Title 14. Trusts — Subtitle 6. Maryland Trust Decanting Act

“Authorized fiduciary” means a trustee or other fiduciary, other than a settlor, who has discretion to distribute or direct a trustee to distribute all or part of the principal of the first trust to a beneficiary.

“Authorized fiduciary” includes:

Is held by an identified charitable organization and makes the organization a qualified beneficiary;

Benefits only charitable organizations and, if the interest were held by an identified charitable organization, would make the organization a qualified beneficiary; or

Is held solely for charitable purposes and, if the interest were held by an identified charitable organization, would make the organization a qualified beneficiary.

A person, other than an individual, organized and operated exclusively for charitable purposes; or

A government or governmental subdivision, agency, or instrumentality that holds funds exclusively for charitable purposes.

“Current beneficiary” means a beneficiary that, on the date the beneficiary’s qualification is determined, is a distributee or permissible distributee of trust income or principal.

“Current beneficiary” includes a person who is a beneficiary solely because the person holds a presently exercisable general power of appointment.

“Current beneficiary” does not include a person who is a beneficiary only because the person holds a power of appointment other than a presently exercisable general power of appointment.

“Presently exercisable power of appointment” means a power of appointment exercisable by the powerholder at the relevant time.

“Presently exercisable power of appointment” includes a power of appointment exercisable only after the occurrence of a specified event, the satisfaction of an ascertainable standard, or the passage of a specified time only after:

“Presently exercisable power of appointment” does not include a power exercisable only at the powerholder’s death.

Inscribed on a tangible medium; or

A first trust which has been modified under this title; or

A trust to which a distribution of property from a first trust has or may be made under this title.

Is irrevocable or revocable by the settlor only with the consent of the trustee or a person holding an adverse interest; and

Distribute or appoint property in further trust; or

Modify a trust under the trust instrument, law of this State other than this title, common law, a court order, or a nonjudicial settlement agreement.

By personal service;

By certified mail or first–class mail, postage prepaid, return receipt requested;

By courier delivery service, delivery service prepaid, delivery confirmation requested; or

If a person entitled to receive notice under this subtitle agrees in writing to accept an alternative form of notice:

A person may revoke the authorized fiduciary’s authorization to provide notice by an alternative method under subsection (b)(4) of this section by providing notice to the authorized fiduciary in a method specified under subsection (b)(1) through (3) of this section.

An authorized fiduciary authorized to provide notice by an alternative method under subsection (b)(4) of this section may continue to provide notice by the authorized alternative method until the person entitled to receive notice revokes the authorization in accordance with paragraph (1) of this subsection.

Except as provided in subsection (d) of this section and paragraph (2) of this subsection, an authorized fiduciary shall give notice in a record of any intended exercise of the decanting power at least 60 days before the exercise to:

An authorized fiduciary is not required to give notice to any person under this subsection if the person is not known to the fiduciary or is known to the fiduciary and cannot be located after reasonable diligence.

Specify the manner in which the authorized fiduciary intends to exercise the decanting power;

Specify the proposed effective date for the exercise of the power; and

Include a copy of the first trust instrument and all second trust instruments.

An attempted exercise of the decanting power is ineffective because the exercise:

§ 14–619 of this subtitle applies to the exercise of the decanting power.

Due to a failure to comply with the provisions of this subtitle;

As an abuse of the authorized fiduciary’s discretion; or

As a breach of the authorized fiduciary’s fiduciary duties;

The record required by this subsection shall identify:

The record required by this subsection may include information by reference to the notice required by § 14–605 of this subtitle.

In this section the following words have the meanings indicated.

“Presumptive remainder beneficiary” means a qualified beneficiary other than a current beneficiary.

“Vested interest” means:

Except as provided in subsection (d) of this section, include as a current beneficiary a person that is not a current beneficiary of the first trust;

Except as provided in subsection (d) of this section, include as a presumptive remainder beneficiary or successor beneficiary a person that is not a current beneficiary, presumptive remainder beneficiary, or successor beneficiary of the first trust; or

Reduce or eliminate a vested interest.

Retain a power of appointment granted in the first trust;

Omit a power of appointment granted in the first trust, other than a presently exercisable general power of appointment;

Create or modify a power of appointment if the powerholder is a current beneficiary of the first trust and the authorized fiduciary has expanded distributive discretion to distribute principal to that beneficiary; or

Create or modify a power of appointment if the powerholder is a presumptive remainder beneficiary or successor beneficiary of the first trust and the exercise of the power may take effect only after the powerholder becomes, or would have become if then living, a current beneficiary.

A power of appointment described in subsection (d) of this section may be general or nongeneral.

The class of permissible appointees in favor of which a power of appointment described in subsection (d) of this section may be exercised may be broader than or different from the beneficiaries of the first trust.

In this section the following words have the meanings indicated.

“Deferred distribution” means a provision in a second trust that defers or postpones, as compared with the first trust, a contingent right of a beneficiary to receive an outright distribution of assets on the attainment of a certain age or the occurrence of a specified event.

“Limited distributive discretion” means a discretionary power of distribution that is limited to an ascertainable standard or a reasonably definite standard.

Subject to § 14–611 of this subtitle, one or more second trusts may be created or administered under the law of any jurisdiction.

The second trusts, in the aggregate, shall grant each beneficiary of the first trust beneficial interests that are substantially similar to the beneficiary’s beneficial interests under the first trust.

