Maryland Wills vs. Trusts
Maryland presents unique estate planning challenges and opportunities for its residents. The Free State is one of the few that imposes both estate and inheritance taxes, with an estate tax threshold of just $5 million. Despite these tax considerations, Maryland offers powerful planning tools including small estates probate for assets under $50,000 (or $100,000 for surviving spouses), enhanced life estates through Lady Bird deeds, TOD vehicle titles, and robust spendthrift trust protections. Understanding these state-specific provisions is essential for creating an effective estate plan while minimizing unnecessary taxation and complications.
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Maryland Will Requirements
A Maryland Last Will and Testament should include:
- Age and Capacity: Testator must be “legally competent to make a will” and at least 18 years old
- Format: Must be in writing
- Signature: Must be signed by the testator or by another person on behalf of the testator in the testator’s presence and at their express direction
- Witnesses: Must be signed by at least two credible witnesses who are in the testator’s physical presence
Capacity Requirements
Legal competence for creating a Maryland will amounts to a testator’s reasonable understanding of:
- Their assets
- Their family members and heirs
- The effects of the will’s provisions
Witnessing Requirements
For purposes of executing a will in Maryland, a witness is only considered to be in the testator’s presence if they are in the same physical location—video conferencing is insufficient.
Asset Distribution Presumption
Maryland law presumes that, if a will is present, all property owned by the testator upon their death is to be distributed under the will.
Document Incorporation
Maryland wills and trust instruments can incorporate by reference other documents within the will or trust, if the incorporated documents are in existence when the will or trust instrument is executed. For incorporation by reference to be effective:
- The primary will or trust instrument must clearly indicate an intent to incorporate the other document
- The other document must be sufficiently described to allow identification
Recital of Attestation
Maryland law does not provide for the notarized “self-proved” affidavit used in many states. Instead, if a will includes a “recital of attestation” under which the will’s witnesses attest to the proper execution of the will, the will is presumed to have been properly executed when submitted to probate.
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Amendment, Revision, and Revocation of Maryland Wills
Revoking a Maryland Will
Maryland wills may be revoked by:
- Execution of a later will that either expressly revokes the earlier will or revokes the earlier will by implication
- Physical destruction of the document, such as by cutting, burning, or tearing
If a later will is itself subsequently revoked, the earlier will is not revived unless it is formally republished.
Amending a Maryland Will
A Maryland will can be amended through:
- Execution of a new will complying with all formalities required for creation of a will
- Execution of a codicil that satisfies all formalities required for creation of a will
Automatic Revocation by Divorce
If, after executing a will or revocable trust, a testator is divorced, any provisions in the will or trust relating to the former spouse are considered revoked, unless the will, trust instrument, or a divorce decree expressly provides otherwise. Property subject to voided provisions is distributed as if the provision had not existed.
Children Born After Will Execution
If a testator has a child after execution of a will—and if the will provides for another child of the testator but not for the after-born child and does not expressly omit the after-born child—the after-born child inherits the same share of the estate the child would have inherited had the testator died intestate.
Alternatively, the after-born child receives a share equal to the value of all distributions to the testator’s children divided by the total number of the testator’s children—if that amount would be less than the intestate share.
Marriage and Birth After Will Execution
In the event that a testator gets married and has a child (whether through birth, adoption, or legitimation) subsequent to executing a Maryland will, the will is considered revoked as long as the after-born child survives the testator.
Holographic and Oral Wills
Holographic Wills
Maryland law recognizes holographic wills, but only under certain limited circumstances. To form a valid holographic will:
- The testator must be serving in the United States armed forces
- The will must be entirely in the testator’s own handwriting
- The will must be signed while the testator is outside of the U.S.
Maryland holographic wills become void one year after a testator’s discharge from the armed forces, unless the testator has already died or no longer has adequate capacity to create a will.
Oral (Nuncupative) Wills
Maryland law does not recognize oral (or “nuncupative”) wills.
Maryland Trust Requirements
Governing Law
Trusts in Maryland are primarily governed by the Maryland Trust Act (enacted by the legislature as Title 14.5 of the MD Estate & Trust Code), Maryland’s version of the Uniform Trust Code. In general, Maryland law applies the same legal standards for interpreting the terms of a living trust as are applied to wills.
