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Walker v. Walker

    Brief Fact Summary. Plaintiffs, trustees of the Donald D. Walker Revocable Trust (Plaintiffs), commenced this action seeking to reform the trust based upon their claim that, due to a mistake, the trust as presently written fails to accomplish the settlor’s goals.

    Synopsis of Rule of Law. A trust instrument may be reformed to conform to the trust settlor’s intent as long as clear and decisive proof that the instrument fails to embody that intent is presented to the Court.

    Facts. Plaintiffs commenced this action to amend the trust at issue to conform with the settlor’s intent. Defendants are the presently identifiable beneficiaries of the trust and the Commissioner of the Internal Revenue Service (Defendants). According to the settlor’s trust, the trust funds were to be characterized and distributed to allow for the greatest possible marital deduction under federal tax law. Under these trusts, the settlor’s wife, one of the Plaintiffs in this case, is to receive the net income generated from the property during her life. The inclusion of a provision in the trust gave settlor’s wife the authority to make discretionary payments of principal to herself, as beneficiary, and therefore constituted a general power of appointment within the meaning of the Internal Revenue Code. Because of this characterization, the property was subject to a power. In other words, all property included in the nonmarital deduction trust will be includable in the settlor’s wife e
    state at the time of her death, regardless of whether or not she exercised the power. Plaintiffs claim that this is contrary to the settlor’s intent to have the property pass free of estate taxes from both his estate and his wife’s estate.

    Issue. May a trust instrument be reformed to conform to the trust settlor’s intent as long as clear and decisive proof that the instrument fails to embody that intent is presented to the Court?

    Held. Yes. A trust instrument may be reformed to conform to the trust settlor’s intent as long as clear and decisive proof that the instrument fails to embody that intent is presented to the Court.

    Discussion. In a situation where a settlor creates a trust with a clear tax objective in mind, but the trust fails to accomplish that objective, a Court generally has the power to amend the trust to fulfill the settlor’s intent.


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