In simple terms, a trust is a legal arrangement – almost always created through written trust documents – where legal ownership of property is given over to the trust
- By one person – often called the “Grantor”
- To be managed by a person or organization – called the “Trustee” (which can be and often is the same person as the “Grantor”)
- For the benefit of some third party – called the “Beneficiary”
There are many types of trusts that can be created under Maryland statutes and trusts can be used for a variety of purposes. The most common use of trusts is for estate planning purposes as alternatives to using a Last Will & Testament. Other common uses involve creating a trust to fund future education for children or to financially support an infirm or disabled relative. Creating a trust and complying with the legal requirement is complicated. So, if you think you want to create a Maryland trust, contact us here at the Law Offices of Thomas Stahl. We are experienced Maryland trust and estate planning attorneys. This article provides some basic information on creating trusts in Maryland.
Creating a Maryland Trust
Typically, a Maryland trust is created by the drafting and signing of a document called a “Declaration of Trust.” To come into existence, a trust must have some asset or assets – like money or property – and the asset or assets must be accepted by the Trustee. All of these requirements are generally accomplished in the Declaration of Trust. Once created, a trust takes on a separate legal existence in the same way that a corporate entity becomes a separate legal entity when formed. Thus, a Maryland trust can open a bank account, obtain a tax ID number, buy and sell property, hold title to real estate, file and defend lawsuits, etc. Note that the separate legal rules for transferring property must still be followed. Thus, for real property, a deed must be prepared transferring the property from the Grantor to the trust.
As indicated above, there are generally three parties to a trust – the Grantor, the Trustee and the beneficiary or beneficiaries. The Grantor creates the trust by transferring some asset or assets to the trust, the Trustee is the person empowered to manage and distribute the asset/assets according to the terms of the trust and the beneficiaries receive distributions.
It is “okay” for the Grantor to be all three of these parties. Thus, for example, with a Maryland Living Revocable Trust, the Grantor creates the trust, becomes the Trustee and, generally, is the beneficiary of the trust (at least while the Grantor is alive). Note also that corporate entities can be parties to trust documents. Banks and corporations are often named as Trustees and charities, religious organizations and not-for-profit organizations are often listed as beneficiaries.
In addition to naming the Trustee, the Declaration of Trust must name how successor Trustees are selected or chosen. Further, the Declaration must list the powers that the Trustee may exercise over the assets deposited into the trust. Thus, for example, if real property is given over to the trust, the Declaration should state whether the Trustee has the power and authority to sell the real property.
In addition, the Declaration must state what the purpose of the trust is. Examples might include:
- Manage the assets until the Grantor’s death and then disburse the assets as follows …
- Invest and manage the assets until such time as the named beneficiaries are attending college or university and then disburse the assets to pay for tuition, expenses …
- Manage and disburse the assets to the beneficiary for her reasonable comfort and maintenance …
Finally, Maryland trusts must generally have some “end date” for when the trust will terminate. Examples might include “the death of the Grantor” or “the completion or abandonment by all listed beneficiaries of their college or university education.” Then, in general, the trust must indicate how any remaining assets are to be distributed.
Maryland and D.C. Trust and Estate Planning Attorneys
If you are thinking about establishing a trust or need estate planning documents drafted, contact the Maryland and D.C. trust and estate planning attorneys at The Law Offices of Thomas Stahl. We have the experience and expertise you need. Schedule a consultation today or call us at (410) 696-4326 or (202) 964-7280.