When a personal representative or a trustee makes the final distribution to the beneficiaries, they want to be done. They do not want those beneficiaries raising questions later about the management of the estate or trust. A common practice is for personal representatives and trustees to require a release before making the final distribution. Recently the Court of Appeals used two cases to examine whether this practice was appropriate.
In the most recent case, PNC, the corporate trustee, required the beneficiaries of the trust to sign a release holding it free from liability prior to the beneficiaries receiving their final distribution of trust funds. The beneficiaries objected, claiming that they could not be forced to sign a release because the release was solely in the self-interest of the trustee and did not benefit the beneficiaries in any way. The Maryland Court of Appeals held that the terms of the release were not so broad and one-sided as to impermissibly place the bank’s interest before those of the beneficiaries. Hastings v. PNC Bank, N.A., 2012 WL 4464890 (Sept. 27, 2012).
This case followed by several months a case that we won in the Court of Appeals upholding the right of a personal representative to demand a release before distributing estate assets to the heirs. That case, however, was different in that there is a specific statute permitting such a release in the case of the administration of an estate. Because of that statute, we avoided the “sole benefit rule” governing trustees as fiduciaries. Allen v. Ritter, 424 Md. 216, 35 A.3d 443 (2011). During oral argument in the Allen case, the Court expressed an interest in whether a personal representative could demand a release in the absence of the statute. The Hastings case answers that question in the affirmative.
