Maryland residents include living trusts in their estate plans to ensure that their assets are distributed according to their wishes after they pass away. Trusts can be used to shield assets from creditors and prevent people who have not managed money well in the past from inheriting large lump sums, and they can also be structured to distribute assets when beneficiaries graduate from college, remain sober for a specified amount of time or reach other milestones. Another benefit of trusts is that they allow assets to be distributed without first going through the probate process, which can save a lot of time and money.
Revocable and irrevocable living trusts
Living trusts are created while the grantor is still alive, and there are two basic types. Revocable trusts can be changed easily, and the assets placed into them are still owned by the grantor. They can be used to avoid probate, but they do not protect assets from creditors or reduce estate taxes. Conversely, irrevocable trusts generally cannot be changed after they are created, and the assets placed into them are no longer owned by the grantor.
Estate plans that include living trusts often also include pour-over wills. This is a kind of last will and testament that automatically transfer a decedent’s remaining assets into their living trust after they pass away. Pour-over wills can be used with both irrevocable and revocable living trusts, but they must be validated during probate like traditional wills. However, pour-over wills are usually probated fairly quickly because they are straightforward documents.
Including a living trust in an estate plan provides peace of mind. People who create living trusts can decide how and when their assets will be distributed after they die, and they can also reduce their estate tax exposure and shield their assets from creditors if they choose to create irrevocable trusts.