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Marylanders who are transitioning into older age groups, or who simply wish to get a better grip on how their estate will be dealt with, should familiarize themselves with the basic principles of estate planning. In this post, we will discuss two cornerstones of estate planning: the use of trusts, and the minimization of tax consequences. These two things can be accurately conceived as traditional pillars of estate planning in Maryland.
The Use of “Trusts” The first question to answer: what is trust? Simply put, a trust is a legal entity that can be established to fulfill many different purposes. Trusts can show up in a wide range of forms: revocable living trusts, irrevocable trusts, testamentary trusts, and so forth. The common feature underlying all these entities is the fact that all are created to carry out specific goals. For instance, trusts can be used to ensure that assets are distributed to beneficiaries in a particular manner, so as to fulfill the wishes of the trust creator. If, for instance, a person accumulates substantial wealth and wishes to distribute that wealth to multiple beneficiaries, a trust can be established to accomplish this goal. Or, if a person wishes to see that his or her assets are only used for a specific purpose – such as education – this can also be arranged.
Trusts have three key players: creators (or trustors), trustees (or managers), and beneficiaries. All three players will always be clearly identified at the time the trust is built. The selection of a trustee is an immensely important task, as trustees are placed in charge of carrying out all the specific instructions set forth in the trust itself. Trustees have a specific type of duty with respect to the trust, and this is referred to as their “fiduciary” responsibility. This means that they are legally bound to observe the rules of the trust and the wishes of the creator.
1. The Use of “Trusts”
The first question to answer: what is a trust? Simply put, a trust is a legal entity which can be established to fulfill many different purposes. Trusts can show up in a wide range of forms: revocable living trusts, irrevocable trusts, testamentary trusts, and so forth. The common feature underlying all these entities is the fact that all are created to carry out specific goals. For instance, trusts can be used to ensure that assets are distributed to beneficiaries in a particular manner, so as to fulfill the wishes of the trust creator. If, for instance, a person accumulates substantial wealth and wishes to distribute that wealth to multiple beneficiaries, a trust can be established to accomplish this goal. Or, if a person wishes to see that his or her assets are only used for a specific purpose – such as education – this can also be arranged.
Trusts have three key players: creators (or trustor), trustees (or managers), and beneficiaries. All three players will always be clearly identified at the time the trust is built. The selection of a trustee is an immensely important task, as trustees are placed in charge of carrying out all the specific instructions set forth in the trust itself. Trustees have a specific type of duty with respect to the trust, and this is referred to as their “fiduciary” responsibility. This means that they are legally bound to observe the rules of the trust and the wishes of the creator.
2. Minimizing Tax Liabilities
Another major pillar of estate planning in Maryland is the overall minimization of tax liabilities. Depending on the specific facts of a given case, a person’s estate can face various tax consequences when he or she passes away. When you consult with an experienced estate planning attorney, that specialist will be able to educate you about these various tax implications. For instance, estate planning will always involve devising strategies pertaining to federal taxation and state taxation. At the federal level, there is the estate tax which can be imposed on estates which exceed a certain threshold; furthermore, there are rules regarding inter vivos gifts, available deductions, and so forth. Marylanders need to know all this tax related information in order to maximize their estate and, by extension, maximize the assets distributed to beneficiaries.
Contact the Murphy Law Firm for More Information
This is just a very general overview of estate planning principles for Marylanders. In the near future, we will come back and discuss these issues in greater depth, as there is plenty more to know about these pillars of estate planning. For now, if you want to learn more, reach out to one of the top lawyers at the Murphy Law Firm today by calling 240-219-8825.
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