Courts Can Alter Unambiguous Trust Language When Necessary To Effectuate Settlor’s Probable Intent

A New Jersey appellate court ruled that a court can alter the plain and unambiguous language of a trust when extrinsic evidence suggests that the trust language is not what the settlor intended. In the Matter of the Trust of Violet Nelson, Deceased, Docket No. A-4004-15T1 (App. Div. March 28, 2018).

Violet and Joseph Nelson had three children: Jacob (known as “Jack”), Jacoba and Robert. Jack had three children, Jacoba had two children, and Robert had one child.

Violet and Joseph practiced Orthodox Judaism, which forbids members of the Jewish faith from marrying non-Jews. In 1970, Jacoba married a man who was not Jewish. The marriage caused a rupture in the relationship between Jacoba and her parents. Between 1986 and Violet’s death in 2006, there was no contact between Jacoba and Violet, or between Jacoba’s children and Violet.

Violet’s Last Will and Testament, prepared in 1988, as well as a codicil, prepared in 2001, omitted Jacoba and her children as beneficiaries.

Violet also executed a trust, in 2005. The trust distribution provision provided that, upon Joseph’s death, the “then principal and all accrued or undistributed net income of the trust shall be distributed in equal shares per capita and not per stirpes to Settlor’s grandchildren who survived Settlor …” Contrary to Violet’s will, the trust did not expressly omit Jacoba’s children as trust beneficiaries.

There was substantial extrinsic evidence, or evidence outside the trust itself, suggesting that Violet meant to omit Jacoba’s children as trust beneficiaries. The scrivener of the trust testified that he told Violet prior to the execution of the trust document that Jacoba’s children were omitted as trust beneficiaries, and that Violet understood and fully agreed with that disposition of trust assets. Violet was not provided with a copy of the trust prior to execution. Also, Violet did not read the document before signing it, and there was no evidence that the document was read to her.

In 2015, Jack brought a lawsuit as trustee of Violet’s trust, seeking a declaration that Jacoba’s children were not beneficiaries of the trust. At the conclusion of discovery, Jack filed a motion for summary judgment, while one of Jacoba’s children filed a cross-motion seeking confirmation that Jacoba’s children were trust beneficiaries.

The trial court granted Jack’s motion, ruling that a court cannot alter the language of a trust that is plain and unambiguous even when extrinsic evidence strongly suggests that the trust language is not what the settlor intended. As a result, the court ruled that Jacoba’s children were trust beneficiaries.

One of Jacoba’s children filed a motion for reconsideration based upon New Jersey’s then newly-enacted Uniform Trust Act. The motion was denied by the trial court based upon the finding that the new law was not effective until months after passage, thereby leaving the old law operative under which Jacoba’s children were properly found to be trust beneficiaries.

(A blog post on the case and the opinion of the trial court can be found here – No Trust Reformation Absent Ambiguity in Language of the Trust)

Jacoba’s children filed an appeal. The appellate court reversed and remanded the trial court’s decision, holding that “a court may resort to extrinsic evidence to unveil ambiguity that does not appear on the document’s face.” The appellate court held as follows:

[I]t does not matter whether an ambiguity was “latent” — that is, discernable only by resort to extrinsic evidence — or “patent” — identifiable on the face of the document. ‘[I]n deciding whether there is an ambiguity, a court should always admit extrinsic evidence including direct statements of intent since experience teaches that language is so poor an instrument for communication or expression . . . .’ Extrinsic evidence shall be considered twice: to determine if there is ambiguity, and, if there is, to resolve it. If a factual issue remains, the court must conduct an evidentiary hearing.

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Jack’s principal argument depends on interpretation of the trust’s language. He contends the simple word “grandchildren” had a meaning personal to Violet, which excluded Jacoba’s sons. Alternatively, he contends that the scrivener made a mistake, by failing to identify the grandchildren Violet intended to benefit; and the trust should be reformed to conform to that intent. In assessing both arguments, the trial court was obliged to consider the extrinsic evidence Jack presented.

Finally, the appellate court held that determining a settlor’s probable intent was necessary to avoid unintended takers under the trust.

The case is annexed here – In the Matter of the Trust of Violet Nelson, Deceased, Docket No. A-4004-15T1 (App. Div. March 28, 2018).

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