Can a trust be reformed to add beneficiaries where the trust as originally drafted fails to include any beneficiaries? According to a recent Florida trust case, yes, the trust can be reformed to add a residual beneficiary clause.
In Megiel-Rollo v Megiel, 2nd DCA 2015), the decedent has prepared a will naming her three children as equal beneficiaries. Some years later, the decedent prepared a revocable trust. She also deeded her real property to the trust. The trust, however, failed to name any beneficiaries of the trust upon the death of the decedent. The trust stated that, upon the death of the settlor, the corpus should pass according to Schedule of Beneficial Interests, which was supposed to be prepared and attached to the trust.
A dispute arose among the three children of the decedent, with two claiming that the decedent intended to name the two of them as the sole heirs, with the third child contending that the trust was void and/or could not be reformed. Under the third child’s contention, the trust would be split into three equal shares for the children.
The drafting attorney filed an affidavit admitting that he had made a mistake and should have prepared the Schedule of Beneficial Interest naming only two the decedent’s children as the deathtime beneficiaries of the trust. Based on this affidavit and other information, the two children argued for trust reformation.
The Florida Trust Code, as of 2007, contains a that allows a trust to be reformed to correct a mistake, Section 736.0415:
The third child argued that the trust itself failed under the “merger” doctrine, which requires that a trust have some separation of interests in the corpus. The Court rejected this argument (internal citation omitted:
In allowing for the possibility of reformation to limit the trust to the two children, the Court explained as follows:
It is beyond argument that the statutory reference to “a mistake of fact or law” is not limited by any qualifiers. The broad scope of the language used in the statute is inconsistent with the notion that reformation is available to correct some mistakes in a trust, i.e., “simple scrivener’s error,” but not others. “[W]hen the language of the statute is clear and unambiguous and conveys a clear and definite meaning, . . . the statute must be given its plain and obvious meaning.
Giving the statutory language of section 736.0415 its plain and ordinary meaning compels the conclusion that the remedy of reformation of the Trust is available to correct the alleged drafting error resulting from the omission to prepare and incorporate into the Trust the contemplated Schedule of Beneficial Interests. The absence of any language of limitation in the statute–other than the requirement of proof by the heightened standard of clear and convincing evidence–is additional evidence that the legislature did not intend the construction of the statute for which Sharon contends. For this court to read such a limitation into the statute would amount to judicial legislation of the sort in which we will not indulge.