Elements of a Maryland Revocable Living Trust

There are three elements needed to create a revocable living trust in Maryland. First, there has to be donative intent to create the trust. Second, there has to be delivery of the property to the trustee. Third, there has to be acceptance by the trustee of the terms of the trust.

Advantages of Hiring a Trusts Attorney

It may be important to have a trusts attorney help prepare a revocable living trust because the concept of a revocable living trust can often be complicated. The trust often covers a number of issues including the creation of the trust itself. The trust discusses how the assets are to be maintained during the lifetime of the initial grantor or a settlor. The trust discusses how income and principal will be distributed. The trust often provides provisions for the distribution of the property at the death of the original settlor, or the maintenance of the property, or maintaining of the property in trust for the beneficiary.

The trust also often provides trustee powers. The trust identifies the successor trustees in the event that the initial trustee is no longer able to act and it often includes provisions such as spendthrift provisions or trustee compensation provisions.

It is often very complicated for individuals to understand how the trust document is prepared and administered throughout a lifetime.

Distributions of Revocable Living Trusts

Many trusts allow for distributions to be made to the original settlor or grantor during his or her lifetime. The income and principal of the trust can be used to support the original settlor. During the settlor’s lifetime, the trust uses the settlor’s personal Social Security number, and any income that is accrued on trust assets is reported on the settlor’s individual tax return.

The principal held in the trust can be distributed pursuant to the provisions of the individual trust document. Many revocable living trusts provide that principal and income can be used during the grantor’s lifetime for the grantor’s benefit. Some trusts state that after the death of the grantor, the trust will terminate and the trust principal and income will be distributed out to the named beneficiaries.

In some situations, the trust provisions require that the trust be divided among beneficiaries and that a new trust be created, or separate shared trusts be created for each beneficiary for a defined period of time or indefinitely.

Some trusts state that the trust principal will be distributed at staggered ages. For example, a provision for distribution may provide that after the death of the grantor, the trust principal will be distributed to the grantor’s children at age 25, 30 and 35. Some trust provisions require that the trust assets be managed for the lifetime of the next generation; and only after that generation, will principal begin to be distributed to the grandchildren’s generation.

The provisions of the trust will provide for how the trust is managed after the grantor’s death. There are a number of options that could be implemented, depending on what the grantor’s goals are, his or her assets and what the overall planning technique that is implemented is.

Spendthrift Provisions

Spendthrift provisions are provisions that are in a trust that prevent a beneficiary’s creditors from attaching the principal or income of the trust that would be inherited by the beneficiary.

Spendthrift provisions often prohibit a beneficiary from assigning, selling or transferring their interest in the trust so that creditors cannot attach that piece. In some situations, spendthrift provisions limit the distributions that can come out of the trust so that there is no opportunity for a creditor to attach the distributions once they have been distributed to a beneficiary.

Spendthrift provisions can protect both income and principal of the trust from beneficiary’s claims. A common misconception is that spendthrift protect the grantor’s assets from creditors.

In addition, a revocable living trust is an ineffective tool for Medicaid or long term care planning, because the assets in a revocable living trust are still considered an available resource for the grantor.

Waiving the Requirement for Filing Accountings For Court Approval

The trust language can state that the trustee is not required to obtain a bond and that there is no requirement for any trust accountings to be filed for Court approval.

However, the new Maryland Trust Act does say that upon request, there are certain individuals who are entitled to a trust accounting. Even if the language says that trust accountings are not required for Court approval, it is possible that that does not alleviate the trustee from the burden of actually preparing and providing accountings to the qualified beneficiaries.