How Living Trusts Work in Maryland
A living trust is one of the most effective estate planning tools available to Maryland residents. Maryland is one of few states that imposes both a state estate tax and an inheritance tax, with the estate tax exemption matching the federal level. By placing your assets in a revocable living trust, you can bypass Maryland's probate process entirely, saving your family time, expense, and the stress of court proceedings. Maryland's probate process can be lengthy and expensive, making a living trust an especially valuable planning tool for residents.
Separate Property Trusts in Maryland
In Maryland's separate property system, a living trust must be carefully structured to reflect each spouse's individual ownership of assets. Joint trusts and individual trusts each have advantages depending on your specific circumstances. Proper asset titling is critical to ensure the trust functions as intended and achieves the probate avoidance and tax benefits you are seeking.
Funding Your Trust in Maryland
Creating a living trust is only the first step — properly funding the trust by transferring ownership of your assets is equally important. In Maryland, this typically involves retitling real estate through a new deed, changing ownership of bank and investment accounts, and assigning ownership of personal property. Maryland's specific recording requirements for real property deeds must be followed to ensure the transfer is legally effective. An unfunded or partially funded trust may still require your estate to go through probate for the assets that were not transferred, defeating the primary purpose of the trust.
Trust Administration After Death in Maryland
When the trust creator passes away, the successor trustee takes over management and distribution of trust assets according to the terms of the trust document. In Maryland, this process is governed by the state's trust code and does not require court involvement in most cases. The successor trustee is responsible for notifying beneficiaries, managing trust assets, paying debts and taxes, and distributing assets. Because Maryland imposes a state estate tax, the trustee must also ensure compliance with state tax filing requirements.