How To Reform a Trust in Florida

A Florida trust, even if not ambiguous, can be reformed to correct a mistake by the settlor, upon a showing of clear and convincing evidence of the settlor’s trust intention.

Section 736.0415 of the Florida Trust Code provides as follows:

736.0415 Reformation to correct mistakes.—Upon application of a settlor or any interested person, the court may reform the terms of a trust, even if unambiguous, to conform the terms to the settlor’s intent if it is proved by clear and convincing evidence that both the accomplishment of the settlor’s intent and the terms of the trust were affected by a mistake of fact or law, whether in expression or inducement. In determining the settlor’s original intent, the court may consider evidence relevant to the settlor’s intent even though the evidence contradicts an apparent plain meaning of the trust instrument.

What Evidentiary Standard Applies To Reform A Trust Under Florida Law?

Most civil cases are decided by an evidentiary standard called a preponderance of the evidence. To reform a trust, a higher standard of evidence is required – the clear and convincing standard. Apparently, any probative evidence can be considered in reforming the trust, even if the evidence contradicts the plain language of the trust itself.

Trust Reformation Cases in Florida

Common Law of Trusts

In Reid v. Temple Judea, 994 So. 2d 1146 (Fla. 3d DCA 2008), the Court held that, under the common law of trusts in Florida, a Court had the power to reform a trust to correct a mistake:

Thus, in In re Estate of Robinson, 720 So. 2d 540, 543 (Fla. 4th DCA 1998), the Fourth District Court of Appeal, in a case of first impression, held “a trust with testamentary aspects may be reformed after the death of the settlor for a unilateral drafting mistake so long as the reformation is not contrary to the interest of the settlor.” See Schroeder, 825 So. 2d at 445 (adopting the reasoning and holding of Robinson for the proposition that reformation of a trust after the death of the settlor will be allowed where consistent with general equitable principles); In re Estate of Huls, 732 So. 2d 1206, 1207 (Fla. 2d DCA 1999) (citing Robinson for the proposition that a trust with testamentary aspects may be reformed after the death of the settlor for a unilateral drafting mistake where reformation is not contrary to the settlor’s interest).

The Court also pointed to the (at the time) newly enacted Section 736.0415 for additional support of the power to reform a trust. The other issue in the case – whether the trustee had standing to bring the reformation action – was answered in the affirmative.

Clear and Convincing Evidence

The Reid case came back on appeal, in Reid v. Estate of Sonder, 63 So. 3d 7, 10 (Fla. Dist. Ct. App. 3d Dist. 2011), after the probate trial court denied the petition to reform the trust, explaining the difficult burden that one has in seeking reformation:

Even assuming the probate court found Palmer’s testimony credible, there is no evidence Sonder would not have been capable of understanding the trust as written. In fact, nothing in the record explains why Sonder, an articulate and precise businessman, would have approved the plain and simple trust terms if they did not reflect his intent. Further, although it is clear Sonder intended for Reid to have the apartment, it is equally apparent Sonder intended for Hebrew Union College to have $125,000 as part of an endowment fund in honor of his deceased wife. These two gifts together constitute the bulk of the trust assets. The testimony does not establish Sonder would have preferred the gift to Reid over the endowment gift in the event both could not be satisfied. Therefore, we affirm the probate court’s order on the petition to reform.

Change in Circumstances Not Sufficient to Reform Trust

The third Florida case, Morey v. Everbank, denied the attempt to reform the trust, explaining:

Reformation is not available to modify the terms of a trust to effectuate what the settlor would have done differently had the settlor foreseen a change of circumstances that occurred after the instruments were executed.

Many trust reformation situations may be in fact driven by a change in circumstances.  To be successful, the asserted reasons for the reformation should be based on the settlor’s original thinking, not what the settlor might have done differently had he or she known about the change in circumstances.

Adding Beneficiaries to a Trust

In Megiel-Rollo v. Megiel, 162 So. 3d 1088 (Fla. 2d DCA 2015), the decedent has prepared a will naming her three children as equal beneficiaries.  Some years later, the decedent prepared a revocable trust.  She also deeded her real property to the trust.  The trust, however, failed to name any beneficiaries of the trust upon the death of the decedent.  The trust stated that, upon the death of the settlor, the corpus should pass according to a  Schedule of Beneficial Interests, which was supposed to be prepared and attached to the trust.

