## Facts

- Stanton W. Putnam created an irrevocable charitable remainder unitrust in 1989 holding non-income-producing real estate worth under $400,000.
- The instrument required annual distributions equal to 10% of the trust’s annually valued assets, paid first from income and, if insufficient, from principal, with quarterly payments.
- Putnam was the initial noncharitable beneficiary for life; a successor noncharitable beneficiary could receive distributions for life if he survived Putnam, but not beyond twenty years after Putnam’s death.
- After the noncharitable term, remaining assets were to pass equally to named charitable remainder beneficiaries.
- Putnam expected to receive no distributions and did not review the trust terms when executing the instrument; the drafting attorney later died.
- Because the trust produced no income, the 10% payout from principal threatened rapid depletion of the corpus, undermining the charitable remainder and the tax results Putnam intended.
- Putnam sued in equity to reform the trust to reflect his actual intent, including preserving the charitable remainder and intended tax objectives; all beneficiaries and trustees named as defendants assented.
- The case reached the Supreme Judicial Court on reservation and report from the Superior Court on the facts stated in the complaint; the Internal Revenue Service was not a party.

## Issues

1. Whether a Massachusetts court may reform an irrevocable charitable remainder unitrust to correct a mistake so the instrument reflects the settlor’s charitable and tax objectives, even if the text is facially unambiguous and all beneficiaries consent.
2. Whether the absence of the IRS as a party limits a state court’s ability to order reformation intended to support favorable federal tax treatment.

## Decision

- The Supreme Judicial Court approved reformation of the unitrust to conform the instrument to Putnam’s actual intent.
- The court held that Massachusetts equity permits reformation not only to resolve ambiguity but also to correct mistakes (including tax-related drafting errors) that cause the written terms to misstate the settlor’s intent.
- The court declined to state whether the IRS would be bound by the reformation for federal tax purposes, limiting its ruling to state trust law.

## Legal Principles

- A trust may be reformed in equity when, due to mistake or scrivener’s error, the written terms fail to express the settlor’s actual intent, even if the language is not ambiguous.
- The settlor’s intended tax objectives may be part of the intent protected through reformation when adequately proven.
- Reformation requires sufficient evidence of both the settlor’s intent and the mistake in expression; economic structure and surrounding circumstances may support an inference of error.
- Broad beneficiary consent supports equitable reformation where the change aligns the instrument with the agreed intended arrangement and does not impose an unconsented redistribution among adverse parties.
- A state court’s determination of trust terms under state law does not control federal tax treatment when the taxing authority is not a party.

## Conclusion

The court permitted equitable reformation of an irrevocable charitable remainder unitrust to correct a drafting mistake that conflicted with the settlor’s charitable and tax objectives, while reserving any determination of federal tax consequences to federal authorities.


Putnam v. Putnam, 425 Mass. 770, 682 N.E.2d 1351 (Mass. 1997)