Creating an estate plan is one of the most important things an individual can do for themselves while they are alive. When creating an extensive estate plan, an individual may want to set up a trust to manage their assets. The person who creates the trust is known as the trustor while the person who benefits from it is called a beneficiary. An individual who manages the trust is called the trustee. A trust is an arrangement that allows a trustee to hold assets on behalf of a beneficiary. There are many different ways that a trust can be set up.
Benefits of a Trust
A trust creates a contract between the estate and a trustee that allows them to be in charge of administering the trust. There are many benefits to setting up a trust as opposed to other estate options. Because trusts sometimes avoid probate, it may possible for a beneficiary to gain access to assets faster. It also allows a trustor to control their wealth by controlling who an estate is distributed to. This also ensures that a trustor may protect their estate from ending up in the wrong hands.
Irrevocable vs. Revocable Trusts
There are different ways an individual may set up their trust. Depending on what they are looking for and the amount of control they wish to have over the trust, an individual has options on how to proceed. In the state of Maryland, there are two main types of trusts:
- Revocable Trust: This type of trust may be modified, changed, or terminated at any time without permission from the beneficiary, as long as the trustor is of sound mind to do so.
- Irrevocable Trust: This type of trust requires the trustor to nullify their rights to trust. This means they no longer have any ownership of the trust. It also takes away the ability for the trustor to change or terminate the trust at any time.
Other Types of Trusts
While revocable and irrevocable trusts are the most common types of trusts that are created, there are different options for trustors to consider as well. Depending on their estate and the situation of any beneficiaries, a trustor may want to create a different kind of trust. Other common trusts that people choose to draft in Maryland may include:
- Irrevocable Life Insurance Trust: This trust allows an individual to remove their life insurance from their estate. This may free a beneficiary from taxes on the trustor’s life insurance policy.
- Testamentary Trust: This trust is created as part of a will and becomes effective only after the individual passes away.
- Special Needs Trust: This trust may be created if a trustor has a loved one with a disability. This ensures that the loved one will receive any financial support they need.
Contact our Firm
If you wish to create an estate plan and are seeking a legal representative to guide you through the process, contact JD Katz, Attorneys at Law today.
The attorneys at JD Katz have years of experience compassionately guiding clients in Maryland through the estate planning and administration process. Our firm also has experience with matters of elder law, business law, tax law, and litigation. For a legal team that will put your needs first, contact JD Katz today.