A dispute arose among the three children of the decedent, with two claiming that the decedent intended to name the two of them as the sole heirs, with the third child contending that the trust was void and/or could not be reformed.  Under the third child’s contention, the trust would be split into three equal shares for the children. 

The drafting attorney filed an affidavit admitting that he had made a mistake and should have prepared the Schedule of Beneficial Interest naming only two the decedent’s children as the deathtime beneficiaries of the trust.  Based on this affidavit and other information, the two children argued for trust reformation.  The third child argued that the trust itself failed under the “merger” doctrine, which requires that a trust have some separation of interests in the corpus.  The Court rejected this argument (internal citation omitted):

[t]he failure of the Trust instrument to designate any remainder beneficiaries would ordinarily result in a merger is correct as far as it goes. “In order to sustain a trust entity, there must be a separation between the legal and equitable interests of the trust. If there is no separation of these interests, the doctrine of merger may apply and the trust be terminated.” “If the designation of beneficiaries is deemed too indefinite for enforcement of the provisions of a trust, the usual result is that the trust is void and ‘the designated trustee holds the corpus under a resulting trust in favor of the estate of the settlor.'” Based on these general principles, we agree with Sharon that–absent reformation–the failure of the Trust to designate any remainder beneficiaries would have the result that upon the Decedent’s death, then Denise, as successor trustee, would hold the Trust assets upon a resulting trust for the benefit of the Decedent’s estate.

In allowing for the possibility of reformation to limit the trust to the two children, the Court explained as follows:

It is beyond argument that the statutory reference to “a mistake of fact or law” is not limited by any qualifiers. The broad scope of the language used in the statute is inconsistent with the notion that reformation is available to correct some mistakes in a trust, i.e., “simple scrivener’s error,” but not others. “[W]hen the language of the statute is clear and unambiguous and conveys a clear and definite meaning, . . . the statute must be given its plain and obvious meaning.

Giving the statutory language of section 736.0415 its plain and ordinary meaning compels the conclusion that the remedy of reformation of the Trust is available to correct the alleged drafting error resulting from the omission to prepare and incorporate into the Trust the contemplated Schedule of Beneficial Interests. The absence of any language of limitation in the statute–other than the requirement of proof by the heightened standard of clear and convincing evidence–is additional evidence that  the legislature did not intend the construction of the statute for which Sharon contends. For this court to read such a limitation into the statute would amount to judicial legislation of the sort in which we will not indulge.

Can Reformation be Used to Correct an Error in Execution Formalities?

No.  In Kelly v. Lindenau, 223 So. 3d 1074 (Fla. 2d DCA 2017), the Florida appellate court held that reformation of the trust was not permitted, because the amendment at issue was only signed by one of the witnesses and was invalid under Florida law.  There were no terms of the Trust that needed reformation.  The court stated:

Indeed, in discussing Florida’s liberal policy regarding reformation, this court has acknowledged that the remedy is used “to cause the instrument to reflect the true agreement of the parties when the terms of the agreement have not been clearly expressed in the instrument because of [a] mutual mistake or inadvertence.”  Id. at 1097 (emphasis added) (quoting Tri-Cty. Prod. Distrs., Inc. v. Ne. Prod. Credit Ass’n, 160 So. 2d 46, 49 (Fla. 1st DCA 1963)). But here, the terms of the second amendment are clear that Ralph intended to leave the Bradenton house to Lindenau. Thus there were no terms of the trust that needed reformation. Rather, Lindenau sought reformation to remedy an error in the execution of the second amendment. But by the statute’s terms, reformation is only available to remedy mistakes that affect “both the accomplishment of the settlor’s intent and the terms of the trust.” § 736.0415.

If reformation was allowed to correct an error in execution formalities, every trust could be reformed in this manner, obliterating the execution formality requirements.

Construction vs. Reformation

In Giller v. Grossman, the court determined that a beneficiary’s children were intended beneficiaries of the trust in a trust construction dispute and that reformation of the trust was not supported by the evidence.

Norman Giller created seven trust instruments during his lifetime.  Pursuant to the trusts, Norman’s children – Brian, Anita, and Ira – were each allocated one-third of the assets and accumulated income. Anita and Ira received their one-third allocations outright. Brian had financial difficulties and elected to place his one-third trust allocation into separate subtrusts attached to the seven primary trusts as a means of protecting his share of trust assets from creditors.

