9.1 In General
A discretionary trust, in contrast to a support trust, creates no enforceable distribution rights in the beneficiary: “[I]f, by direction of the settlor, all or part of the trust assets can be totally withheld from the beneficiary by the trustees then, to the extent it can be so retained, a discretionary trust would be created.” First Nat’l Bank of Maryland v. Dept. Health and Mental Hygiene, 284 Md. 720, 725, 399 A.2d 891, 894 (1979). The First National case involved potentially ambiguous language: “My Trustees … shall pay from time to time the net income and so much of the principal as they, in their absolute and uncontrolled discretion, may determine, to my daughter, Annesley Bond Baugh, or, in their absolute and uncontrolled discretion, may apply the same for her maintenance, comfort and support.” The Trustee’s position was that it was to pay the net income for the daughter’s support but that it had sole discretion over any payment from principal. The Court agreed. It distinguished the language of the trust under review from the “typical” support trust language: “For example, ‘the trustees shall pay to the beneficiary of this trust so much of the income or principal as they deem necessary for his health, comfort, and support,’ is a fairly typical clause that clearly shows the testator’s intent to create a support trust.”
As with all interpretation cases, the testator’s (or settlor’s) intent is to be gleaned from the four corners of the document. Johnson v. Hall, 283 Md. 644, 649, 392 A.2d 1103, 1106 (1978). An issue is created when wholly discretionary language is amplified by what may appear to be a distribution standard. Often, the distinction between a “support trust” and a “discretionary trust” is not a bright line. Ultimately, the Court determines whether the settlor intended a support trust or a discretionary trust: “Sitting in Loretta’s (the testatrix’s) armchair, her testamentary intent becomes clear.” Bregel v. Julier, 253 Md. 103, 251 A.2d 891 (1969). “There has been much litigation on the issue of whether or not a trust is a support trust. If the trust is discretionary with a support standard, some cases have held that the beneficiary cannot compel a distribution. In these cases, the trust property is not an available resource and the beneficiary is not disqualified from eligibility of means-tested governmental benefits. Other cases have held that the beneficiary can compel a distribution and that the trust property is therefore an available resource. The question becomes one of settlor intent…” Davis and Kent, The Impact of the Uniform Trust Code on Special Needs Trusts, 1 NAELA J. 235, 247-8 (2005).