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Trust Reformation

Written by on Jun 23, 2010| Posted in: Trust Litigation

Breathing Life Into An Otherwise Unenforceable Trust Instrument

The following is based on real events, only the names have been changed to protect the guilty. 

Jane Settlor created her revocable trust in 2005, naming herself as the initial trustee and sole income beneficiary during her lifetime, and upon her death, the remainder of the trust estate is to be divided amongst numerous individuals (some family, some not), charities and a charitable foundation that she created.  The drafting attorney, John Lawyer, is also the nominated successor trustee and the CEO of Mrs. Smith’s charitable foundation.

A couple years after executing her trust, Jane Settlor pulled out her estate planning documents to re-review her estate plan.  Upon reviewing her revocable trust, and to her surprise, she noticed that many of the residuary beneficiaries of her trust were people that she hardly knew at all, and should not have been included as beneficiaries of her trust.  Mrs. Settlor immediately began crossing out names and devises, and interlineated (in her own handwriting) new names and devises.  Next to each interlineated change, Mrs. Settlor handwrote her initials and the date.  She then made some handwritten notes on the front page of the trust instrument, which read as follows:  “Mr. Lawyer, I read my trust today, and I couldn’t believe what I saw.  There were people named who I hardly even know.  I was so sick at the time I signed the trust, that I didn’t even know what was being presented to me for my signature!!!” 

Mrs. Settlor then phoned Mr. Lawyer and instructed him to draft a trust amendment incorporating the changes she interlineated on her copy of the trust instrument.  However, her health began to rapidly decline and Mrs. Settlor passed away before getting an opportunity to execute her new trust amendment. 

One of Mrs. Settlor’s family members sued Mr. Lawyer as successor trustee, seeking to reform the trust based upon a unilateral drafting mistake.  The lawsuit alleged that Mrs. Settlor’s true testamentary intent is evidenced by her handwritten interlineations and notes contained on the trust instrument, and that the interlineations and notes are direct evidence of a unilateral drafting mistake.  Mr. Lawyer responded with a Motion to Dismiss, arguing that pursuant to Fla. Stat. §736.0403, the provisions of a revocable trust that dispose of trust property on or after the death of the settlor, must be executed with the same formalities as a will in this State. 

It is well-settled law in Florida that the testamentary aspects of a revocable trust must be executed with the same formalities as a last will and testament in this State.  See Fla. Stat. §736.0403 and §732.502.  It is equally settled in Florida that un-witnessed interlineations in an original will are to be ignored, and the will probated as though the interlineations were not present.  See Lowy v. Roberts, 453 So. 2d 886, Fla. 3d DCA 1984); and In re Estate of Shifflet, 170 So. 2d 96 (Fla. 3d DCA 1964).  However, the question naturally begs itself:  Is there some other mechanism by which to breathe new life into the interlineated changes that are otherwise unenforceable?

Section 736.0415 Florida Statutes allows courts to “reform the terms of a trust, even if unambiguous, to conform the terms to the settlor’s intent if it is proved by clear and convincing evidence that both the accomplishment of the settlor’s intent and the terms of the trust were affected by a mistake of fact or law, whether in expression or inducement.”  The Statute also permits the courts to consider relevant extrinsic evidence “even though the evidence contradicts an apparent plain meaning of the trust instrument.”  See also, Robinson v. Robinson, 720 So. 2d 540 (Fla. 4th DCA 1998), rev.den. 729 So. 2d 391 (Fla. 1999); and Estate of Huls, 732 So. 2d 1206, 1207 (Fla. 2d DCA 1999).  Hence, based upon the current status of Florida law, it appears that it is possible to breathe life into Mrs. Settlor’s handwritten interlineated changes, not by declaring the interlineations or the unexecuted trust amendment as valid, but by utilizing both together as evidence that the original trust instrument contained a unilateral drafting mistake which prevented Mrs. Settlor’s true testamentary intent from being expressed.  Stated simply, the original trust instrument can arguably be reformed to comport with Mrs. Settlor’s true testamentary intent evidenced by her own handwritten changes and notes.  

Estate litigation and trust disputes come in all shapes and sizes.  A recurring theme in will and trust contests is what the deceased person intended.  Most times the intention is argued through witness testimony.  It’s rare to have the words of the deceased person for the estate lawyers to use in a case, but when you do it sure is helpful.

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