To love what you do and feel that it matters--how could anything be more fun?

― Katherine Graham


Maryland Trust Act Effective January 1, 2015

The new Maryland Trust Act “the Act” took effect January 1st & it will apply to all Maryland trusts, including those created prior to its effective date. Note it will not retroactively apply to ongoing judicial proceedings. The Act is intended to provide a readily available source for determining Maryland’s trust law.

Here are a few highlights of Maryland’s new law:

The terms of a trust prevail over Maryland Trust Act provisions, except for certain mandatory provisions that cannot be waived or drafted around, including certain notice provisions, the scope of the court’s authority, and the duty of the trustee to act reasonably.

Duty to Inform & Report:

The Duty to Inform & Report is a critical part of the new law.

Within 60 days of accepting trusteeship (after January 1, 2015), a trustee must notify all qualified beneficiaries of the trustee’s acceptance of the trust and of the trustee’s name, address, and telephone number.

When a new irrevocable trust is created (or a formerly revocable trust becomes irrevocable) on or after January 1, 2015, the trustee must notify all qualified beneficiaries within 90 days, informing them of the trust’s existence, the identity of the trustmaker, each beneficiary’s right to request a copy of the trust agreement, and the right to request regular reports from the trustee.

A trustee is also required to respond promptly to a qualified beneficiary’s request for information related to the trust administration (including a copy of the trust) unless the request is unreasonable under the circumstances.

Many of the notice requirements are mandatory rules under the Act and cannot be waived by the trustmaker by providing contrary instructions in the trust.

The Maryland Trust Act establishes three tiers of “qualified beneficiaries” who are afforded certain tier-based rights, and the term is used throughout the Act.

The Duty to Inform & Report has already created quite a bit of discussion among attorneys and other “professional” trustees.

Virtual Representation:

The Maryland Trust Act allows some people to stand in for others and make decisions that are binding on them, such as providing consent to a proposed action of the trustee. Here are two examples: A parent may represent a minor child. A person who holds certain powers of appointment over trust assets may represent remainder beneficiaries.

Modification and Termination of Trusts:

If the trustee and all beneficiaries consent, a court may modify or terminate an irrevocable (non-charitable) trust unless the court determines that it would interfere with the material purpose of the trust. The Act does not permit the trustee and beneficiaries to modify or terminate such a trust on their own, via a non-judicial settlement agreement, the court must be involved (unless the trust terms say otherwise).

The court can also reform or modify a trust to carry out the trustmaker’s intentions or achieve the trustmaker’s tax objectives and it can combine or divide trusts.

A trustee may decide to terminate a small trust (under $100,000) without a court order, after providing notice to the qualified beneficiaries. The beneficiaries would then have an opportunity to object to the trust termination.

Revocable Trusts:

The Act permits an Agent acting under a power of attorney to exercise the principal’s retained power to revoke or amend his or her revocable trust, but only if both the trust and the power of attorney include and express such authorization.

If a trust is silent as to whether or not it is a revocable trust, the Act provides the trust is revocable. This is a change from pre-Act Maryland law (under which such a trust would be deemed irrevocable) and it affects only trusts created on or after January 1, 2015.

Some Thoughts:

Comprehensive trust design and drafting will continue to be crucial, if not more so, to the success of each trust. The Act states much but “holes” still exist in Maryland trust law. The Section Council of the Estates & Trust Law Section of the Maryland State Bar is working on amendments to the Act. We have to work with the law as it now stands knowing that it will evolve over time as will our practices under it.

This information was prepared by Lena Barnett & Associates, LLC and is intended only to provide general information.
It is neither offered nor intended for use as legal advice, nor is it a substitute for a consultation with an attorney.

© 2015 Lena Barnett & Associates, L.L.C. All Rights Reserved

 

Website by Marc Nathan and Simply Computers Plus