excess over $5 million.
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Taxes and Creditors
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There are no additional federal estate tax savings with living trusts. In fact, the inheritance tax in Maryland is generally due within three months of the beneficiary taking claim of the trust compared with nine months in the case of a will. In addition, there is only a $100 or $300 federal tax exemption for trusts compared with the $600 exemption for estates with wills. Living trusts are not exempt from creditors. Creditors have three years to make a claim against a living trust compared with six months in the case of a will.
Impact on the Spouse
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In Maryland certain assets owned by a husband and wife are protected from creditors, but if the asset is transferred to one of their living trusts it is no longer protected. In addition, in Maryland, a surviving spouse has the right to assets in a living trust as part of his entitlement to a portion of the decedent's probate estate, regardless of whether he is a beneficiary of the trust.
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References
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