By Fred Franke
Franke, Sessions & Beckett LLC
Effective October 1, 2015, the Maryland Trust Act provides statutory limitations on the presentation of claims against the decedent’s revocable trust.
Current statutory law does not address this issue. Many assumed that the general claims statute of Estates and Trusts §8 – 103 applied. Others believed that the general, but longer, three-year statute of limitations applied. The new Act clarifies the limitation periods.
Under the new statute, if either a regular or modified administration is commenced on behalf of a decedent, then the usual six-month limitation will apply. Both regular and modified administration require notice to be published. It is important to remember, however, that the six month period runs from the date of death not the date of the appointment of personal representative or of publication of the notice. This was the result of a U.S. Supreme Court case that determined that a short statute of limitations just for decedents’ estates violated a creditor’s due process rights if there was state involvement –such as appointment of personal representative by state agency. After that holding, many states, including Maryland, revised the triggering event to be the decedent’s death not any action by state agency. Tulsa Professional Collections Services, Inc. v. Pope, 485 U.S. 478 (1988).
Interestingly the statute provides that if a small estate proceeding is instituted (which generally does not afford creditors much notice) or if no estate has been opened at all, then a trustee may publish a notice that will then begin a six-month claim limitation from the date of the first notice. The form of the notice is set out in the statute.
The approach of the Maryland statute sidesteps the Supreme Court’s problem in the Tulsa Arizona case because nothing is mandated. Its only “weakness” is that the statute does not say what the limitation period would be if the trustee does not elect publication. Instead, the statute creates a safe harbor for when the short statutory limitations for claims will be assured.
This modification of the Maryland Trust Act is a “bare-bones” approach compared to the treatment under the uniform probate code. The UPC also sets up limitations that parallel that for probate estates but it also sets out an ordering scheme as to which assets are first used in satisfying claims. UPC §3-801 et seq. Maryland opted for a less ambitious statute. Nevertheless this is a good step which gives a trustee some assurance as to the limitation for claims.