The Basic Steps of Establishing a Revocable Living Trust in Maryland

Introduction to Revocable Living Trusts

Many people are superficially familiar with legal “trusts,” but very few people fully understand the benefits of trusts, and even fewer understand the process of creating trusts. A trust is a legal instrument which is used to ensure that certain resources are distributed according to predesigned goals. In a typical arrangement, a creator (or “trustor”) engages a trustee to manage a trust, and the trustee is responsible (with a “fiduciary” duty) for guaranteeing the administration of the trust for the beneficiary. As we’ve hinted in previous posts, trusts can come in various forms – there are revocable trusts, irrevocable trusts, trusts for educational purposes, and so forth. A “revocable living trust” is essentially a trust which may be revoked (or dissolved) at any time by the trustor; importantly, there are no requirements which must be met prior to this revocation, aside from the stated desires of the trustor himself or herself.

In some cases, revocable living trusts are established without a separate trustee, and without a separate beneficiary. In those cases, the trustor literally acts as the trustee, and the beneficiary; the trustor fulfills these three roles all by himself or herself individually. In these cases, the trust can be considered a “disregarded entity” in the sense that the trust won’t be treated as a distinct entity for tax purposes.

First Steps: Identify the Purpose & Other Parties

The first step in the creation process is to identify the purpose of the trust itself, and then to identify the other parties who will take part in the trust. When you create a trust, as mentioned, the real purpose is to ensure that certain resources are used or expended properly; to make this happen, the trust can be written in order to guarantee that resources are directed according to the trustor’s desires. For example, if the trustor wishes to create a trust to provide resources for educational purposes (i.e. college expenses for the beneficiary), then this purpose can literally be encoded into the trust itself. This means that using resources for non-educational purposes would constitute a violation of the trust rules. The trustee (or manager) also needs to be identified, and the beneficiary. Again, with a revocable living trust, the trustor, trustee and beneficiary are often all the same, but this isn’t necessarily the case.

Establishing / Implementing the Trust

After you have identified your purpose, your trustee, your beneficiary, as well as the resources you will contribute to the trust, the next step is to create and finalize a trust document. This document will simply make manifest all the specific things you desire, and also formally impose obligations on the trustee. If a trustee is appointed, and that trustee mismanages the trust or fails to protect the trust’s interests, that person can be held accountable for breach of fiduciary duty. The trust document will be finalized once it has been reviewed and signed by all parties. Not surprisingly, counsel from an experienced attorney is always advised when setting up a trust and creating the final trust document. This is true even when the trustee isn’t an attorney; you should always obtain quality counsel, regardless of the other details of the situation.

Contact the Murphy Law Firm for More Information

If you would like to learn more, or if you have a new query, don’t hesitate to reach out to one of the leading family law attorneys at the Murphy Law Firm today by calling 240-219-8901.