Maryland Trustee powers

The general powers

A trustee, without authorization by the court, may exercise the powers conferred by the terms of the trust and, except as the terms limit them, all the powers over the trust property that an unmarried competent owner has over individually owned property, other powers appropriate to achieve the proper investment, management and distribution of the trust property, and the powers the Trust Act and the fiduciary-powers subtitle confer (Est. & Trusts § 14.5-815(a)). The exercise of each is subject to the fiduciary duties (§ 14.5-815(b)).

Beside the general grant, the Act lists environmental powers — to inspect property for possible liability, to remedy a violation, to decline property burdened with liability, to compromise claims and to pay for remediation — and a power to donate a conservation easement where the instrument authorizes it or every affected beneficiary consents in writing (Est. & Trusts § 14.5-816), and Est. & Trusts § 15-102 lists the specific powers a fiduciary may exercise without a court.

The duties every power answers to

A trustee administers the trust solely in the interests of the beneficiaries; a transaction for the trustee's own account, or otherwise affected by a conflict between the trustee's fiduciary and personal interests, is voidable by an affected beneficiary unless the terms authorized it, the court approved it, the beneficiary let the time run, consented, ratified or released, or it predates the trusteeship (Est. & Trusts § 14.5-802(a), (b)). A transaction with the trustee's spouse, close relatives, agent or attorney, or an enterprise in which the trustee has an interest that might affect judgment is presumed affected by a conflict (§ 14.5-802(c)); reasonable compensation and an advance to protect the trust are not precluded if fair (§ 14.5-802(f)).

With two or more beneficiaries, the trustee acts impartially, giving due regard to their respective interests (Est. & Trusts § 14.5-803), and administers as a prudent person would (§ 14.5-804). A discretionary power is subject to judicial control to prevent its misinterpretation or abuse, however broad its words (Est. & Trusts § 14.5-203(a)).

The limits on a trustee who is also a beneficiary

A trustee may not exercise a power to make discretionary distributions to the trustee personally except as limited by an ascertainable standard of health, education, support or maintenance, may not use one to satisfy the trustee's own legal obligations, and may not make discretionary allocations of receipts or expenses between income and principal in the trustee's own favor; the rule does not apply while the trust is revocable, where it would defeat a marital deduction, or to a trust whose contributions qualify for the § 2503(c) exclusion (Est. & Trusts § 14.5-814(a), (b), (d)). Where no trustee can exercise such a power, a court may appoint one who can (§ 14.5-814(c)).

Advisers, directions and delegation

While a trust is revocable, the trustee may follow the settlor's written direction even if it is contrary to the terms (Est. & Trusts § 14.5-808(a)). A person other than the settlor of a revocable trust whom the terms give a power to direct, consent to or disapprove the trustee's decisions is an adviser and a fiduciary, and the trustee may not follow a direction manifestly contrary to the terms or one it knows would breach the adviser's duty; where the terms require the trustee to follow the adviser's direction, the trustee is liable only for willful misconduct and has no duty to monitor the adviser, advise the adviser or warn a beneficiary (§ 14.5-808(b), (c)).

A trustee may delegate duties and powers a prudent trustee of comparable skills could properly delegate, exercising reasonable care in selecting the agent, setting the scope and terms of the delegation and periodically reviewing the agent's actions; an agent who accepts the delegation submits to Maryland's courts (Est. & Trusts § 14.5-807).

Third parties, and the certification of trust

A person who deals with a trustee without actual knowledge, or reasonable cause to inquire, that the trustee is improperly exercising a power need not inquire, is protected as if the power were properly exercised, and need not see to the application of assets paid to the trustee (Est. & Trusts § 14.5-909). Instead of the instrument, the trustee may give a person other than a beneficiary a certification of trust with the eight facts the statute lists, signed by a trustee (Est. & Trusts § 14.5-910); a person who relies on it reasonably and without knowledge of an error is not liable (§ 14.5-910(f)).

Personal liability

A trustee is not personally liable on a contract properly entered into in the trustee's fiduciary capacity if the contract disclosed that capacity, and a claim on such a contract, on the ownership or control of trust property, or on a tort committed in the administration may be asserted against the trustee in the fiduciary capacity, whether or not the trustee is personally liable (Est. & Trusts § 14.5-908). Trust property is not subject to the trustee's personal obligations, even if the trustee becomes insolvent (Est. & Trusts § 14.5-509). Absent a breach, a trustee is not liable for a loss or for not having made a profit (Est. & Trusts § 14.5-903).

When a licensed Maryland attorney is the right next call

Whether a power reaches a proposed transaction, whether a conflict is presumed, whether an adviser's direction must be followed and whether a delegation discharges a duty are questions a licensed Maryland attorney of your choosing answers. TrusteeClear records the decision, the reason and the document, and decides none of them.