Actions To Modify a Trust | Reformation of Wills and Trusts Explained

In this article, we discuss the actions taken in reformation of wills and trust and answer the following questions:

• What is Reformation of a Will or Trust?
• What is Reformation of a Trust Based On Mistake?
• What is Reformation of a Trust Based On Changed Circumstances?
• What Evidence Is Necessary In a Reformation Suit?

What is Reformation of a Will Or Trust?

Reformation of a will or trust is the action of modifying the will or trust instrument to best align with the intent of the settlor (the person that established the trust). The differences between a will and trust reformation versus modification are subtle, but, generally, reformation is concerned with correcting an inaccuracy caused by mistake, fraud, or changed circumstances, while modification seeks to modify the actual terms of the trust to clear up confusion, ambiguity or due to an unforeseen change in circumstances. Both revocable and irrevocable trusts can be reformed or modified by the court and these actions can be forced by an interested party in a reformation lawsuit. To learn more about the reformation of an irrevocable trust click here.

Depending on the party interested in reformation, reformation of a revocable trust is normally a much easier task than modifying an irrevocable trust. Depending on the portion of the trust being reformed, if the living settlor of a trust wishes for reformation it can sometimes be done so without issue and in many cases without the involvement of the court. However, if a beneficiary or another interested party wants to force the reformation of a trust, a more involved legal process may ensue. Reformation of wills, on the other hand, are generally not permitted by Illinois courts except for in extreme circumstances. This specifically refers to the will of a deceased person. Illinois courts have ruled it is not appropriate for a “will to be made for the testator,” and that allowing reformation of a descendant’s will would open the door for the interpretation of all wills to be thrown into question.

What is Reformation of a Trust Based On Mistake?

Reformation of a trust based on mistake is exactly what it sounds like, the party seeking reformation of the trust alleges that a mistake was made when the trust in question was written. Reformation of a trust based on mistake is very similar to the process of reformation of property transfers and thus is based directly on the law of contract reformation. The party seeking reformation must prove that 1) A mistake was made and 2) That an actual agreement exists other than the agreement that is stated in writing. The overall goal of the trust reformation is not to change the original agreement arrived at by the involved parties but to change the language of the trust so that it best reflects the original agreement.

There are multiple types of mistakes that may be corrected under a reformation of trust based on a mistake, they include:

• Mutual or Unilateral Mistake: This is a mistake made by both parties or a mistake made by one party which is known and hidden by the other party. This type of a mistake may not always apply even when a mistake was made in the writing up of a trust, because not all trusts have multiple parties involved. Often, the settlor of a trust is also the trustee, and unless the beneficiary was directly involved in the trust creation they cannot include themself under the mutual or unilateral mistake argument, as a party.
• Mistake of Fact or Law: This is a mistake that clearly results in the wrong intention under the trust. An example would be an attorney drafting a promissory note that created an agreement of tenancy in common versus joint tenancy under the trust.
• Scrivener’s Error: An scrivener’s error can be thought of like a typo. The meaning or intention of a portion of the trust is not necessarily called into question, but rather the intent of the trust instrument is clear but an item such as the address of a trust property was recorded incorrectly.
• Mistake As To the Meaning of Written Words: This type of mistake will usually not warrant a reformation as the court will argue that regardless of any confusion associated with the meaning of the words the document was written as intended and signed by the involved parties.
• Another Agreement Exists: In addition to a mistake in the document the proponent of the reformation must also prove that another agreement existed at the time the original trust was executed that supports the proposed reformation.

What Is Reformation of a Trust Based on Changed Circumstances?

Reformation of a trust based on changed circumstances mostly refers to instances where an unforeseen circumstance arises that makes the correct language of the trust ineffectual at carrying out the intent of the trust creator. The unforeseen circumstance must be extreme enough that it will clearly cause an issue such as the beneficiaries suffering a loss under the current language of the trust. Illinois caselaw suggests that two distinct categories exist that encompass all, if not the majority, of the scenarios that would fulfill the requirement for reformation. They are:

1. When a trust property is so unproductive that it can’t even cover it’s own expenses and begins to cause the beneficiaries serious losses. An example would by a restaurant started by the settlor that could not be sold by the beneficiaries under the trust for whatever reason, that quickly became unprofitable due to unforeseen circumstances not directly related to the beneficiaries or the management of the business, such as other restaurants in the area closing rapidly due to a failing local economy.
2. When a beneficiary or some other party associated with the trust is experiencing an emergency. An emergency can be emotional or financial. However, a trust cannot simply be reformed because the beneficiaries feel they could be receiving a greater income. An example of emotional change of circumstances might be that the prolonged litigation of a case involving the trust lead to extreme emotional distress of an involved party.

What Evidence Is Necessary in a Reformation Suit?

The burden of proof in an action for reformation is on the party seeking reformation and the standard of proof is clear and convincing evidence. The evidence presented in a reformation suit is similar to many other types of civil suits. Often one or both parties will present documents supporting their position as well as testimony from appropriate parties as to the intent of the contract. Having an experienced probate attorney can make all the difference between winning and losing a reformation suit. If you have any questions regarding reformation of a will or trust, give us a call at 630-324-6666.