Subtitle 5 of the MTA differs substantially from UTC Article 5. Much of the common law of Maryland regarding creditors’ rights is well established and follows closely the statement of the law as found in the Restatement (Second) of Trusts.

Article 5 of the UTC is primarily modeled on the precepts of the Restatement (Third) of the Law of Trusts and does not recognize the distinctions recognized by Maryland common law limiting the rights of creditors to reach discretionary trusts, support trusts, and spendthrift trusts. In particular, First National Bank v. Department of Health and Mental Hygiene, 284 Md. 720, 399 A.2d 891 (1979), provides guidance on the creation and administration of discretionary and support trusts.

Under Maryland common law, it is well-settled that limited powers of appointment are not property and therefore are not subject to remedies for the benefit of the limited powerholder’s creditors. See, United State v. Baldwin, 283 Md. 586, 391 A.2d 844 (1978) and Mercantile Trust Co. v. Bergdorf & Goodman Co., 167 Md. 158, 173 A.2d 21 (1934). In order to explain and support the provisions of Subtitle 5 of the MTA, a number of definitions are included in MD §14.5-103 which are omitted from the UTC. Those definitions are “discretionary distribution provision,” “support provision,” “mandatory distribution provision,” “power of appointment,” “general power of appointment,” “power of withdrawal,” and “spendthrift provision.”

MD §§14.5-503 and §14.5-504 allow a settlor to retrain the transfer of a beneficiary’s interest regardless of whether the beneficiary has an interest in income, in principal or in both. Unless one of the exceptions applies, a creditor of the beneficiary is prohibited from attaching a protected interest and may only attempt to collect directly from the beneficiary after a distribution is made.

MD §14.5-504(e) provides that the use and occupancy of a residence and tangible personal property that are subject to a spendthrift provision may not be transferred by the beneficiary user and that subjecting such use and occupancy to the enforcement of creditor judgments is contrary to legitimate expectations of settlors for their intended beneficiaries.