## Facts

- A will created a testamentary trust divided into four equal shares, including one share held for the life of the decedent’s sister, with a remainder to another beneficiary or, if deceased, to that beneficiary’s descendants.
- After the decedent’s death, the estate was probated and the trust was funded with approximately $450,451.
- The life beneficiary received income and discretionary principal distributions; her death triggered termination and distribution of the remainder to four descendants in equal shares.
- The successor corporate trustee sent the beneficiaries an accounting and a proposed release/indemnity agreement stating it would be “in a position” to disburse cash upon receiving executed releases from all beneficiaries.
- The release broadly discharged and indemnified the trustee from claims and costs arising from trust administration, including actions taken or not taken.
- One beneficiary (through counsel) objected that conditioning distribution on a broad release was unlawful; the trustee responded that releases were not mandatory because it could seek judicial termination and protection.
- Beneficiaries also disputed the trustee’s calculation of Maryland inheritance tax and trustee commission, arguing that accrued income should be exempt as “income on probate assets” under Md. Code, Tax–Gen. § 7-203(j).
- The circuit court granted summary judgment for the trustee; the intermediate appellate court affirmed; the state’s highest court granted review.

## Issues

1. Whether a trustee breaches the fiduciary duty of loyalty by requesting beneficiaries to sign a broad release and indemnity agreement in connection with nonjudicial termination and distribution of a trust.
2. Whether income accrued on assets held in a testamentary trust is exempt from Maryland inheritance tax as “income on probate assets” under Md. Code, Tax–Gen. § 7-203(j), and whether the trustee’s related commission calculation was proper.

## Decision

- Affirmed summary judgment for the trustee.
- A trustee does not violate the duty of loyalty merely by requesting beneficiary execution of a broad release/indemnity agreement in connection with trust termination and distribution.
- Assets contributed to a testamentary trust after estate administration are not “probate assets” for § 7-203(j); income and appreciation accruing in the trust are not exempt and may be included in the inheritance tax base when the remainder becomes payable.
- Because the tax base was properly calculated, the trustee’s commission calculation tied to that valuation was also upheld.

## Legal Principles

- A trustee’s request for beneficiary consent to a course of action, including a release/indemnity arrangement that could otherwise be addressed through court supervision, is not itself a breach of the duty of loyalty.
- A release request is evaluated in context, including whether beneficiaries remain free to refuse and obtain judicial oversight and whether the trustee misrepresented facts or concealed material information.
- For Maryland inheritance tax purposes, property distributed from an estate to fund a testamentary trust ceases to be “probate assets” within Tax–General § 7-203(j).
- Income and appreciation accruing on testamentary trust property after estate administration are not exempt as “income on probate assets” and may be taxed based on the value when the tax becomes payable on the subsequent interest.

## Conclusion

The court held that a trustee may seek broad releases to complete a nonjudicial trust termination without breaching loyalty when beneficiaries can refuse and obtain court supervision, and it ruled that income accruing in a testamentary trust after estate administration is not exempt from Maryland inheritance tax as “income on probate assets,” validating the trustee’s tax and commission calculations.


Hastings v. PNC Bank, N.A., 429 Md. 5, 54 A.3d 714 (Md. 2012)