When the Trust says jump, then the Trustee jumps, right? Not necessarily. When sufficient evidence instructs the Trustee otherwise, consider a petition to reform the Trust.
In Frakes v. Nay, the Oregon Court of Appeals upheld a grant of summary judgment in favor of reforming certain terms of the Saling Family Trust to require only two, rather than three distributions of $500,000 to beneficiary Raymond Frakes. Even though the trust language unambiguously instructed the trustee to make a third round of distributions, the Petitioners (trustee Nay and beneficiary Carol and Velma Saling Foundation) offered sufficiently clear and convincing evidence that the settlors’ intended to give Frakes only two distributions for a total of $1,000,000. At trial, Frakes failed to present any relevant evidence of a contrary intent. Thus, the court found no genuine issues of material fact regarding the settlors’ intent, and allowed summary judgment for trust reformation under ORS 130.220.
ORS 130.220 allows a court to reform a trust to conform to the settlor’s intent, even if the express terms are unambiguous, if the party seeking reformation shows by clear and convincing evidence a mistake “of fact or law, whether in expression or inducement.” Here, the trust language unambiguously instructed distribution according to “paragraph 8.3.” The Petitioners argued that this was a drafting error (a mistake of fact in expression), and that the language should have instead instructed distribution according to “paragraph 8.3.2.” Under this latter paragraph, after the second distribution all remaining trust assets would go to the family foundation. Under paragraph 8.3, the trustee would have to make a third round of distributions (giving Frakes a total of $1,500,000) before the foundation received remaining assets.
The trial court found that the Petitioners offered sufficiently clear and convincing evidence that the settlors’ wanted the trust to distribute only $1,000,000 to Frakes. This included letters sent by the trustee to the settlors during the process of amending the trust which expressly stated only two distributions of $500,000 each would go to Frakes, and the trustee’s declaration that the settlors had told him of their intention that Frakes should receive no more than $1,000,000 from the trust. A paralegal who assisted in amending the trust also declared that settlor Carol had showed her a chart he had drawn which demonstrated that Frakes would receive $1,000,000 under the trust, and that Carol specifically told her that $1,000,000 “is enough for anybody.” Frakes himself acknowledged in his own deposition that, just prior to his death, Carol had directly said that he would receive two $500,000 distributions under the trust.
