Advantages of a Revocable Living Trust in Maryland
Revocable living trusts are useful as a solution for a number of estate planning concerns. Revocable living trusts were very popular a few years ago and they continue to be popular in states such as Virginia. A lot of clients find that a revocable living trust is a good fit because the assets that are pre-funded into a revocable living trust pass outside of the probate administration proceeding at the death of the original settlor.
When an Attorney Would Suggest a Revocable Living Trust
There are a number of scenarios where an attorney may consider using or recommending a revocable living trust. The first scenario is where the client asks to use a revocable living trust. A revocable living trust is a popular estate planning tool. Many individuals want revocable living trusts because they understand the concept. Even though there are times when a revocable living trust may not be recommended based on the client’s current situation, they may wish to use one as part of their estate plan.
Another situation where an attorney may recommend using a Maryland revocable living trust is in the event that an individual owns real estate or assets in multiple jurisdictions. A revocable living trust allows individuals to avoid probate in each state where the individual owns assets. Another scenario when a revocable living trust may be recommended is when a client is concerned with privacy. Finally, a revocable living trust may be a good fit in some family dynamics to prevent inter-family feuds or conflict because one individual is managing all of the assets.
Unifying Property Management
If an individual loses capacity or becomes incapacitated, a revocable living trust can be a streamlined way for an individual to step into someone’s shoes to act on their behalf to manage property. For example, when a revocable living trust is funded correctly, it aggregates all of an individual’s assets into one management system and into one vehicle. A successor trustee could then easily take over to manage all of the assets that have been re-titled into the name of the revocable living trust when the grantor loses capacity or passes away.
Occasionally, the trust can act as an umbrella vehicle for managing of all a settlor’s assets. Sometimes it becomes easier to have just one document or one agreement and one individual governing all of the assets that have been pre-funded into the trust.
A common misunderstanding about a revocable living trust is that it saves taxes. A revocable living trust is a tax neutral document, meaning that during the grantor’s lifetime, all income on any of the assets in the trust is reported on the settlor’s personal income tax returns and any income after the death of the settlor is reported on a fiduciary income tax return.
In addition, assets that are pre-funded into a revocable living trust are subject to Maryland estate taxes in the event that the total gross taxable estate of the decedent is over the current estate tax filing threshold for that year.
For decedent’s dying in 2016, the Maryland estate tax filing threshold is $2 million. For example, if an individual died having a revocable living trust that was pre-funded with $1 million and had other assets such as life insurance, real estate or other assets that were not in the trust totaling $1.5 million, that individual would still be required to file a Maryland estate tax return.
Out of State Real Estate and Privacy
A revocable living trust is a useful estate planning tool for individuals who own real estate in multiple States or in multiple jurisdictions. Probate in Maryland is not an onerous process and can be very streamlined, although probate in multiple jurisdictions can result in additional costs over time.
When individuals own real estate in more than one State, a revocable living trust may be a useful estate planning tool. In addition, revocable living trust does provide some modicum of privacy. The Maryland probate process is public; and items, including any reports, accountings, and the last will and testament are filed with the Register of Wills and become part of the public record.
Trusts do not become part of the public record. The new Maryland Trust Act, which was enacted last year and became effective as of January 1st, does state that there are certain qualified beneficiaries who are entitled to receive a copy of the trust in the event that they request it.
Although there are other methods, if someone does not use a trust to deal with incapacity, a revocable living trust can assist when an individual becomes incapacitated; allowing the named successor trustee to act on behalf of the trust assets.
Additionally, a revocable living trust can sometimes be used as an alternative to guardianships. Assets owned in a revocable living trust often reduce or eliminate the need for guardianship.