Trust Purposes and Validity
Maryland trusts can be created for any lawful purpose that:
- Does not violate the state’s public policy
- Is possible to achieve
The purpose and terms of a Maryland trust must ultimately be designed to benefit the trust’s beneficiaries. A trust found to have been induced by fraud, duress, or undue influence is void under Maryland law. If the terms of a trust or the settlor’s intentions were affected by a mistake of law or fact, a court may reform the terms of even an unambiguous trust to conform to the settlor’s intentions.
Written vs. Oral Trusts
Though most trusts are evidenced by a written instrument setting forth the trust’s terms, Maryland law recognizes oral trusts. However, the creation and terms of an oral trust must be established by clear and convincing evidence.
Trust Creation Methods
A Maryland trust can be created through:
- Transfer of property by a settlor to a trustee
- A settlor’s declaration that he or she owns property as trustee
- Exercising a power of appointment in favor of a trustee
Trust Requirements
A valid trust is only created under Maryland law if:
- The settlor has adequate capacity to create the trust
- The settlor expresses an intent to create a trust
- The trust has a trustee with actual duties to perform
- The trust has a reasonably ascertainable beneficiary (subject to exceptions such as for charitable trusts and trusts for the care of animals)
For revocable trusts, the standard for capacity is the same as for wills. Maryland law assumes that trusts are revocable unless the trust is expressly made irrevocable.
Trustee Duties
In administering a trust, a trustee is governed by the “prudent person rule,” under which he or she must exercise reasonable skill, care, and caution.
Trust Termination
Maryland trusts terminate upon:
- Revocation or expiration under the trust’s own terms
- When the trust’s purpose becomes unlawful or impossible
- Upon order of a court in a proceeding commenced by the trustee or a beneficiary
Divorce Effects on Trusts
If a Maryland grantor divorces after creating a revocable trust, any provisions in favor of the former spouse are deemed to have been revoked, and the trust is treated as if the former spouse had died prior to the grantor.
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Special Considerations
Estate and Inheritance Taxes
Dual Tax System
Maryland is one of the few states that impose both an estate tax and an inheritance tax.
- Estate Tax: Applies to estates with gross values over $5 million—less than half the current federal threshold—and the estate-tax rate goes as high as 16%. Distributions to spouses are exempt from Maryland’s estate tax.
- Inheritance Tax: Imposes a rate of 10% on non-exempt property that passes by will or through intestacy, interests acquired through joint ownership, assets like POD accounts and trusts over which the decedent retained some control, and certain transfers within two years of the decedent’s death.
Inheritance Tax Exemptions
Maryland law allows for numerous exemptions to the inheritance tax, including for property inherited by:
- A parent
- A sibling
- A lineal descendant (or spouse thereof)
- A stepchild of the decedent
Assets inherited through small-estate probate or not exceeding $1,000 in value are also exempt.
Small Estates Probate
Streamlined Process
Maryland provides a streamlined probate process for certain small estates. Qualifying estates must be valued at less than $50,000 (or $100,000 if a surviving spouse is the sole heir). When small estates probate is available, the personal representative is able to administer the estate without going through the lengthier, more complicated regular probate process.
Modified administration is also available for solvent estates if no inheritance taxes are implicated and the personal representative and beneficiaries consent.
Non-Probate Transfers
Transfer-on-Death (TOD) Deeds and Titles
Real Estate Transfers
Maryland law does not recognize TOD designations on real estate deeds. However, Maryland does allow deeds creating “enhanced life estates” (a/k/a “Lady Bird Deeds”). Lady Bird deeds allow a property owner to retain full control over a property, including the power to sell or transfer, for life, while providing in advance for non-probate transfer to a long-term beneficiary upon the owner’s death.
Vehicle Titles
Maryland law recognizes TOD designations on vehicle titles. If a TOD designation is added to a vehicle’s official title, ownership passes to the beneficiary automatically upon the original owner’s death.
Spendthrift Trusts
Maryland law expressly recognizes spendthrift and discretionary trusts protecting trust assets from claims of most creditors of trust beneficiaries. If a trust includes a spendthrift or support provision or discretionary distributions, a beneficiary’s creditor cannot attach trust property until it is actually distributed to the beneficiary.
