Maryland Living Trust

Introduction

Key Things to Know

1. 1

   Maryland is one of only two states combining a state estate tax (Tax-General Section 7-309, a $5,000,000 exclusion that is not indexed for inflation, taxed up to 16 percent above that) with a separate flat 10 percent inheritance tax (Section 7-204) on transfers to non-exempt beneficiaries. Funding a living trust avoids neither tax, and a revocable trust never reduces estate tax during the grantor's life.

2. 2

   A Maryland living trust needs no notary, witnesses, or will formalities to create. Estates and Trusts Section 14.5-402 requires only settlor capacity, indicated intent, a definite beneficiary, and trustee duties, and Section 14.5-406 will even enforce an oral trust of personal property on clear and convincing evidence. A Maryland will, by contrast, requires two attesting witnesses under Section 4-102(b); readers who assume the trust is the harder document to make have it backwards here.

3. 3

   Maryland's 2020 augmented-estate elective share law pulls a settlor's revocable trust assets directly into a surviving spouse's claim. Estates and Trusts Section 3-404(a)(1)(ii) lists revocable trusts first among the components counted toward the augmented estate, so funding a revocable trust provides no elective-share avoidance in Maryland.

4. 4

   Funding Maryland real property into this trust, and later distributing it out to a beneficiary at the settlor's death, is exempt from the state's recordation tax, transfer tax, and any other state or local excise tax under Estates and Trusts Section 14.5-1001(b), a real and quantifiable savings with no analogue in most states.

5. 5

   Maryland's homestead is a property-tax assessment-cap credit, not a creditor exemption. Tax-Property Section 9-105(a)(8)(viii) keeps a settlor or beneficiary eligible once a residence is titled in the trust's name, provided they pay no rent to the trust. No Florida- or Texas-style creditor exemption for the home itself was identified in Maryland law for this purpose; ask a Maryland attorney if you are relying on creditor protection for the residence.

6. 6

   This trust protects nothing from the settlor's own creditors while the settlor is alive, and Maryland allows no self-settled asset protection trust. Estates and Trusts Section 14.5-508(a) subjects a revocable trust's property to the settlor's creditors without exception; if the trust is made irrevocable and still benefits the settlor, a creditor can still reach the maximum amount that could be distributed to or for the settlor's benefit, so only the amount above that is shielded.

7. 7

   Like most states, Maryland requires nothing to be filed with any court or state agency to create or maintain this trust. Only a trustee who chooses to furnish a certification of trust must disclose the trust's taxpayer identification number, unless it is also the settlor's Social Security number, under Estates and Trusts Section 14.5-910(a)(7).

Maryland Requirements for Living Trust

• Maryland No Notary or Witness Required to Create the Trust

  Estates and Trusts Section 14.5-402 requires only settlor capacity, indicated intent, a definite beneficiary, and trustee duties. No notary, witness, or will formality applies to the trust itself, though the deed funding real property into it must be notarized under Real Property Section 4-101(a).

• Maryland Real Property Funding Exempt From Transfer and Recordation Tax

  Estates and Trusts Section 14.5-1001(b) exempts a transfer of real property into this trust, and the later transfer out to a beneficiary at death, from Maryland's recordation tax, transfer tax, and any other state or local excise tax.

• Maryland Homestead Preserved as a Property-Tax Credit, Not a Creditor Exemption

  Tax-Property Section 9-105(a)(8)(viii) keeps a settlor or beneficiary eligible for Maryland's homestead property-tax assessment cap once a residence is titled in the trust's name, provided they pay no rent. No Florida- or Texas-style creditor exemption was identified for a home held in the trust.

• Maryland Elective Share Reaches Revocable Trust Assets

  Estates and Trusts Section 3-404(a)(1)(ii) includes all revocable trusts of the decedent in the augmented estate used to calculate a surviving spouse's elective share, so funding this trust does not avoid the claim.

• Maryland Certificate of Trust Must Disclose the Taxpayer Identification Number

  Estates and Trusts Section 14.5-910(a)(7) requires a certification of trust to disclose the trust's taxpayer identification number, unless it is also the settlor's Social Security number.

• Maryland Dual Estate and Inheritance Tax

  Maryland imposes both a state estate tax (Tax-General Section 7-309, a $5,000,000 exclusion not indexed for inflation, taxed up to 16 percent) and a separate flat 10 percent inheritance tax (Section 7-204) on transfers to non-exempt beneficiaries; a revocable living trust reduces neither tax during the grantor's life.