Probate, trust, guardianship and inheritance litigation
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Can the Settlor Amend an Irrevocable Trust 25 Years Later?

Yes, pursuant to the Uniform Trust Code and Mississippi law, an irrevocable trust can be amended 25 years after its creation by the settlor, to correct a scrivener’s error.  The Mississippi Supreme Court, in In the Matter of the Elton G. Beebe Sr. Irrevocable Family Mortgage Trust, held that the settlor, by clear and convincing evidence, met the standard for correcting a mistake in an irrevocable trust.

The $80 million Trust named sixteen lifetime beneficiaries.  The distribution plan of the Trust was simple:

The Trust provides that it is a discretionary trust and that the trustees, in their sole discretion, are authorized to distribute the net income and principal of the Trust to the named beneficiaries “for their support, welfare, and maintenance ….” The Trust further provides that “[a]ny income not distributed shall be accumulated.”…

Who received the Trust upon its termination was the issue in dispute.  The termination provision was:

Unless all of the principal of this Trust is previously distributed, this Trust shall terminate upon the death of the last of the named beneficiaries to die; at such time, any remaining principal and accumulated income of the Trust shall be distributed in equal shares to the descendants of the named beneficiaries, or their issue, per stirpes.

Apparently, Mr. Beebe did not want the Trust distributed to the descendants of the named beneficiaries, but instead to his own descendants:

The petition stated that Elton had “recently undertaken a review of his assets, estate, businesses, and existing trust(s) based on his age and desire to become less involved with the day to day operations of his various business ventures, which are vast.” Upon review, Elton discovered that Article III, Section 3.2, of the Trust did not accurately reflect his intent. Instead, the petition stated that Elton had intended that, upon the death of the last of the named beneficiaries, the Trust’s assets would be distributed to Elton’s lineal descendants, per stirpes, as opposed to the lineal descendants of all sixteen initial beneficiaries. FMI requested that the trial court modify Article III, Section 3.2, to reflect Elton’s true intent.

Not reading an estate planning document is an excellent way to argue for its modification at a later date:

At trial, Elton testified that, in 1992, Earl had drafted the Trust and had brought it to Elton to read. Elton, however, further testified that he did not read it. When asked why Elton did not read the document, he stated:  I just-the way I did business, and still do to this day, is the attorney took care of whatever I asked them to do, and also my CPA. You know, once I told them what I would like to accomplish, then they took care of it and I never went behind and-which I should have, I guess. I never went behind and checked everything.

Elton testified that he had not spoken to Earl about what would happen when the Trust terminated. Elton also stated that between 1992 and 2019 or 2020, he had not read the termination clause in the Trust.

Elton testified that he would not have continued to put assets in the Trust had he known about the termination clause. He stated that he would not have continued to grow the value of the trust “to take care of people that I don’t even know and that maybe some of them not even born yet. It just doesn’t make sense.” Elton testified:

I think that I’m smart enough, if I had read that, I would have said, Whoa, and I would have continued to support the people that were the beneficiaries, but I wouldn’t be-I wouldn’t be trying to take care of their issue. And I even told my three kids-of course, I don’t know that I’ve lived up to this, but I told them, I’m going to help you but you’re going to help your own kids. I’m not taking that responsibility.  But here is this document I’m taking a lot more responsibility. So I just-I know that I would not have done that. I mean, the document says what it says. It was my fault for not studying the document. The gentleman that brought it to my attention was explaining other things besides this of what everything-how everything was going to fit and flow in my estate planning.

Does the Uniform Trust Code Allow an Irrevocable Trust to be Reformed?

Yes, the Uniform Trust Code allows an irrevocable trust to be reformed.  Mississippi adopted the Uniform Trust Code in 2014.  The relevant portion of Mississippi law was as follows:

The Legislature enacted Mississippi’s Uniform Trust Code (UTC) in 2014. Miss. Code Ann. § 91-8-101 to -1206 (Rev. 2021). Mississippi Code Section 91-8-1106 states that it “applies to all trusts created before, on, or after July 1, 2014” and “applies to all judicial proceedings concerning trusts commenced on or after July 1, 2014.” Miss. Code Ann. § 91-8-1106(a)(1), (2) (Rev. 2021). Therefore, the issue of reformation in this case falls under the UTC.

         Section 91-8-415 provides that

The court may reform the terms of a trust, even if unambiguous, to conform the terms to the settlor’s intention if it is proved by clear and convincing evidence what the settlor’s intention was and that the terms of the trust were affected by a mistake of fact or law, whether in expression or inducement.

The Court then explained how the reformation provision is to be applied:

Thus, in order to reform the terms of a trust, Section 91-8-415 requires proof by clear and convincing evidence: 1) of “what the settlor’s intention was” at the time the Trust was created, and 2) “that the terms of the trust were affected by a mistake of fact or law, whether in expression or inducement.” Id. The language of Section 91-8-415 derives from the Uniform Trust Code. Unif. Tr. Code § 415 (Unif. L. Comm’n 2000). The official comments to the Uniform Trust Code provide:

A mistake of expression occurs when the terms of the trust misstate the settlor’s intention, fail to include a term that was intended to be included, or include a term that was not intended to be included. A mistake in the inducement occurs when the terms of the trust accurately reflect what the settlor intended to be included or excluded but this intention was based on a mistake of fact or law. Mistakes of expression are frequently caused by scriveners’ errors while mistakes of inducement often trace to errors of the settlor.
Unif. Tr. Code § 415 cmt. (citation omitted). Thus, in this case, a mistake of expression is at issue.

In permitting the Trust to be reformed, the Court reasoned as follows:

Elton also pointed out that, because the youngest named beneficiary was fifty years old at the time the petition was filed, the termination provision contained in the Trust would likely lead to a vast number of beneficiaries. Hibernia corroborated Elton’s testimony. She spoke about Elton’s generosity but stated that his ultimate focus was on his family line. The Respondents presented no contrary testimony as to Elton’s intent at the time the Trust was created. We find that FMI submitted sufficient evidence showing that the termination provision in the Trust was a mistake of expression that did not evidence Elton’s intent at the time the Trust was created. Thus, the trial court did not abuse its discretion by reforming the Trust to conform to Elton’s original intent.

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