Ethics Hotline & Opinions

ETHICS DOCKET NO. 1988-39

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MARYLAND STATE BAR ASSOCIATION, INC.

COMMITTEE ON ETHICS

ETHICS DOCKET NO. 1988-39

Irrevocable Trust: Propriety of Creating Trust For Person Under a Disability


You represent the daughter of a person who has been adjudicated under disability by a Maryland Court. The daughter has been appointed guardian of the person and property of her mother. You have prepared a proposed irrevocable trust which would be funded by the disabled person's assets in the amount of $148,000. The terms of the proposed trust would provide that the assets could be used for the benefit of the disabled person, but need not be used for that individual's benefit. On the disabled person's death, the assets would pass to that person's issue per stirpes. Additionally, the assets of the proposed trust would be insulated from the claim of creditors. It is the intention of the guardian in proposing this transaction that by the trust arrangement the disabled may qualify for State of Maryland medical assistance payments. If the disabled person qualified for such medical assistance, the amount placed in trust would not be expended for nursing home care, but would rely on State benefits for that purpose.

The first question is whether the assets of the legally disabled person may be placed in trust by the guardian and used for purposes other than the benefit of the disabled individual. This issue is a question of law and our committee is not authorized to issue opinions on purely legal questions. Accordingly, you will have to determine the legality of the arrangement. If the arrangement is lawful, then no ethical violation presents.

The second question is whether or not the assets of the disabled may be placed in trust in hopes of qualifying for State funded medical assistance. Here again, this is a question of law which you will need to address. Again, if the arrangement is lawful, no ethical problem presents.


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