Opinion
12-P-1111
04-21-2015
GARY P. LESANTO & another v. DONNA LESANTO.
NOTICE: Summary decisions issued by the Appeals Court pursuant to its rule 1:28, as amended by 73 Mass. App. Ct. 1001 (2009), are primarily directed to the parties and, therefore, may not fully address the facts of the case or the panel's decisional rationale. Moreover, such decisions are not circulated to the entire court and, therefore, represent only the views of the panel that decided the case. A summary decision pursuant to rule 1:28 issued after February 25, 2008, may be cited for its persuasive value but, because of the limitations noted above, not as binding precedent. See Chace v. Curran, 71 Mass. App. Ct. 258, 260 n.4 (2008). MEMORANDUM AND ORDER PURSUANT TO RULE 1:28
In this consolidated case, we are asked to decide whether a judge of the Probate and Family Court properly reformed a trust to make it amend rather than revoke a prior trust in order to avoid the consequences of G. L. c. 203, § 3B, as then in effect. Because we conclude there was no mistake of the type that would warrant reformation of the trust, we reverse the judgment.
Background. The facts are largely undisputed. On October 17, 2005, Paul Lesanto executed estate documents drafted by Attorney Peter Bella, including a will and the Paul Lesanto 2005 Revocable Trust (the First 2005 Trust). Pursuant to the will's residuary bequest, the bulk of Paul's estate was to pour into the First 2005 Trust "executed earlier this day." In the First 2005 Trust document, Paul, as settlor, retained the right to amend or revoke the trust during his lifetime but it was to become irrevocable upon his death. In addition, upon Paul's death, the First 2005 Trust provided for creation of a QTIP trust naming his wife, Donna Lesanto, as the lifetime beneficiary with a special power of appointment of the assets to be effective upon her death. Should she fail to exercise that power, then the remainder was to go to her issue. A credit-shelter trust was to be created with the balance of the trust property and Paul's two children, Gary and Dianna, were to be the beneficiaries. Paul was identified as the original trustee and Gary was named successor trustee should Paul fail or cease to serve, and Dianna was named, should Gary fail or cease to serve.
The QTIP trust was to be funded with the greater of (i) $30,000 and one third of the total assets of the trust subject to the rights of a surviving spouse pursuant to G. L. c. 191, § 15, or (ii) the minimum Federal marital deduction amount or Massachusetts marital deduction amount, with an expressed intent of producing "the minimum marital deduction amount necessary to eliminate or reduce both the [F]ederal estate tax and any Massachusetts estate tax."
Contrary to the judge's finding, the First 2005 Trust makes no specific designation of how the various properties were to be divided, other than if Donna predeceased Paul, their marital home was to go to Donna's issue.
In June of 2010, Paul met with Attorney John Mahaney and engaged him to assist in settling a dispute with his ex-wife, Theresa, Gary and Dianna's mother, regarding the lapse of a life insurance policy he was obligated to hold for her benefit. The parties ultimately agreed to resolve the dispute in August of 2010 with a promissory note secured by a mortgage on Paul's commercial property in Newton. Thereafter, sometime prior to October 5, 2010, Paul met with Attorney Mahaney and engaged him to revise his estate plan, explaining that he wanted to disinherit his two children because he was angry and disappointed that they had taken their mother's side during the insurance dispute.
Attorney Mahaney drafted a trust document, retaining the name "The Paul Lesanto 2005 Revocable Trust" [the Second 2005 Trust]. The second paragraph of the Second 2005 trust provides that "[t]he Grantor wishes to establish a Trust which may receive property which the Grantor may transfer to it. The Grantor hereby revokes all prior Trusts." (emphasis original). Indeed, a copy of the First 2005 Trust contained in Attorney Mahaney's file had the handwritten notation "revoke" on the front page and the judge concluded it was written by Attorney Mahaney. The Second 2005 Trust further provides that upon Paul's death, (i) Donna is the sole beneficiary and her children are the sole contingent beneficiaries; (ii) there are no provisions for Gary or Diana; (iii) specific tax savings measures, including the QTIP trust and the credit-shelter trust, are eliminated; (iv) the successor trustee to Paul is Attorney Mahaney; and (v) although the powers and duties of the trustee perhaps overlap to a large degree, the formatting and wording of all of the clauses in the Second 2005 Trust are completely different from the First 2005 Trust.
Mr. Mahaney also drafted a new will for Paul naming Donna as the primary beneficiary and her children, should Donna predecease Paul, as contingent beneficiaries. The draft contains no provisions for Paul's children. Attorney Mahaney testified that his intent was for the Second 2005 Trust and the new will to work together to implement Paul's estate plan.
The new will, however, was never executed. Attorney Mahaney explained, the judge deemed credibly, that Paul dropped by his office unexpectedly on October 5, 2010, and executed the Second 2005 Trust and Attorney Mahaney notarized it. Paul did not execute the will because there were no witnesses available and, therefore, he planned to come back another day. Paul was admitted to the hospital the next day, however, and never left the hospital before his death on October 23, 2010. He made no additional changes to his estate plan before he died.
