Maryland follows the general rule that a trust may be terminated when all beneficiaries consent to the termination and when termination is not contrary to the settlor’s intention. Probasco v. Clark, 58 Md. App. 683, 474 A.2d 221 (1984). When a trust contains a spendthrift provision, however, one of the material purposes of the trust is the protection afforded a beneficiary by that clause. Consequently, a trust containing a spendthrift provision may not be modified by a Maryland court regardless of whether all beneficiaries consent:
“These cases and many others in Maryland have upheld the immunity of spendthrift trusts from attempted invasion by creditors of the beneficiaries. A necessary corollary of such a policy is that spendthrift trusts must be immune from attempts by the beneficiaries themselves to reach the corpus. As Dean Griswold has pointed out, to permit premature termination by the beneficiaries, either in whole or in pro tanto, would amount to an assignment of the corpus, the very thing that a restraint on alienation, such as we have in the case at bar, forbids. Griswold, “Spendthrift Trusts,” (2 Ed.) § 517, 517.1. If a beneficiary be forbidden to assign her interests in the trust, should she be allowed to accomplish the same result by termination? We think the answer is apparent. The purpose of the restraint on alienation such as the one in this trust is not only to protect the beneficiaries from the claims of creditors, but also to assure the maximum annual income.”
Kirkland v. Mercantile-Safe Deposit and Trust Co. of Baltimore, 218 Md. 17, 23, 145 A.2d 230 (1958).
The Kirkland case is instructive as to the type of circumstances under which a spendthrift clause could injure the very beneficiary who the trust was established to protect. In Kirkland, a mother established a trust to protect her three daughters. The trust directed for “all income” to go to the daughters without any distributions of corpus. Almost forty years after the mother’s death, one of the two remaining daughters suffered a stroke and “was left in such a condition that she was unable to care for herself, which involved expenses in excess of the income from the trust.” Id. at 21. As her sister’s guardian, the remaining daughter sought termination of the trust so that principal could be used for her sister. The court held that the trust could not be terminated. When a court is allowed to terminate a trust it may also order modification of that trust.
“The trust in the instant case clearly is not a spendthrift trust and may be terminated upon the agreement of the life beneficiary and the remaindermen, with the approval of the court. The settlor did not place a restraint on alienation of the beneficiaries’ interests, and thus, termination with the consent of the life beneficiary and the remaindermen would not undermine the settlor’s designs. Since the court may, when all beneficiaries consent, terminate the trust, it follows that the court may authorize the mere modification of the trust when all beneficiaries so consent.”
In Re Trust of Lane, 323 Md. 188, 193, 592 A.2d 492 (1991) (emphasis in original).
But who constitutes a person interested in the trust who may agree to its modification and/or termination? In Lane, the trust provided that two hundred dollars be paid monthly to a life beneficiary. At the death of the life beneficiary, the trust instructed that the corpus be paid “equally, share and share alike, among my grandchildren; Nancy Marie Brownwell, Lois Lane, and Patricia Land, or to the survivors of them if any be deceased.” Id. at 191. The three named grandchildren were alive when the court was asked to modify the trust, At issue was whether there were potential beneficiaries other than those three named grandchildren and the life beneficiary. Resolution hinged on the answer to the following hypothetical question: If all three grandchildren were dead at the time the life beneficiary died, would the proceeds go through the estates of the three grandchildren or go through the estate of the settler? The court found that the three named remaindermen had a vested remainder interest subject to a condition subsequent (namely, survival). Because the settlor’s estate did not retain a reversionary interest in the trust property, there were no unknown beneficiaries. Ultimately, all could join in the request to modify the trust because there were no unascertainable heirs.