Our Knowledgeable Estate Planning Lawyer will advise whether a Living Trust is right for you.

What is a Living Trust?

  • A Living Trust is also known as a Revocable Trust

  • It is a form of ownership that allows you to distribute your property to your heirs promptly after death and avoiding the cost and delays of probate.

  • The Living Trust gives your beneficiaries the future right to your property upon your death without the need to open an estate or probate a Will.

  • It is a legal mechanism that is set up while you are well, to provide for the management by your Trustee of your assets should you become disabled. You name your trustees who will take over when you can no longer handle the management of trust assets.

Advantages of a Living Trust (Revocable Trust)

  • You have the power, during your life, to amend or revoke the trust. Upon your death, the trust becomes irrevocable.

  • Because there is no Will to probate, your heirs will save a substantial amount of money with a trust.
    • No probate fee to pay - can run up to $2,500.00
    • No personal representative commissions to pay - these fees are 9% of the first $20,000.00 and 3.6% of the balance. On a one million dollar estate, the personal representative commissions are $37,080.00.
    • Reduced attorney's fees - With no estate to open and administer, there is less legal work to be done with the trust distribution.
    • No bond fees, no appraisal fees, and no Notice to Creditor. This will save your heirs an additional $1,500.00 to $2,000.00.
  • No delay in distribution of trust
    • With a Living Trust, the trustee can distribute your assets to your heirs immediately after death.
    • If there is an estate, the personal representative must wait a minimum of six months before the assets can be distributed to your heirs.
  • Confidential
    • If you die with a Will, a Notice to Creditors, an inventory, and an administration accounting are published in a newspaper. With a Living Trust, there will be no notice published in any newspaper. You will be able to pass your assets to your beneficiaries without disclosing how much or what you owned at the time of your death.
  • An estate is a public record
    • Probate of a Will is a court proceeding. Anyone can go to the Register of Wills office and review you’re Will, your inventory of assets, and the administration accounting. If anyone challenges your Will, it is a matter of public record.
  • Out of state property
    • If you own real property in Maryland and another state, with a Will, your personal representative will have to open your estate both in Maryland and in the other state(s) where you owned other real property. If your real property is titled in your Living Trust, this will not be necessary. Your real property can be distributed by your Trustee, upon death, no matter where it is located.
  • Protection if you become incapacitated
    • With a Living Trust, your incapacity is irrelevant to the continued operation of your trust. Your successor trustee takes over the management of the trust and distributes funds to your caregivers or other health care providers. There is no need for your heirs to apply for the appointment of a guardianship, a long drawn out and costly legal procedure.
  • Protection for your heirs
    • If your heirs are minors or have creditor directed to pay discretionary income and principal to your heirs until they reach certain ages. You can continue the trust for your children for the duration of their lives, plus twenty-one years. In other words, you can make sure one or all of your children will have some measure of financial security for the rest of their lives, despite creditor problems.

A Living Trust (Revocable Trust) Prevents Challenges to Your Plan of Distribution

    • If you have a Will, your estate plan can be challenged once your estate is opened. This is known as a Caveat Proceeding. It applies only to a Will, not a Living Trust.

    • Challenges to a Living Trust are much more difficult. A challenger must establish that the Living Trust was invalid at the time it was adopted. Because you serve as your own trustee for a good number of years before you die, it would be much more difficult for a challenger to prove that you were incompetent in setting up and managing your own Living Trust. Also, there is no set procedure for challenging a trust comparable to a Caveat Proceeding.

    • With a Living Trust, your successor trustee, upon death, can immediately distribute your assets to your heirs, as you have designated in your trust, without any public notice being made by the trust. Anyone seeking to challenge the trust would find that the trust has already distributed the assets, making the job of defeating a Living Trust much more difficult than with a Will.
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Accomplished Estate Planning Lawyer

The Moore Law Group concentrates  in estate and business planning. We have over 45 years experience in these matters. We regularly attend estate planning and tax seminars to maintain a current knowledge in these technical areas of the law.

Our firm has received an AV rating from Martindale Hubble, the national attorney rating firm. The AV rating is the highest peer review rating given.

We are dedicated to the best interests of our clients. We believe the adoption of an efficient estate plan will be beneficial to our clients and their families. We invite you to call our office for a free initial consultation to review your estate objectives. We are confident you will be pleased with our recommendations and proposed fees.

We look forward to working with you on your important estate planning matter.

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How Can a Living Trust Save Taxes?

  • Most inheritance taxes were eliminated in Maryland recently. However, Maryland has adopted its own Maryland Estate Tax that applies to amounts in excess of $1,000,000.00 that are left to a trust. We have adopted the use of the Maryland-Only QTIP trust provision which allows the 16% Maryland Estate Tax to be deferred and paid upon the second spouse’s date of death. In the process of dealing with the estate taxes of the State and the IRS, we are always planning to make sure that the Federal Estate Tax is reduced and or eliminated as the maximum tax is now 35%.

  • All of your assets, both titled in your Living Trust and out of it, are included in your gross estate and subject to both Maryland and Federal estate tax. If your gross estate is less than $5,000,000.00 in 2011, you generally have nothing to worry about. The federal estate tax (FET) applies to larger estates. At the time of the revision of this memo, Congress has updated the Federal Estate Tax law, but the changes are only for this year and 2012. No one is certain what the Estate Tax and Gift Tax laws will be after 2012.

  • If, however, your estate - both husband and wife, exceeds $5,500,000, additional planning within the Living Trusts can eliminate and or reduce the FET. An example will help to show this.
    • Bill and Mary Jones have a combined gross estate of $5,500,000.00. They have no estate plan. Bill dies. There is no FET because Bill passes everything he owns to Mary under the unlimited marital deduction. But when Mary dies, unmarried, her $5,500,000.00 estate will pay an unnecessary FET on the amount over $5,500,000.00. If Bill and Mary incorporated bypass trust provisions in their Living Trusts, there would be no FET to be paid. (This example does not deal with the impact of the Maryland Estate tax of 16% on amounts over $1,000,000.00.)
  • With proper planning, a husband and wife, with substantial estate values can avoid payment of any FET. The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 allows an exclusion of $5,000,000.00 in the year 2011and 2012. This means that Bill and Mary, in 2011 can, with proper estate planning, distribute a combined $10,000,000.00 to their children without any FET. Of course, we will have to revisit this tax issue when the Congress adopts a Tax law later in 2012 or 2013.

  • For the first time in estate and gift tax history, the estate tax exclusion amount and the gift tax credit amounts are both at $5,000,000.00. This presents an opportunity for parents to make large gifts of their property or business interest without paying any gift taxes.

  • Because of the uncertainty in the estate tax laws, we incorporate in our Trust and Wills a disclaimer trust provision which allows the surviving spouse to decide whether it is necessary to place all or a portion of the deceased spouse’ assets in a Marital Trust and or in a Maryland only QTIP trust.

Establishing a Living Trust

  • There are numerous decisions to be made regarding:
    • Trustees - who should I choose?
    • How much children are to get and when-should a part be left in trust for later distribution?
    • How much discretion will your trustees have?
    • Gifts to grandchildren - making gifts directly to grandchildren helps your children.
    • Charitable gifts - how much should you give and in what form?
    • Who will receive your assets if your heirs predecease you?
    • Specific gifts of tangible property
    • Federal Estate tax and Gift Tax issues

Funding the Trust

  • While it is important to design your trust properly, it is as important that you transfer and re-title your assets in the trust name. Thus, if you have failed to re-title your residence, and other assets, your trustee, upon your death, would have to open an estate to administer such assets. This would defeat the purpose of the Living Trust.

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