## Facts

- Donald D. Walker created a revocable trust intended to minimize federal estate taxes through allocations among marital and nonmarital components.
- Because Donald’s estate was insufficient to trigger federal estate tax, all property funded the nonmarital deduction trust.
- The nonmarital deduction trust provided Donald’s wife, Virginia, lifetime income and gave her, as trustee, discretion to distribute principal to herself without an ascertainable standard.
- The broad trustee-beneficiary distribution power created a general power of appointment under federal tax law, causing inclusion of the trust property in Virginia’s gross estate at her death.
- The drafting attorney submitted an affidavit stating the general power of appointment language was included by mistake and that Donald intended the nonmarital trust to avoid estate inclusion in both spouses’ estates.
- Virginia later served as sole trustee and appointed a corporate co-trustee; the trustees sought equitable reformation to limit principal distributions to Virginia by an ascertainable standard (e.g., health, education, support, or maintenance).
- All identifiable beneficiaries consented; a guardian ad litem represented unborn or unascertained interests and assented; the Commissioner of Internal Revenue was served but did not participate.

## Issues

1. Whether a trust may be reformed to reflect the settlor’s actual tax-minimization intent upon clear and decisive proof that a drafting mistake caused the written terms to conflict with that intent.
2. Whether the court may amend a trustee-beneficiary’s power to distribute principal to herself by inserting an ascertainable standard to eliminate an unintended general power of appointment for federal estate tax purposes.

## Decision

- The Supreme Judicial Court of Massachusetts ordered reformation of the trust.
- The court found clear and decisive proof that the trust, as written, failed to embody the settlor’s intent due to a scrivener’s error.
- The court approved inserting an ascertainable standard limiting distributions of principal to Virginia, removing the general power of appointment characterization.
- The reformation was treated as effective as of the trust’s creation for purposes of construing the instrument.

## Legal Principles

- A trust instrument may be reformed to conform to the settlor’s intent upon clear and decisive proof that the instrument fails to embody that intent.
- Reformation is available to correct drafting mistakes that produce tax consequences clearly inconsistent with the settlor’s demonstrated tax objectives.
- When a trustee is also a beneficiary, an unlimited power to distribute principal to herself can constitute a general power of appointment under federal tax law; limiting that power by an ascertainable standard can avoid estate inclusion.
- A state high court may issue an authoritative reformation judgment in an uncontested trust matter, including where federal tax consequences motivate the request.

## Conclusion

The court permitted equitable reformation of a revocable trust where uncontroverted evidence showed a scrivener’s error granted the surviving spouse a general power of appointment that defeated the settlor’s tax plan, and it corrected the instrument by adding an ascertainable standard restricting the spouse’s access to principal.


Walker v. Walker, 744 N.E.2d 60 (Mass. 2001)