However, interests in spendthrift trusts can be attached to satisfy:
- Domestic support obligations
- Governmental claims
If a spendthrift trust is revocable, the settlor’s creditors can attach trust assets during the settlor’s lifetime, and trust assets can be reached to satisfy estate claims. If irrevocable, creditors of the settlor can only reach the amount of trust assets that can be distributed for the settlor’s benefit.
Need help creating the right estate plan for your Maryland family?
Our estate planning specialists can help you navigate Maryland’s unique laws and create a personalized strategy.
Wills vs. Trusts: Comparison
| Feature | Wills | Trusts |
|---|---|---|
| When It Takes Effect | After death | Can be immediate (living trust) or after death (testamentary trust) |
| Probate Process | Requires probate | Assets in trust avoid probate |
| Privacy | Public record | Generally private |
| Challenges | Can be challenged in probate court | More difficult to challenge |
| Cost to Create | Generally less expensive | Usually more expensive |
| Ongoing Administration | None until death | May require ongoing management |
| Protection During Incapacity | None (requires separate power of attorney) | Can provide management if grantor becomes incapacitated |
| Maryland Special Feature | Recital of attestation; small estates probate for estates under $50K-$100K | Spendthrift provisions; Lady Bird deeds; protection from dual tax system |
Conclusion
Establishing a will or trust does not have to be difficult or intimidating for Maryland residents. However, certain circumstances—like second marriages, stepchildren, aging parents, special needs beneficiaries, guardianships, and business interests—can add complexity and result in unforeseen consequences.
Maryland’s unique estate planning environment creates both challenges and opportunities. As one of the few states with both estate and inheritance taxes, careful planning is essential to minimize tax burdens. The state’s estate tax threshold of $5 million is significantly lower than the federal exemption, affecting many more estates.
On the positive side, Maryland offers several advantageous estate planning tools including streamlined probate for small estates (under $50,000, or $100,000 for surviving spouses), Lady Bird deeds for real estate transfers, TOD vehicle titles, and robust spendthrift trust protections. The state’s expanded elective share calculation also provides important protection for surviving spouses.
When any out-of-the-ordinary issues are present, it’s advisable to consult with an experienced attorney familiar with and licensed under Maryland law to ensure your estate plan takes full advantage of the state’s provisions while minimizing exposure to its dual tax system.
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FAQs: Maryland Wills and Trusts
Q: What are the requirements for a valid will in Maryland?
A: A Maryland will must be in writing, signed by the testator (18+ and legally competent), and witnessed by two credible people in the testator’s physical presence. Legal competence means understanding your assets, heirs, and the will’s effects. If the testator can’t sign, another can sign at their direction in their presence.
Q: Does Maryland recognize holographic or oral wills?
A: Maryland recognizes holographic wills only for U.S. armed forces members, handwritten and signed by the testator while abroad, valid until one year after discharge unless they die or lose capacity. Oral (nuncupative) wills are not recognized.
Q: What taxes apply to estates in Maryland?
A: Maryland imposes both an estate tax (up to 16% on estates over $5 million) and a 10% inheritance tax on non-exempt transfers, though spouses, parents, siblings, and lineal descendants are exempt. Small estates under $1,000 avoid inheritance tax.
Q: How can I avoid probate in Maryland?
A: Avoid probate with living trusts, joint ownership with right of survivorship, tenancy by the entireties (for spouses), payable-on-death (POD) accounts, transfer-on-death (TOD) securities, or TOD vehicle titles. Small estates under $50,000 ($100,000 for a spouse) qualify for streamlined probate.
Q: What is a Lady Bird Deed in Maryland?
A: A Lady Bird Deed (enhanced life estate deed) lets you retain control of real estate during your life, including the right to sell, while naming a beneficiary to inherit it upon your death without probate. Maryland recognizes these, unlike standard TOD deeds.
Q: What protections do surviving spouses have in Maryland?
A: Maryland grants surviving spouses an elective share of one-third of the estate (including trusts and some non-probate assets) if there are kids, or one-half if not, waivable by agreement. This ensures they aren’t fully disinherited.
