What Makes a Trust Unenforceable in Maryland?

Creating a trust can help people pass on their assets smoothly and privately to loved ones without going through probate. These estate planning instruments also offer a means of establishing specific instructions for the management and use of assets, providing a structured way to preserve and allocate wealth according to grantors’ wishes.

There are many ways that a trust may be deemed unenforceable in Maryland. Thankfully, the team at our law firm can help ensure that the necessary conditions for creating and managing a trust are satisfied in your case. We will work diligently to create an effective estate plan that aligns with your personal preferences.

If you need to create an enforceable trust, get assistance from our Maryland estate and trusts lawyers by calling Rice, Murtha & Psoras at (410) 694-7291.

Creating an Enforceable Trust in Maryland

Creating an enforceable trust can be a complicated process without support from legal representation. Fortunately, our Maryland estate and trusts attorneys can help create a trust that adheres to the following requirements:

Declaration of Trust

In Maryland, trusts are usually established through the creation of a Declaration of Trust, a written document wherein the grantor legally transfers ownership of specified property to a trustee for the benefit of a named beneficiary. While trusts do not strictly require a written form, their execution is nearly impractical without written documentation according to Md. Code, Ests. & Trs. Art, § 14.5-406.

Grantor Competency and Trustee Acceptance

For a trust to be valid, the grantor must be legally competent at the time of establishing the trust, as outlined in Md. Code, Ests. & Trs. Art, § 14.5-402(a)(1). Further, § 14.5-402(a)(2) mandates that the grantor must indicate an intention to create the trust.

Additionally, the trust only comes into existence when the designated trustee formally accepts the responsibility of managing the entrusted property. The trustee, whether an individual, institution, or organization, can also be specified with a list of backup trustees in case the primary trustee is unable to continue.

Fiduciary Duty of Trustees

Trustees in Maryland are obligated to uphold a fiduciary duty, as outlined in Md. Code, Ests. & Trs. Art, § 14.5-801. This legal responsibility requires trustees to act in the best interests of beneficiaries. Key aspects of this duty include prudent asset management to maximize returns, avoidance of conflicts of interest, and maintaining transparency.

Misconduct can arise in several different forms. For example, a trustee may breach their fiduciary duty by involving themselves in self-dealing, embezzling trust funds, failing to diversify investments, or by withholding crucial information from beneficiaries. Trustees must demonstrate the highest standards of integrity, prioritizing the welfare of beneficiaries in order to preserve the trust’s integrity.

Property Description and Transfer Rules

The property designated for the trust must be precisely described in the Declaration of Trust, adhering to the guidelines set forth in Md. Code, Ests. & Trs. Art, § 14-404. While no specific language is mandated to move property into a trust, grantors are still required to comply with relevant laws governing property transfer, including specific regulations for real estate.

The Maryland Discretionary Trust Act

Lastly, trusts created under The Maryland Discretionary Trust Act must explicitly state that the property is intended to be held under the act. Those created without such a designation are presumed to be revocable trusts, as per Md. Code, Ests. & Trs. Art, § 14-402.

How a Beneficiary’s Death Impacts the Enforceability of a Trust in Maryland?

In Maryland, the death of a beneficiary can have implications for the enforceability of a trust. As specified in to Md. Code, Ests. & Trs. Art, § 14-406(a)(1), one of the events that can lead to the termination of a trust is the death of the beneficiary. When a beneficiary passes away, the trust may cease to be enforceable and the disposition of the trust assets may be subject to the terms outlined in the trust document or the applicable laws.

The enforceability of the trust after the death of a beneficiary is contingent upon the specific provisions detailed in the trust document. These provisions may dictate alternative arrangements, such as naming contingent beneficiaries or outlining the distribution of trust assets in the event of a beneficiary’s death.

Our legal team is prepared to assist grantors and trustees when carefully drafting trust documents. We will help consider contingencies like the death of beneficiaries to ensure the enforceability and proper administration of trusts in accordance with Maryland law.

Other Events that May Impact Trust Enforceability in Maryland

Apart from the death of a beneficiary, there are other events may affect the enforceability of a trust in Maryland. Md. Code, Ests. & Trs. Art, § 14-406(a)(2) and § 14-406(a)(3) establish that a trust may terminate upon the occurrence of a specified event or date, or if the trustee appropriately determines that trust property or income will be considered an available resource for the beneficiary.

During your free case review, our legal team can further explain the specific triggers that may lead to the termination of a trust.

Role of Backup Trustees in Maryland

The appointment of backup trustees holds significant importance in ensuring the continuity and enforceability of a trust in Maryland. The inclusion of backup trustees is a proactive measure that safeguards against potential disruptions in trust administration. This provision allows for the appointment of substitute trustees in the event that the primary trustee is unable to fulfill their duties, whether due to incapacity, resignation, or other unforeseen circumstances.

The importance of backup trustees becomes evident when considering the potential challenges that may arise during the trust’s lifespan. By having designated backup trustees, a trust may remain a viable and effective vehicle for achieving the grantor’s intentions even in the face of unexpected events affecting the primary trustee.

Contact Our Lawyers for Help Creating an Enforceable Trust in Maryland

Seek guidance from our Annapolis, MD estate and trusts lawyers at Rice, Murtha & Psoras by calling (410) 694-7291 for a free assessment of your case.