Most people assume trusts are only for the wealthy. They're not. A trust is a legal arrangement that allows a trustee to hold and manage assets for the benefit of others. A properly structured trust can save your family time, money, and unnecessary complications, whether your estate is modest or substantial. Maryland trusts are governed by the Maryland Trust Act (Md. Code, Estates & Trusts § 14.5-101 et seq.), and creating one properly involves more than simply downloading a template. Here's what you need to know.
Probate avoidance is one of the most common reasons to create a trust. If you die with a will, your estate still must go through probate, which is administered through the Register of Wills and supervised by the Orphans' Court. Probate is a public process that takes time and involves court and administrative costs. In Maryland, a regular estate commonly takes 9 to 12 months to administer. Assets held in a properly funded revocable trust, however, can pass to your beneficiaries without going through probate.
Privacy is another important benefit. Probate records, including information about the estate's assets and beneficiaries, become part of the public court record and can be accessed by anyone. A trust is different. The trust agreement is generally private and does not have to be filed with the court or otherwise made publicly available.
Tax planning is another important reason to consider a trust. Maryland has both an estate tax and an inheritance tax. In 2026, Maryland's estate tax exemption is $5 million per person. This means that an estate worth more than $5 million may owe Maryland estate tax, even if no federal estate tax is due.
The federal estate tax exemption is much higher. Beginning in 2026, the federal exemption is $15 million per person under the One Big Beautiful Bill Act of 2025. As a result, someone with a $7 million estate could owe no federal estate tax but could still owe Maryland estate tax because the estate exceeds Maryland's $5 million exemption.
Maryland's estate tax rate is graduated, meaning the entire amount over $5 million is not simply taxed at the highest rate. The rates range from 0.8% to 16%, with the highest rate applying only at the upper end of the tax brackets.
Married couples may also be able to preserve the unused Maryland estate tax exemption of the first spouse to die. With proper planning, this can potentially allow a married couple to protect up to $10 million from Maryland estate tax. However, certain tax filings must be made after the first spouse's death to preserve this benefit, even when no Maryland estate tax is due at that time.
Because Maryland's estate tax exemption is significantly lower than the federal exemption, Maryland residents with substantial estates should consider state estate-tax planning even when they are well below the federal estate-tax threshold.
Revocable living trust. This is the most common trust used in estate planning. You keep control of your assets during your lifetime and can change or revoke the trust whenever you wish. A properly funded revocable trust can avoid probate, keep your estate private, and make it easier for someone you choose to manage your affairs if you become incapacitated. It does not, by itself, reduce estate taxes.
Irrevocable trust. An irrevocable trust may be appropriate when tax planning, asset protection, or long-term planning is a significant concern. Unlike a revocable trust, you generally give up some control over the assets placed in it. Because the tax and legal consequences depend heavily on how the trust is structured, this type of planning should be tailored to your circumstances.
Special needs trust. If you want to provide for a child or other family member with a disability, a special needs trust can allow you to leave assets for their benefit without jeopardizing eligibility for programs such as Medicaid or SSI.
Trusts for children or other beneficiaries. You do not have to leave an inheritance to a beneficiary all at once. A trust can hold and manage assets for a minor child or an adult beneficiary who may need financial protection. You can decide when and under what circumstances the beneficiary receives the money.
Charitable trusts. For clients who want to make significant charitable gifts, certain trusts can combine charitable giving with estate and tax planning.
The right trust depends on what you are trying to accomplish. For many families, a revocable living trust is sufficient. Others need additional planning because of estate taxes, a family member with special needs, minor children, a blended family, or substantial assets. The first step is identifying your goals and then choosing a trust designed to accomplish them.
A trust only works as intended if it is properly prepared and properly funded. This is where estate planning involves much more than simply signing a trust document.
After the trust is created, you need to determine which assets should be transferred into it and which should not. Real estate may require a new deed. Bank and investment accounts may need to be retitled. Business interests may require additional documents. Retirement accounts and life insurance generally require a separate review of beneficiary designations rather than simply transferring them into the trust.
This is an important part of the estate planning process. A beautifully drafted trust will not avoid probate for an asset that was never transferred into it. When I prepare a trust, the goal is not simply to give my client a document. It is to make sure the estate plan actually works with the assets the client owns.
The trustee carries significant responsibility under Maryland law: the duties of loyalty, prudence, impartiality, and good faith are codified at § 14.5-801 through § 14.5-806. A trustee who breaches these duties can be held personally liable for resulting losses.
Family members are the most common choice and often the right one — but consider whether the person you're naming has the bandwidth and skills. Trustee work involves recordkeeping, tax filings (a separate trust return where the trust generates income), prudent investment management, and impartial treatment of beneficiaries who may not all want the same things. In blended families or estates with complex assets, a corporate trustee — a bank trust department or a Maryland-based trust company — is often worth the fee. Their value isn't just expertise; it's impartiality.
