Violet Nelson, a grandmother, was the settlor of a trust agreement in 2005. The trust agreement provided that after the settlor’s death, upon the death of her husband, “the then principal and accrued or undistributed net income of the trust shall be distributed in equal shares per capita and not per stirpes to Settlor’s grandchildren who survive Settlor.” The corpus of the trust included an interest in rental property. Grandmother had six grandchildren, but she had been estranged for decades from her daughter, the mother of two of her grandchildren, because her daughter had not married within the Orthodox Jewish faith. The trustee had brought an action for a declaration that the children of the daughter were not included in the definition of “grandchildren.” The trial court held that examining extrinsic evidence of the grandmother’s intent to exclude the two grandchildren, although such evidence existed, would be contrary to the clear and unambiguous language of the trust. The court, granting partial summary judgment to one of the two excluded grandchildren (the other did not participate in the suit but would benefit if his brother prevailed), held that the doctrine of probable intent is not available where the document is unambiguous on its face and therefore all six grandchildren were trust beneficiaries.
The Appellate Division recently reversed in In re Trust of Nelson, 454 N.J.Super. 151, and held that a trial court may “look beyond the apparently plain language of a trust” to determine what the settlor intended. The extrinsic evidence included the drafting attorney’s certification that Mrs. Nelson did not consider the other two grandchildren as her grandchildren nor “acknowledge their existence.” Counsel had explained to Mrs. Nelson before she signed the document, despite the plain language of “grandchildren,” that only four would benefit, and she agreed. Prior estate planning documents had only referenced four grandchildren.
The Uniform Trust Code (NJUTC), N.J.S.A. 3B:31-1 to – 84, had been enacted while the lower court matter was pending. Two provisions of the NJUTC allowed a court to reform a trust to conform to a settlor’s probable intent regardless of the utilization of unambiguous language. The trial court had held, however, that the NJUTC did not apply because its effective date fell after his decisions on the relevant motions.
On appeal, the Appellate Division noted that the primary goal of a court is to interpret a trust agreement so as “to fulfill the settlor’s intent,” which is usually probable intent. Such goal is memorialized in N.J.S.A. 3B: 3-33.1, which holds that the trust’s language as well as statutory rules of construction control “unless the probable intent of such settlor or of such individual, as indicated by the trust or by such governing instrument and relevant circumstances, is contrary.” Application of a preponderance of the evidence standard to interpretation and application of the clear and convincing standard to reformation is required to fulfill probable intent. New Jersey courts have always considered evidence of circumstances to assist in the interpretation of an integrated agreement. The Appellate Division specifically held that the trial court had been wrong when it relied on prior case law that barred resort to extrinsic evidence to unveil an ambiguity that does not appear on the face of the document. It reversed and remanded on the denial of summary judgment to the trustee and the grant of partial summary judgment to the potentially excluded grandsons. Its decision was entirely based on prior statutory law without regard to application of the UTC.
On remand, the trustee of the Nelson trust agreement could therefore present sufficient extrinsic evidence to demonstrate that the term “grandchildren” was ambiguous as applied to Mrs. Nelson’s understanding. On the other hand, the grandson who would potentially be excluded could also provide evidence to the contrary. Another course of legal action for the trustee was proving mistake of law or fact. The trustee could offer evidence of the scrivener’s mistake in not further clarifying “grandchildren” to comport with Mrs. Nelson’s wishes. Reformation of the trust by clear and convincing evidence would be required.
The lesson of Violent Nelson for litigators is a reminder that in the context of trust and will interpretation, New Jersey courts reject the “plain meaning” rule and adopt a more modern view. Extrinsic evidence will be received because, as the Supreme Court said in Wilson v. Glowers, 58 N.J. 250, 263 (1971), “experience teaches that language is so poor an instrument for communication or expression.”
We support the decision in Nelson because it will serve to effectuate Mrs. Nelson’s intent. The case is also a lesson for litigators: Sometimes grandchildren are not grandchildren.