Court Reformation Of A Trust In Order To Effectuate The Settlor’s Intent

(Below I have reproduced a portion of the legal argument section in a brief we recently filed to support an application asking the court to effectuate the intent of a decedent by reforming a trust created by the decedent into a special needs trust so that the decedent’s surviving adult disabled child could maintain her eligibility for Medicaid and other needs-based services provided by New Jersey’s Division on Developmental Disabilities. I hope that readers get a sense of the legal arguments that should be presented to a court in order to be successful in this type of application.)

A court of equity is empowered to reform a trust in order to accomplish the objectives of the settlor (i.e., the creator of the trust) , even where the terms of the trust are unambiguous. Bogert, The Law of Trusts and Trustees §§991, 994 at Ch. 47; see In re Crichfield Trust, 177 N.J. Super. 258, 261 (Ch. Div. 1980) (“A court of chancery may modify or amend an existing trust to prevent the impairment of the trust’s primary purpose.”).  A trust may be reformed by the Court in order to effectuate the trust settlor’s intent, where the trustee or other interested party is able to establish, by clear and convincing evidence, that a provision of a trust, and the settlor’s intent with respect to that provision, were affected by a mistake.  Restatement (Third) of Trusts, §62 (2003); Bogert, The Law of Trusts and Trustees §991 at Ch. 47; see Pivnick v. Beck, 326 N.J. Super. 474, 477 (App. Div. 1999), aff’d, 165 N.J. 670 (2000) (in which application for reformation of trust was denied for failure to demonstrate by clear and convincing evidence that the provisions of the trust were contrary to the settlor’s intent).

If, due to a mistake, the trust does not contain the terms that were intended by the settlor, the settlor or other interested party may maintain a suit in equity to have the instrument reformed so that it will contain the terms that … reflect the testator’s actual intent.

Bogert,, supra, §991. A court of equity may correct a mistake in a trust, whether that trust is inter vivos or testamentary. Id.

The reformation of testamentary trusts is governed by the law governing testamentary dispositions, Restatement (Third) of Trusts, §62 (2003), which directs that a Court “ascertain and give effect to the ‘probable intention of the testator.’” Fidelity Union Trust Co. v. Robert, 36 N.J. 561, 564 (1962) (further citations omitted). This function is carried out by “giv[ing] primary emphasis to [the testator’s] dominant plan and purpose as they appear from the entirety of his will when read and considered in the light of the surrounding facts and circumstances.” Fidelity Union Trust, supra, 36 N.J. at 564-65.

The primary goal of determining the testator’s intent “is not to be thwarted by unduly stressing ‘the literal meaning’ of [the decedent’s] words.” Id. at 565. Once that intent is established by a preponderance of the evidence, those wishes are to be carried out “even though they be imperfectly expressed.” Id. A fundamental principle of probable intent is that “it is reasonable to impute to the decedent a general intent that reflects ‘impulses … common to human nature.’” In re Estate of Branigan, 129 N.J. 324, 335 (1992) (quoting Fidelity Union, supra, 36 N.J. at 565).

New Jersey’s liberal judicial attitude makes clear the correct answer to the question central to a reformation action:

Will the court execute the clear intent of the testator not fully or clearly expressed in a will, or will it by a strict technical adherence to the form of words and their literal meaning suffer the intention of the testator to be defeated?

Id. at 566-67 (quoting Scarborough v. Scarborough, 134 N.J. Eq. 201 (Ch. Ct. 1943)).