A common middle path: name a family member as trustee with a corporate co-trustee or a designated trust protector who can step in if circumstances change. The Maryland Trust Act explicitly contemplates trust protectors and directed trusts under § 14.5-808. Worth noting: a 2025 amendment to § 14.5-705 (effective October 1, 2025) allows a trustee to resign with 30 days' written notice to qualified beneficiaries, the settlor, co-trustees, and any person with the right to appoint a successor — without requiring court approval. This makes co-trustee and corporate trustee arrangements easier to unwind if they stop working.
1. Define your goals. Probate avoidance, estate tax reduction, providing for a beneficiary with a disability, asset protection, charitable giving — the goal determines the structure. Most plans involve more than one objective.
2. Engage a Maryland estate planning attorney. Online templates and out-of-state forms regularly miss Maryland-specific rules. The cost of fixing a defective trust after the fact dwarfs the cost of drafting one correctly. Fees vary widely — from a few thousand for a basic revocable trust to substantially more for layered planning involving irrevocable trusts or estate tax mitigation. Get a clear engagement letter so you know what's included.
3. Draft and execute the trust. Your attorney will prepare the trust agreement, related documents (pour-over will, powers of attorney, advance directives), and ancillary funding documents. Execution typically happens at a single signing meeting.
4. Fund the trust. This is where many DIY plans fail. Real estate requires a new deed (and you'll want to confirm the transfer doesn't trigger any due-on-sale clause with your mortgage lender, though federal law generally protects transfers to revocable trusts for owner-occupied homes). Bank and investment accounts require retitling. Some assets — like retirement accounts and life insurance — are handled through beneficiary designations rather than retitling, and getting those designations right is part of the funding process.
5. Execute a pour-over will. This is a will that catches anything you didn't move into the trust during life and routes it into the trust at death. It still requires probate for whatever it catches, but it prevents assets from being distributed under Maryland's intestacy statute (§ 3-101 et seq.).
6. Review every few years. Major life events — marriage, divorce, the birth of a child, a significant change in net worth, the death of a named beneficiary or trustee — should trigger a review.
Maryland law protects a surviving spouse from being completely disinherited. If the person who died had children or other descendants, the surviving spouse may elect to receive one-third of the estate subject to the elective share. If there are no surviving descendants, the spouse may elect to receive one-half. Md. Code, Estates & Trusts § 3-403.
Since 2020, this calculation can include certain assets that pass outside of probate, including assets held in a revocable trust. Md. Code, Estates & Trusts § 3-404. This means that simply transferring assets into a trust generally cannot be used to disinherit a spouse. If your estate plan limits what your spouse will receive, Maryland's elective share rules must be considered when creating the plan.
Failing to fund the trust. A trust only works for assets that are properly transferred into it. If assets remain in your individual name, they may still have to go through probate.
Choosing the wrong trustee. The person you choose to manage the trust should be responsible, organized, and capable of handling financial matters. A family member may be the right choice, but not in every situation.
Failing to update your plan. Your trust should be reviewed when there are major changes in your family, finances, or the law. An outdated trust may no longer accomplish what you intended.
Overlooking Maryland inheritance tax. Maryland imposes a 10% inheritance tax on certain beneficiaries, including nieces, nephews, cousins, and friends. Spouses and certain close family members are exempt. If you plan to leave assets to someone who may be subject to the tax, it should be considered as part of your estate plan.
Using a one-size-fits-all trust. A basic revocable trust works well for many families, but not every situation. Special planning may be necessary if you have a beneficiary with special needs, concerns about how a beneficiary will manage an inheritance, a family business, significant assets, or property in another state.
Maryland does not impose a separate state gift tax, which can make lifetime gifting an important part of estate planning for some Maryland residents. For individuals and couples with larger estates, lifetime gifts, irrevocable trusts, and careful planning between spouses may help reduce future estate tax exposure. The tax consequences depend on how and when assets are transferred, so these strategies should be considered as part of the overall estate plan.
A revocable living trust can provide an important foundation for an estate plan, but it does not reduce estate taxes by itself. If your estate may be subject to Maryland estate tax, additional planning may be appropriate.
If you are deciding whether a will, trust, or more comprehensive estate plan is right for you, a Maryland estate planning attorney can help you choose a plan that fits your family, your assets, and your goals.
This article provides general information about Maryland trust law and is not legal advice. Trust planning depends heavily on your specific assets, family situation, and goals. Maryland's estate and inheritance tax thresholds and the federal exemption are subject to legislative change — verify current figures before relying on any specific number. For advice on your situation, consult a licensed Maryland attorney.
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