How to Create a Living Trust in Maryland

Establishing a living trust in Maryland as part of your estate plan helps your loved ones avoid the probate process. Unlike a will, a living trust allows your assets to transfer directly to your beneficiaries without court intervention, potentially saving time and money. For Maryland residents considering how to create a living trust, understanding the state-specific requirements is essential to ensuring your estate plan accomplishes your goals. The process involves selecting the right type of trust for your situation, identifying assets to include, choosing trustees and beneficiaries and properly executing the necessary documentation.

A financial advisor can guide you through the estate planning process, including creation of a living trust.

How to Create a Living Trust in Maryland

In Maryland, creating a living trust can help your loved ones avoid a lengthy and expensive probate process. This estate planning tool provides privacy and flexibility that a will alone cannot offer. Here’s how you’ll go about creating a living trust in the Old Line State:

1. Choose the type of trust you want: If you are single, a single trust will likely be your best option. Married couples will likely want a joint trust. Joint trusts can store property individually and jointly owned by you and your partner.
2. Take inventory of your property: You can store physical property, cash, stocks and bonds, in your living trust. Also, gather relevant documents like certificates of stock ownership and housing deeds.
3. 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 once you die. This ensures distribution of your property to your named beneficiaries.
4. Create the trust document: You can do this using an online program or with the assistance of a lawyer.
5. Get the document notarized: Sign the trust in front of a notary public.
6. Fund the trust by transferring your property into it: Again, you can do this but the paperwork is complicated. If you can, 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. 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 a trusted relative.

One type of living trust is an irrevocable living trust. This type of living trust is permanent. The person who created the trust cannot remove property or modify the trust without 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 to avoid surprises.

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

Living trusts offer immediate asset management if you become incapacitated, allowing your successor trustee to step in without court intervention. Wills only take effect after death, requiring someone to petition for guardianship if you become unable to manage your affairs. This difference in timing can significantly impact how smoothly your affairs are handled during a health crisis.

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 the 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

Living Trusts and Taxes in Maryland

A living trust probably won’t impact your taxes. However, you should know about the Maryland estate tax and inheritance tax.

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%. ¹ The federal estate tax may also apply. However, its exemption is much higher at $15 million, or $30 million for couples. ²

Maryland also has an inheritance tax. It does not apply to the following relations of the 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%.

Estate Planning Services a Financial Advisor Can Offer

Estate planning involves more moving parts than most people expect, and a financial advisor can help coordinate those pieces in a way that a lawyer drafting documents alone typically does not. The attorney handles the legal instruments. The advisor focuses on how your assets, your tax situation and your long-term goals fit together.

One of the most practical contributions an advisor makes is helping you decide which assets belong in a trust and which are better handled through beneficiary designations or other transfer mechanisms. Not everything needs to go into a living trust, and putting the wrong assets in can create complications rather than simplifying the estate. An advisor who understands your full financial picture can identify which accounts, properties and investments are candidates for trust ownership and which are more efficiently transferred another way.

Tax planning is another area where an advisor adds meaningful value. Maryland imposes both an estate tax and an inheritance tax, and the interaction between those state-level obligations and the federal estate tax requires attention for estates of any significant size. An advisor can model different scenarios, such as the timing of large gifts, the use of irrevocable structures or charitable strategies, to show how each affects the eventual tax exposure of your estate and your beneficiaries.

Long-Term Management

Advisors also play a role in keeping an estate plan current. A trust drafted when your children were young, your assets were different and tax law looked different may not serve its intended purpose today. Life changes including marriage, divorce, the birth of grandchildren, the sale of a business or a significant change in asset values all create reasons to revisit the plan. An advisor who reviews your overall financial situation regularly is positioned to flag when the estate plan needs attention rather than leaving that review to happen by accident.

Finally, an advisor can help coordinate the professionals involved in your estate plan. Estate planning done well typically requires input from an attorney, a tax professional and a financial advisor working from the same set of facts. When those conversations happen in isolation, gaps and inconsistencies tend to develop between the legal documents, the account structures and the tax strategy. An advisor who takes a coordinating role across those relationships helps ensure that what your trust says, what your accounts are titled and what your tax plan assumes are all pointing in the same direction.

Bottom Line

Understanding how to create a living will in Maryland is an essential step in planning for your future healthcare needs. By establishing this important document, you’re ensuring your medical wishes will be respected even if you become unable to communicate them. Remember that Maryland has specific requirements, including the need for two witnesses who aren’t beneficiaries of your estate or directly responsible for your medical care.

Estate Planning Tips

• Estate planning, like any other form of financial planning, isn’t easy. No matter where you live, it sometimes helps to find someone to guide you, such as a financial advisor. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel 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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