HB1345 amends the Maryland Trust Act to address so-called in terrorem clauses in trusts, which are provisions designed to discourage beneficiaries or other interested persons from challenging a trust by threatening to penalize them if they do so. Under the bill, such a clause is void when probable cause exists for bringing proceedings, meaning a trust cannot enforce a penalty against a person who has a legitimate basis to contest the trust or related estate proceedings.
The bill is narrowly focused on trust and estate litigation. It adds a new section to the Estates and Trusts Article stating that a penalty clause in a trust is unenforceable in the specified circumstances, and it applies only prospectively to causes of action arising on or after the effective date. The act takes effect July 1, 2026, and does not alter prior disputes or existing claims that arose before that date.
Impact
The bill creates a new statutory rule in the Maryland Trust Act that limits the enforceability of no-contest or in terrorem clauses in trusts when probable cause exists for a challenge. This affects trust drafting, estate administration, and probate litigation by protecting interested persons from contractual-style penalties for bringing good-faith proceedings. It primarily impacts trustees, beneficiaries, heirs, and estate practitioners, while leaving preexisting causes of action unchanged because the law applies prospectively only.
Sentiment
The available legislative history suggests the bill was broadly supported and noncontroversial. It passed the House 127-0 and the Senate 46-0, and the committee report was favorable. The unanimous votes indicate strong agreement that the measure is a targeted clarification or reform within trust law rather than a contested policy change.
Contention
There is little evidence of substantive opposition in the available record. The main policy issue inherent in the bill is the balance between honoring a settlor’s intent to deter litigation and preserving access to the courts for parties with probable cause to challenge a trust. The bill resolves that tension in favor of allowing meritorious challenges, but no recorded committee testimony or floor debate in the provided materials shows organized opposition or a major dispute over the scope of the probable-cause standard.