What Assets Can You Not Put in a Trust in Maryland?

Trusts are a versatile estate planning tool that allows individuals to protect and manage their assets in accordance with their wishes. While trusts offer numerous benefits, not all assets can be transferred into one.

Maryland has certain restrictions on the types of assets that can be held in a trust. That is why it is critical to seek our team’s guidance to comprehensively understand your situation’s nuances and how to effectively protect your assets. We can help you navigate the legal complexities and provide personalized solutions aligning with your financial goals.

For a free case consultation with our dedicated Maryland trust attorneys, call Rice, Murtha & Psoras at (410) 694-7291 today.

What Assets Cannot Be Placed in a Maryland Trust?

Estate planning is an essential aspect of financial management, and a living trust, also referred to as a revocable trust, is a widely used tool for this purpose. The grantor, who creates the trust, can maintain control over their assets throughout their lifetime and also modify or dissolve the trust if they so desire.

However, in Maryland, certain types of assets are not eligible to be placed in a living trust. Fortunately, our seasoned Rockville trust attorneys can review your case to help determine which assets can be protected by creating a trust. It is important to understand these limitations so that you can make informed decisions while creating your estate plan.

Retirement Accounts

Any assets held in individual retirement accounts (IRAs), 401(k)s, and other qualified retirement plans cannot be placed in a living trust. These types of assets are subject to strict federal laws and regulations, including the Employee Retirement Income Security Act (ERISA), which provides specific rules for their distribution upon the account holder’s death.

Essentially, these assets are considered separate legal entities from the account holder and are governed by their own set of tax and distribution rules that must be followed. Understanding the specific implications of your individual retirement accounts and how they can be best managed and distributed is important.

Life Insurance Policies

Although life insurance policies are useful in estate planning, it is not possible to place them directly in a living trust. Nonetheless, you can assign the trust as the beneficiary of the policy, directing the proceeds to the trust.

This approach enables you to retain flexibility and control over the life insurance policy during your lifetime while ensuring that the policy’s benefits are distributed according to the terms of the trust after your passing. By doing so, you can create a comprehensive estate plan that meets your specific needs and goals and ensures the financial security of your loved ones.

Real Estate Property

If you want to avoid the probate process for your real estate property, placing it in a living trust can be a great option. However, this process involves some additional steps that need to be taken. The first step is to properly transfer the ownership of the property to the trust, which is done through a process called funding the trust.

This process generally requires executing a deed that transfers the ownership of the property from the owner to the trust. It is important to ensure this is done correctly, as any mistakes can cause issues.

Once the property is successfully transferred into the trust, it becomes a trust asset, and the trust will own the property instead of the individual. This can provide numerous benefits, including avoiding probate and potential estate taxes from being levied.

Certain Types of Bank Accounts

Not all bank accounts need to be placed in a living trust. Specifically, accounts held jointly or with designated beneficiaries, such as payable-on-death (POD) or transfer-on-death (TOD) accounts, are exempt from the probate process. This means they pass directly to the joint owner or designated beneficiary without going through the court system.

By designating a beneficiary on these types of accounts, you can ensure that your assets are distributed according to your wishes and avoid the delays and expenses associated with probate. However, joint accounts and POD/TOD accounts are still subject to estate taxes and other financial considerations.

Assets Owned in Other Jurisdictions

If you own any assets that are located outside of Maryland, such as a property situated in another state, you need to be aware that those assets might be subject to the laws, rules, and regulations of that specific jurisdiction. It means that the legal requirements, taxes, and liabilities might vary depending on the location of the asset.

How Our Attorneys Can Help Choose the Right Trust for You in Maryland

Navigating the complexities of estate planning and determining which assets can be placed in a trust requires skilled legal guidance. Our firm can provide valuable assistance in choosing the right type of trust and ensuring compliance with Maryland laws. Here is how our attorneys can help:

Assess Your Financial Situation

A trust attorney plays a crucial role in estate planning by performing a comprehensive review of your financial situation. This entails a thorough analysis of the types of assets you own, including real estate, investments, personal property, and your specific estate planning goals.

Based on this assessment, our attorneys will guide the type of trust most suits your needs. This might include a revocable living trust to avoid probate, an irrevocable trust to minimize taxes, or a special needs trust to ensure a loved one with a disability is financially secure.

Evaluate Your Assets

At our firm, we will evaluate your assets and determine which ones are eligible to be placed in a trust. We will consider factors such as the nature of the asset, its transferability, and any legal restrictions that might apply.

Selection of Trust Type

There are several different types of trusts that you can consider when planning your estate. One option is a revocable living trust, which allows you to maintain control over your assets during your lifetime and provides flexibility in making changes to the trust.

Another option is an irrevocable trust, which can help you protect your assets from creditors and minimize estate taxes.

Testamentary trusts are established in your will and only come into effect after you pass away. Other types of trusts include charitable trusts and special needs trusts, which are set up for very particular circumstances.

We Understand Maryland Estate Laws

Each state has its own laws and regulations governing trusts. Regarding Maryland estate laws, our attorneys are well-versed in the intricacies of Maryland law and can draft your trust to comply with all applicable statutes.

Our Marland Trust Attorneys Are Here to Support Your Estate Planning Goals

Contact Rice, Murtha & Psoras by calling (410) 694-7291 and speak with our Dundalk estate lawyers to receive your free case review.