Two provisions of the Maryland Trust Act address the creation of the trust. Under Maryland Trust Act § 14.5-401, a trust may be created in one of three ways: (1) by transfer of property to another person as trustee or during the lifetime of the settlor or by will, (2) by a declaration of trust by the owner of the property and that person holds identifiable property as trustee, or (3) by exercise of a power of appointment in favor of a trustee. Maryland Trust Act § 14.5-401(“Pro ration of trust.”). The operative word in this provision is may. The comments to the Uniform Trust Code make it clear that this is a non-exclusive list of how a trust may be created.
Maryland Trust Act § 14.5-402 sets out the requirements for creation of the trust and states:
MD Code, Estates and Trusts, § 14.5-402
14.5-402, Intent and capacity of settlor to create a trust
In general
(a) A trust is created only if:
(1) The settlor has capacity to create a trust;
(2) The settlor indicates an intention to create the trust;
(3) The trust has a definite beneficiary or is:
(i) A charitable trust;
(ii) A trust for the care of an animal, as provided in § 14.5-407 of this subtitle; or
(iii) A trust for a noncharitable purpose, as provided in § 14.5-408 of this subtitle; and
(4) The trustee has duties to perform.
Definite beneficiaries
(b) A beneficiary is definite if the beneficiary can be ascertained now or in the future, subject to any applicable rule against perpetuities.
Selection of beneficiary from indefinite class
(c)(1) A power in a trustee or in another person under the terms of the trust to select a beneficiary from an indefinite class is valid.
(2) If the power described in paragraph (1) of this subsection is not exercised within a reasonable time, the power fails and the property subject to the power passes to the persons that would have taken the property had the power not been conferred.
Maryland Trust Act § 14.5-402 dropped a fifth requirement that was included in the Uniform Trust Code: “(5) the same person is not the sole trustee and sole beneficiary.” This dropped provision addressed the doctrine of merger. According to the comment: “The doctrine of merger has been inappropriately applied by the courts in some jurisdictions to invalidate self-declarations of trust in which the settlors like beneficiary but other persons are designated as beneficiaries in the remainder. The doctrine of merger is properly applicable only if all beneficial interest, both life interest and remainders, are best in the same person, whether in the settlor or someone else. An example of a trust to which the doctrine of merger would apply is a trust of which the settlor is the sole trustee, sole beneficiary for life, and with the remainder payable to the settlor’s probate estate.” Uniform Trust Code cmt. § 402.
The Maryland common law always held that a merger would require a total identity between beneficial and equitable titles:
“It is true that, if the settlor reserves the right to use the property, and does use it in accordance with the terms of the trust, as evidenced from the intention of the parties, there may be nothing remaining at the death of the settlor; but the question of whether or not a trust has been created cannot be made to depend upon whether there may or may not be property existing at the time the beneficiaries are entitled to the enjoyment thereof. In the case Milholland v. Whalen, supra., this Court held that there was a valid subsisting trust created from the time Miss O’Neill made the deposit in the bank in the form in which it was made, and that without regard to the fact that she retained possession of the passbook by which she might have withdrawn all the funds, which were subject of the trust, before her death. It will be seen in that case that the settlor retained at least as complete control and dominion over the subject of the trust as is contained in the instrument of writing in this case made by Johann Sieling and Anna Sieling; the effect in that case being that if there was any money remaining in the bank which was the subject of trust at the death of settlor, it should go, by virtue of the declaration of trust, to her sister. Sieling at 548, 549.”
Accordingly, Maryland Trust Code § 14.5-402 did not require that clarification.
