As discussed in the previous posting, REFORMING a Last Will and Testament is much more difficult than CHANGING your Last Will and Testament. Reforming a Last Will and Testament can only occur after death and involves a proceeding before the Surrogate’s Court.
Reformation involves removing or adding language to a Last Will and Testament or a Trust created under a Last Will and Testament (a Testamentary Trust), due to a mistake, oversight, or error, to better match the Last Will or the Testamentary Trust to the testator’s intentions. However, as the courts repeatedly state, they are generally loathe to reform testamentary instruments and, as a rule, will not, unless reformation effectuates the testator’s intent. i When construing a will, the testator’s intent is to be gleaned from a sympathetic reading of the instrument in its entirety and not from a single word or phrase. ii It is of paramount importance that the testator’s actual purpose be determined and effectuated to the extent it comports with the law and public policy. iii When the testator gives clear directions courts are to carry out the directions, not add to, or take from them. iv
Courts will rarely reform wills or trusts to correct mistakes unless the reformation effectuates the settlor’s or testator’s intent to take maximum advantage of the available tax exemptions and deductions. The courts have generally been sympathetic where the reformation is requested to cure various tax defects. In particular, courts have allowed reformations to allow a charitable remainder trust to qualify for the charitable deduction; to maximize the generation-skipping transfer tax exemption; to maximize the credit shelter trust; to cure the trust so it will qualify as a subchapter S shareholder; and to limit a power in a trust instrument in order to avoid inclusion for estate tax purposes.
Example:Neil of Nesconset, NY died on October 10, 2012 leaving a will dated February 20, 2008. Neil was survived by his wife, Sharon, and his two children, Bradley and Jennifer. The will created a trust, which provides for Sharon, during her lifetime, and when she dies provides for the two kids Bradley and Jennifer, or their respective children (Neil’s grandchildren), should they die before Sharon.
Sharon, Bradley and Jennifer asserted that there was a scrivener’s error in the Will – it included language that should be deleted and if the will was not reformed there may be a question concerning the number of beneficiaries of the trust jeopardizing the trust’s ability to qualify as a qualified subchapter S trust (QSST) and a qualified terminable interest property (QTIP) trust under the applicable provisions of the Internal Revenue Code. Their assertion was supported by the affidavit of the attorney-draftsman who stated that the language “was inadvertently included in the paragraph and is a scrivener’s error.”
The Surrogate’s Court decided in favor of reformation. The Court stated that Neil intended to minimize or avoid estate taxation by the creation of the trust and the request to delete the superfluous language from the trust was reasonable given that the inclusion of the language was illogical. The court was satisfied that the reformation was consistent with the testator’s intent. v
To be continued….
Aaron E. Futterman, CPA, Esq. is a partner in the law firm of Futterman & Lanza, LLP with offices in Smithtown, NY and clients throughout Suffolk, Nassau, Queens, Brooklyn, Bronx, Richmond, New York, Westchester and Rockland Counties. He concentrates his practice to Elder Law, Medicaid Planning, Medicaid Applications, Estate Planning, Probate, Estate Taxes, and Estate Administration.