Notwithstanding paragraph (2) of this subsection, a second trust may:

A power to make a distribution under a second trust for the benefit of a beneficiary who is an individual is substantially similar to a power under the first trust to make a distribution directly to the beneficiary.

A distribution is for the benefit of the beneficiary if:

In this section the following words have the meanings indicated.

“Beneficiary with a disability” means a beneficiary of a first trust who the special needs fiduciary reasonably believes qualifies for governmental benefits based on disability, whether or not the beneficiary currently receives governmental benefits or has been adjudicated incapacitated.

“Governmental benefits” means financial aid or services from a State, federal, or other public agency.

“Special needs fiduciary” means, with respect to a trust that has a beneficiary with a disability:

“Special needs trust” means a trust that the trustee reasonably believes would not be considered a resource for the purpose of determining whether a beneficiary with a disability is eligible for governmental benefits.

A second trust is a special needs trust that benefits the beneficiary with a disability; and

The special needs fiduciary determines that the exercise of the decanting power will further purposes of the first trust.

The interest in a second trust of a beneficiary with a disability may, but is not required to:

A second trust may reduce or eliminate a vested interest of a beneficiary with a disability; and

Except as affected by any change to the interests of the beneficiary with a disability, a second trust, or second trusts in the aggregate, shall grant each other beneficiary of the first trust beneficial interests in the second trusts that are substantially similar to the beneficiary’s beneficial interests in the first trust.

In this section the following words have the meanings indicated.

“Determinable charitable interest” means a charitable interest that is a right to a mandatory distribution currently, periodically, on the occurrence of a specified event, or after passage of a specified time and that is unconditional or will be held solely for charitable purposes.

“Unconditional” means not subject to the occurrence of a specified event that is not certain to occur, other than a requirement that a charitable organization be in existence or qualify under a particular provision of Title 26 of the United States Code on the date of the distribution, if the charitable organization meets the requirement on the date of determination.

If a first trust contains a determinable charitable interest, the Attorney General has the rights of a qualified beneficiary and may represent and bind the charitable interest.

If a first trust contains a charitable interest, a second trust may not:

If a first trust contains a determinable charitable interest, the second trust shall be administered under the law of this State, unless:

The decanting power; or

A power granted by State law to the fiduciary to distribute all or part of the trust to another trust or to modify the trust.

The decanting power; or

A power granted by State law to the fiduciary to distribute all or part of the trust to another trust or to modify the trust.

A general prohibition of the amendment or revocation of a first trust;

A spendthrift clause; or

A clause restraining the voluntary or involuntary transfer of a beneficiary’s interest.

Relieve an authorized fiduciary from liability for breach of trust to a greater extent than a first trust instrument; or

Reduce fiduciary liability in the aggregate.

In this section the following words have the meanings indicated.

“Grantor trust” means a trust as to which a settlor of a first trust is considered the owner under 26 U.S.C. §§ 671 through 677 or § 679.

“Internal Revenue Code” means Title 26 of the United States Code.

“Nongrantor trust” means a trust that is not a grantor trust.

“Qualified benefits property” means property subject to the minimum distribution requirements of 26 U.S.C. § 401(a)(9), any applicable regulations, or similar requirements.

If the first trust contains property that qualified, or would have qualified but for any provision of this subtitle other than this section, for a marital deduction for purposes of the gift tax or estate tax under the Internal Revenue Code or a State gift, estate, or inheritance tax, the second trust instrument may not include or omit any term that, if included in or omitted from the trust instrument for the trust to which property was transferred, would have prevented the transfer from qualifying for the deduction or would have reduced the amount of the deduction under the provisions of the Internal Revenue Code or State law under which the transfer qualified.

If the first trust contains property that qualified, or would have qualified but for any provision of this subtitle other than this section, for a charitable deduction for purposes of the income, gift, or estate tax under the Internal Revenue Code or a State income, gift, estate, or inheritance tax, the second trust instrument may not include or omit any term that, if included in or omitted from the trust instrument for the trust to which the property was transferred, would have prevented the transfer from qualifying for the deduction or would have reduced the amount of the deduction under the same provisions of the Internal Revenue Code or State law under which the transfer qualified.

If the first trust contains property that qualified, or would have qualified but for any provision of this subtitle other than this section, for a zero inclusion ratio for purposes of the generation–skipping transfer tax under 26 U.S.C. § 2642(c), the second trust instrument may not include or omit a term that, if included or omitted from the first trust instrument, would have prevented the transfer to the first trust from qualifying for a zero inclusion ratio under 26 U.S.C. § 2642(c).

If the first trust qualifies as a grantor trust because of the application of 26 U.S.C. § 672(f)(2)(A), the second trust may not include or omit a term that, if included or omitted from the first trust instrument, would have prevented the first trust from qualifying under 26 U.S.C. § 672(f)(2)(A).

Subject to paragraph (9) of this subsection, a second trust instrument may not include or omit a term that, if included or omitted from the first trust instrument, would have prevented qualification for a tax benefit if:

Except as otherwise provided in this subsection, the second trust may be a nongrantor trust or a grantor trust.

An authorized fiduciary may not exercise the decanting power if a settlor objects in a signed record delivered within the notice period to the fiduciary and:

Any provision in the second trust instrument prohibited by this subtitle is void to the extent necessary to comply with this subtitle; and

The second trust instrument shall be treated as containing any provision which is required by this subtitle but not included in the instrument.

A settlor of the first trust;

A settlor of the second trust; and

An authorized fiduciary.