Gary filed a petition for probate seeking allowance of Paul's will and his appointment as executor of Paul's estate. Donna filed an appearance, objecting only to Gary's appointment as executor. Gary was appointed temporary executor over Donna's objection. Thereafter, Gary filed a complaint in equity on January 20, 2011, seeking, in part, a declaration whether the First 2005 Trust or the Second 2005 Trust should receive the residuary bequest pursuant to Paul's will or whether the residuary bequest has lapsed because the Second 2005 Trust revoked the First 2005 Trust and the residue could not pour over to a trust created after the will pursuant to G. L. c. 203, § 3B, as then in effect. The dispute over the executor was consolidated with Gary's equity complaint. Gary was denied summary judgment on the grounds that there was an outstanding question of fact whether Paul in fact wanted a new trust or simply desired to amend the first trust.
Following a trial, the judge expressly found that clear and convincing evidence showed that it was essentially Paul's intention to disinherit his children. The judge found that Attorney Mahaney was unaware that pursuant to G. L. c. 203, § 3B, as then in effect, a devise or bequest in a will could not be made to a trust that was not in existence on the date of execution of the will. An amendment does not offend the strictures of c. 203, §3B, however, and a devise or bequest can pour over into trusts that have been amended following the date the will was executed.
General laws chapter 203, § 3B, was repealed by St. 2008, c. 521, § 25, approved Jan. 15, 2009, and by § 44, as amended by St. 2010, c. 409, § 23, and St. 2011, c. 224, made effective March 31, 2012. It has been replaced by G. L. c. 190B, § 2-511, which allows the residue of a will to pour over into a trust created after the execution of the will. Neither party argues that the new statute applies retroactively to Paul's will. Indeed, § 43 of the enacting statute, St. 2008, c. 521 provides that "1. This act shall apply to pre-existing governing instruments, except that it shall not apply to governing instruments which become irrevocable prior to the effective date of this act." Paul's will, of course, speaks at the date of death and became irrevocable on that date, which was prior to the enactment of the Uniform Probate Code, G. L. c. 190B. Cape Cod Bank & Trust Co. v. Cape Cod Hosp., 3 Mass. App. Ct. 279, 281 (1975).
The judge found that in preparing the estate plan, Attorney Mahaney advised Paul that he had to revoke the First 2005 Trust so that the residuary bequest in his will would pour over into the Second 2005 Trust and Attorney Mahaney intentionally copied the name of the First 2005 Trust to facilitate that intent. It is unclear whether Attorney Mahaney meant that the original will or the new will would pour over into the second trust. The judge further found that "Attorney Mahaney did not explain to Paul that by revoking the First Trust, he was eradicating, rather than merely revising, his entire estate plan. Moreover, Attorney Mahaney did not explain to Paul that failure to execute a new Will after revoking the First Trust with the Second Trust would result in the bulk of his estate passing via the laws of intestacy, rather than by the terms of his Will."
The judge concluded that "the Will, the First Trust, and the Second Trust, together form a cohesive estate plan, and when viewed in conjunction with the evidence presented at trial, including, but not limited to, the testimony of Attorney Mahaney," "there is full, clear and decisive proof that Paul intended to amend the dispositive provisions of the Second Trust by removing Gary and Diana as beneficiaries thereof. The inclusion of language in the Second Trust purporting to 'revoke' all other trusts was a drafting error on the part of Attorney Mahaney to the extent that he allowed such instrument to be executed by Paul without contemporaneously amending the Will or executing a new Will referencing the Second Trust." Finally, the judge specifically found that the Second 2005 Trust "was intended to be an instrument in the nature of an amendment to the First Trust established in 2005, and thus must be reformed to reflect the Settlor's actual intent regarding same." Judgment entered reforming the Second 2005 Trust by striking the clause that revoked all prior trusts and by inserting a clause stating that the First 2005 Trust was thereby amended and any provisions in the first trust contrary to the "amended" trust were revoked. Gary appeals.
Discussion. A. Reformation. It is well settled in Massachusetts that equity will reform a trust on full, clear, and decisive proof that it does not reflect the settlor's intent due to scrivener's error. Walker v. Walker, 433 Mass. 581, 587 (2001). Shultz v. Shultz, 451 Mass. 1014, 1016 (2008). Fierst v. Laird, 453 Mass. 1016 (2009). See Rounds & Rounds, Loring and Rounds: A Trustee's Handbook § 8.15.22 (2015 ed.)("A court will reform the terms of a trust upon clear and convincing evidence that a material mistake has caused the terms not to reflect the settlor's intent, or that but for the mistake the settlor would have used different terms.")
"To ascertain the settlor's intent, we look to the trust and its amendment as a whole and in particular focus on the circumstances known to the settlor upon execution of the amendment. See Putnam v. Putnam, 366 Mass. 261, 266-267 (1974)." Berman v. Sandler, 379 Mass. 506, 510 (1980). "[W]e have indicated our willingness to accept extrinsic evidence, such as an attorney's affidavit, that demonstrates that there has been a mistake." Walker v. Walker, 433 Mass. 581, 587 (2001). See Mickelson v. Barnet, 390 Mass. 786, 792 (1984)("The parol evidence rule is no bar to the consideration of extrinsic evidence of intent when mistake is alleged."); Redstone v. O'Connor, 70 Mass. App. Ct. 493, 498-499 (2007)("Notwithstanding the absence of ambiguity in the terms of [a] trust, neither we nor the trial judge are bound to adhere to language in that instrument when we are convinced that a reading of the instrument as a whole would frustrate the settlor's intent.")
