The Supreme Judicial Court of Massachusetts allowed a reformation of a trust in O’Connell v. Houser to conform with the settlor’s intent and tax objectives. Tax objectives are a prime reason for creating a trust. Two trusts were created in the George Houser Trust, one for George’s wife Mary and another for power of appointment over the marital trust. The trust contained a termination provision which established the measuring lives as “Donor’s issue by blood.” After the execution of the GST tax, Mary created the Mary Houser Trust. This trust had a termination provision that established the measuring lives as “all of the Donor’s issue.”  The couple’s planning objectives were thwarted by omitting “by blood” from the termination provision. The court therefore allowed the reformation of the trust to include the measuring lives of Mary’s blood issue.

See Luke Lantta, “Unintended Tax Results Permitted Trust Reformation,” Bryan Cave Fiduciary Litigation (Jan. 7, 2015).

Posted by Aryane Garansi, Associate Editor, Wealth Strategies Journal