Trusts in Maryland

A trust is an arrangement where a trustee holds property for a beneficiary under terms the grantor sets. Three roles, sometimes three different people and sometimes all the same person at the start.

The roles

• Grantor, also called settlor. Creates the trust and transfers property into it.
• Trustee. Manages the property and owes fiduciary duties, meaning they must act with reasonable care and in the beneficiary’s interest rather than their own.
• Beneficiary. Receives the benefit.

Revocable and irrevocable

A revocable trust can be changed or undone during your lifetime. You typically serve as your own trustee and keep full control. It does not reduce taxes or shield assets from creditors, because the law still treats the property as yours. What it does is avoid probate and provide a plan if you become incapacitated.

An irrevocable trust generally cannot be changed once made. Giving up that control is what makes it useful for certain tax, creditor and benefits-planning purposes, and it is also why it should never be entered into casually.

Living and testamentary

A living trust, sometimes called inter vivos, is created while you are alive. A testamentary trust is created by your will and comes into existence at death, which means it does not avoid probate.

Probate avoidance, and what that is worth

Property titled in a trust passes outside probate. In Maryland that means it avoids the Register of Wills process, the associated fees, and the public record that probate creates. For a family that values privacy, or that owns real property in more than one state, that can matter a great deal.

It is worth being honest that a trust is not automatically better than a will. For a modest estate that passes cleanly to a spouse and children, a well-drafted will plus correct beneficiary designations often does the job at lower cost. See wills.

Funding is the part people skip

A trust only controls what is actually transferred into it. Signing a trust document and then leaving the house, the accounts and the brokerage in your own name produces the worst of both worlds: the cost of a trust and the probate you were trying to avoid.

Funding means retitling real property, moving accounts, and reviewing beneficiary designations so they align with the plan rather than fight it. It is the step that determines whether the trust works.

Common uses

• Avoiding probate and keeping the estate private
• Providing for a beneficiary over time rather than in one lump sum
• Planning for a blended family, so that children from a prior marriage are provided for
• Managing property if you become incapacitated, without a guardianship
• Providing for a beneficiary with a disability without disrupting benefits, through a special needs trust

Related

• Probate and estate administration
• Power of attorney
• Business interests and divorce

Official resources

• Maryland People’s Law Library, trusts
• Maryland Register of Wills

Talk with a Towson attorney

The Law Office of Thomas K. Mallon, LLC offers a free consultation. Call (410) 847-9075 or request a consultation online. The office is at 1107 Kenilworth Drive, Suite 305, Towson, MD 21204.

This page provides general information about Maryland law. It is not legal advice, and reading it does not create an attorney-client relationship. Maryland law changes, and how it applies depends on the facts of your situation.