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Is a trust the best way to protect your Maryland or Washington DC estate?

A trust is a legal agreement by which a grantor's assets are managed by a person or agency known as the trustee, for the benefit of beneficiaries. Assets may include any type of property, including cash, stocks, bonds, land, homes, other real estate, or interest in a business. Trusts are an important part of estate planning. A trust is often used to provide personal and financial safeguards for your family and other beneficiaries, and depending on the type of trust is often used to reduce estate taxes

Trusts fall into two large categories.

Testamentary trusts - These trusts are established in a will and take effect upon the grantor's death. They are commonly used to provide for minor children in the event of the death of both parents. They must pass through probate and may be subject to estate and inheritance taxes.

Living trusts - Living trusts are not established in a will. They begin during the grantor's life and may continue after death.

Trusts may be revocable or irrevocable. Revocable trusts can be changed at any time. Irrevocable trusts cannot be changed once implemented. There are advantages and disadvantages to each type of trust, and an estate planning attorney will be able to advise you about the type that will work best for your circumstances.

There are many types of trusts used in estate planning. They include:

Revocable living trust - A revocable living trust holds, manages and distributes assets according to the grantor's wishes both before and after death. The trust can be changed as the family changes. This kind of trust helps the assets avoid probate and keeps the details of the estate private. A revocable living trust provides a means of handling affairs in the event of physical or mental incapacitation. Assets must be transferred to the trusts. A living trust does not minimize estate taxes unless it includes specific provisions to do so through a credit shelter trust.

Credit shelter trust - This type of trust is a very effective estate planning tool for ensuring the financial security of a spouse. It holds assets at the first death of a married couple. The unified credit of the husband and wife shelters the estate from taxation. All income goes to the surviving spouse during their lifetime. When the second spouse dies, the assets are part of the trust and not of the estate, so they are not taxed. A credit shelter tax can be part of a living trust or may be part of a will. Similar trusts exist to provide income to an existing spouse while assets go to children from a previous marriage.

Irrevocable life insurance trust - Normally, life insurance benefits are not subject to income taxes. However, if the insured person has any ownership in the policy, the death benefit is included in the taxation of the estate. By putting a life insurance policy into third party ownership, the death benefit is no longer part of the estate and is not subject to taxation. The proceeds of the life insurance policy can be used to fund the estate while it is in probate.

There are other types of trusts that may be appropriate for your needs.

Every estate and every family is unique; there is no single best solution. The Kramer Law Firm offers asset protection and estate planning services to residents of the Washington DC metropolitan area including Maryland and Delaware. Our estate planning lawyers personalize their services to meet the needs of each client. Contact the attorneys at the Kramer Law Firm and ensure that your business and personal interests are protected.

The Kramer Law Firm, LLC

3 Bethesda Metro Center

Suite 700

Bethesda, MD 20814

Email: skramer@kramerfirmllc.com

Phone: 301-961-1503

The Kramer Law Firm provides personalized legal services to corporations, small businesses and individuals in the Washington DC metropolitan area, including Montgomery County, Maryland and the cities of Bethesda, Rockville, Potomac, Silver Spring and Gaithersburg.

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