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Reformation of Trust Supported by Presumption that Settlor Would Not Have Intended Construction Resulting in Payments to Government Rather Than Beneficiaries
Matter of Valerie R. Pecce Supplemental Needs Trust, No. 19-P-591, 2021 WL 1203680 (Mass. App. Ct. Mar. 31, 2021)
Where a mistake in the formation of a trust document is clear, and that mistake would result in excess payments from the trust assets to the government, there is a presumption that the settlor would not have intended such a result. In
Matter of Valerie R. Pecce Supplemental Needs Trust, No. 19-P-591, 2021 WL 1203680 (Mass. App. Ct. Mar. 31, 2021), the settlor had established a trust with reference to the Federal Medicaid statutes for the supplementary benefit of his daughter, who had been born with disabilities and had received Medicaid benefits through the Massachusetts division of medical assistance (“MassHealth”) for many years. At the same time the settlor created the trust, he executed a will that included a pour-over clause to the trust. The daughter died eight years after the settlor, in 2015, and the trust terminated, triggering the asset-disposal provisions. The petitioner—and only remainder beneficiary—argued that there had been a mistake in the formation of the trust, because it “incorrectly and unnecessarily provides that trust assets must first be used to reimburse MassHealth for benefits provided to [the daughter] during her lifetime, before any remaining assets can be distributed to other [trust] beneficiaries.” The Probate and Family Court judge declined to reform the trust, finding that there had not been a mistake in its formation.