Leslie Gould created a trust in 1992 that she completely amended and restated in 2006. The trust provided that after her death the trust assets would be divided by a formula between a marital trust and a family trust, with the family trust funded with the amount that could pass free of both federal and Massachusetts estate taxes and provisions for funding the marital trust that were intended to accomplish this result. Leslie died in July 2007 and her estate tax return was filed in October 2008.
After filing the estate tax return, the value of the trust assets declined significantly and unexpectedly. As a result, if the marital trust were funded according to the formula no assets would remain to fund the family trust. The trustee brought an action seeking to reform the trust to remedy the funding problem by funding the family trust first and using the remaining assets to fund the marital trust.
The court appointed a guardian ad litem to represent the interests of the minor, unborn, and unascertained trust beneficiaries, and permitted the reformation based on: (1) its finding by clear and decisive proof that the proposed reformation effectuated Leslie’s intent; (2) the consent of the spouse, all other adult beneficiaries, and the guardian ad litem; and (3) the fact that Leslie’s dominant intent was to minimize the combined estate tax paid by both spouses.