Other than the subtrust to the Giller Family Trust, the subtrusts provide that Brian and his two now-adult children, Jamie and Jason (“issue”), are equal beneficiaries. In the Giller Family Trust, Brian is the primary beneficiary, and his children are remaindermen.

Norman appointed Anita as Trustee of the seven trusts, with Brian’s agreement. At some point, with Norman’s approval, Brian borrowed money from one of the family businesses and agreed to repay the loan. As it became obvious over time that Brian would never repay the loan, family relationships deteriorated.

Brian began to request distributions from his subtrusts in 2005.  Anita would make a needs assessment and then issue modest checks to Brian.  After Anita’s husband became ill in 2008, Anita continued to write small checks to Brian, but did not conduct any needs assessments.

After Norman’s death in 2009, Brian requested all of the accumulated income from his subtrusts.  An attorney advised Anita that because Brian was not the sole beneficiary of six of the seven subtrusts, Anita would be in breach of her fiduciary duties if she granted Brian’s request and distributed principal to him.

In late 2009, Brian demanded all of the income generating assets of the subtrusts as well as the accumulated income. Anita refused his demand. Subsequently, the board of the Giller family company, from which Brian had borrowed money, sued him to recover the loan balance.

In March 2011, Brian filed a fifteen-count complaint to, among other things, remove Anita as Trustee, for breach of trust, and for civil theft, etc. Brian sought declaratory judgment as to the construction and meaning of the subtrusts’ language, claiming the language of the subtrusts shows it was intended to benefit him solely as a Florida trust beneficiary, not his children.

The Florida probate court found the trust document language unambiguous, found no conflict of interest, and no breach of trust by Anita as Trustee.

Brian argued on appeal that the Florida probate court should have ruled the subtrust language ambiguous and required introduction of extrinsic evidence regarding whether his children were intended beneficiaries. He urged that the Florida probate court should have then reformed the language to conform to his own interpretation that subtrust property was solely for his benefit, to the exclusion of his children.

The Florida appellate court looked at the plain language of the trusts. Six of the seven subtrusts contain the following identical and dispositive language, in pertinent part:

Any share established under this paragraph 2 for BRIAN J. GILLER shall be held as a separate trust for the benefit of BRIAN J. GILLER and administered and disposed of as follows:

(a) the Trustee may distribute to or for the benefit of such beneficiary or his issue (whether equal or unequal, and whether the whole or a lesser amount) so much of the net income of such beneficiary’s separate trust as the Trustee, in the Trustee’s discretion, deems necessary for such beneficiary’s reasonable health, support, maintenance or education of such beneficiary or for the reasonable health, support, maintenance . . . or for the reasonable health, support, maintenance or education of any issue of such beneficiary . . . In determining the amount to be distributed, the Trustee may, but need not consider any income or resources of such beneficiary or his issue.

(b) The Trustee shall have the power and authority, at any time and from time, to time, in the Trustee’s discretion, to make a payment or payments out of the principal of such beneficiary’s separate trust of any amount as the Trustee, in the Trustee’s discretion, deems necessary for the reasonable health, support, maintenance or education of such beneficiary or for the reasonable support, maintenance or education of any issue of such beneficiary. In making such invasions of principal the Trustee may, but need not, consider any other income of such beneficiary or his issue. (emphasis added).

The court determined that, construing the subtrusts in their entirety, the phrase “for the benefit of” does not render the subtrusts ambiguous as a matter of law with respect to the inclusion of Brian’s children as beneficiaries.

The court stated:

Here, the record reflects that Norman created the subtrusts to protect Brian’s share from his creditors; reformation of the trust language to eliminate any mention of Brian’s “issue” would go against Norman’s intent as the one who created and oversaw the trusts for Brian’s debt management benefit.

The court also affirmed the trial court’s finding of no breach of fiduciary duty, and upheld the award of trustee’s attorney’s fees pursuant to section 736.0802(10)(b), which provides:  “If a trustee incurs attorney fees or costs in connection with a claim or defense of a breach of trust which is made in a filed pleading, the trustee may pay such attorney fees or costs from trust assets without the approval of any person and without any court authorization.”

Learn how a Florida trust attorney can help with a reformation action.