"Included in the category of unilateral mistakes for which relief may be obtained is a settlor's acceptance of a trust instrument which, because of the mistake or inadvertence of the scrivener, fails to embody the settlor's intentions." Berman v. Sandler, supra at 510. Upon the requisite proof, the Supreme Judicial Court has reformed trusts due to drafting errors leading to unintended and undesirable tax consequences. Simches v. Simches, 423 Mass. 683 (1996). Fleet Bank, N.A. v. Fleet Bank,N.A., 429 Mass. 1003 (1999). To that end, the court has allowed reformation of a single trust to (i) enable a beneficiary to transfer beneficial interests, (ii) limit a trustee's general power of appointment, and (iii) limit the trustee's dilution powers of beneficial interests of "skip" persons such as grandchildren. Dwyer v. Dwyer, 452 Mass. 1030, 1031 (2008). The court has also allowed reformation to reverse the type of power of appointment granted to a spouse. Loeser v. Talbot, 412 Mass. 361, 366-367 (1992).
Here, even accepting that Paul's ultimate intent was to complete an estate plan which omitted his children as beneficiaries of his estate, no mistake occurred that is amenable to reformation. The Second 2005 Trust contains no drafting errors. The Second 2005 Trust, substantially different from the first in virtually all respects, exactly express Paul's wishes. No terms were omitted. Nor is it clear to us that the attorney erred in drafting a new trust rather than amending the first trust considering the substantial differences between the two trusts.
Paul's attorney testified that he intended to create a comprehensive estate plan which would have consisted of the Second 2005 Trust and a new will. It was the attorney's intention, shared with Paul, that the second trust and a new will would operate in conjunction with one another to effectuate Paul's ultimate estate planning goals. The attorney testified that they agreed Paul would come back to sign the will another day. No one was aware that Paul's illness was such that it would cause his imminent death and neither Paul nor his attorney anticipated the possibility of Paul dying before he could execute a new will. With regard to wills and trusts, it has been said that "[w]hile intent is the lodestar of testamentary construction, it cannot be used . . . to supply a missing clause or to permit speculation as to what the [testator] might have intended had [he] foreseen or contemplated events as they actually turned out, but for which [he] had made no provision." Redstone v. O'Connor, 70 Mass. App. Ct. at 501, quoting from Schena v. Pagliuca, 9 Mass App. Ct. 449, 452 (1980).
Thus, the reason the estate plan does not effectuate Paul's ultimate intentions is not due to any scrivener's or drafting error in the trust itself. Nor is it necessarily due to the attorney's failure to understand that by law, a will cannot pour into a subsequently created trust. It is due to the fact that Paul died before executing a new will which would pour over into the second trust. Reformation of a trust instrument is not a remedy for failing to complete an estate plan, and specifically, for failing to execute a will.
We are aware that the draft of the new will did not contain a pour-over provision as intended by the attorney. We cannot say, however, that this omission would not have been corrected before Paul was to execute the document.
Where a will and trust are intended to form integrally related components of a single testamentary scheme, we view them as parts of an interrelated whole. Maimonides Sch. v. Coles, 71 Mass. App. Ct. 240, 251 (2008). While we have allowed reformation of trust instruments upon full, clear, and decisive proof that a drafting error has caused it to fail to conform to a settlor's intent, we have done so only in the context of a completed estate plan. Here, an essential component of the estate plan was not executed by the settlor. Moreover, it is clear that Paul was aware that he had only partially executed his estate plan.
It is true that the seemingly simple reformation of the second trust to label it an amendment of the first trust would render it unnecessary for Paul to execute a second will. We cannot say on this record, however, that it was Paul's intention by executing the second trust, alone, to complete his estate plan. Where he anticipated executing a new will and thereby complete his estate plan, it is not for the courts to step in and render that additional step unnecessary and even less to anticipate the form his will ultimately would have taken when signed.
For the foregoing reasons we conclude that the judge erred in reforming the Second 2005 Trust to have it amend rather than revoke the First 2005 Trust. Accordingly, the First 2005 Trust was revoked when Paul signed the Second 2005 Trust. As Paul did not also execute a new will before he died, the pour-over provisions of his first will, the only will he executed, lapse by operation of G. L. c. 203, §3B, as then in effect, and for want of a beneficiary. The residue of Paul's estate, therefore, shall be distributed according to our laws of intestacy.
Conclusion: The judgment is reversed and the case is remanded for entry of a new judgment consistent with this memorandum and order.
So ordered.
By the Court (Rapoza, Wolohojian & Milkey, JJ.),
The panelists are listed in order of seniority.
Clerk Entered: April 21, 2015.