Fame and fortune often come together, and sometimes that combustible brew spills over into the world of trusts and estates. Case in point: an inter-vivos trust created decades ago by multi-billionaire Peter Bing was recently at the center of a Los Angeles court battle involving claims by Damian Hurley, son of actress Elizabeth Hurley, and film producer Steve Bing. As reported in Elizabeth Hurley’s Son Prevails in Inheritance Fight, Steve “accused his father of ‘coordinating’ with his sister Mary to ‘orchestrate a massive money-grab,’ which would hurt his children, but enrich her own.”
The legal battle kicked off when the trustee filed a petition seeking to narrowly define the trust’s use of the word “grandchildren” to exclude grandchildren born out of wedlock — which (surprise!) results in Steve Bing’s children getting cut out (Mary’s children fare just fine under this interpretation). But for the large sums at stake and the celebrity references, this is run-of-the-mill stuff for most trusts and estates litigators. What’s interesting about this case — at least from a Florida-law point of view — is what’s NOT contested.
Ambiguity vs. Reformation:
Based on the contents of the trial court order, the litigation seems to have been framed exclusively around a single question: was the trust’s use of the word “grandchildren” ambiguous? According to the trustee, it was. According to the trial court judge, not even close. No ambiguity = no change = Steve Bing’s kids don’t get cut out. Here’s an excerpt from the order:
[T[he Trusts’ use of the word “grandchild” offers no ambiguity otherwise unless one accepts Trustee’s foisted definition that restricts, among others, grandchildren born out of wedlock to one of Settlor’s children unless they lived with one of Settlor’s children while a minor or as a regular member of the household. These restrictive, limiting, further definitions unreasonably distort the term’s clear and plain use in the Trusts.
These cases are usually litigated after the trust’s settlor is dead, which means we all get to speculate about what was actually going through his head when he signed his trust agreement. Not so in this case. Here, Peter Bing, the settlor, submitted an affidavit saying that the narrow definition the trial judge says is now being “foisted” on the court is exactly what he had in mind when he signed his trust agreement back in 1980 (long before any of his grandchildren were born). Sounds like Peter’s telling us his trust agreement doesn’t say what he intended it to say when he signed it. That fact’s important.
If this case were being litigated in Florida, you wouldn’t limit yourself to an “ambiguity” strategy; you’d also seek “reformation” of the document to accurately reflect what the settlor (Peter Bing) is telling us he actually intended to say when he signed his trust agreement. In Florida, the statutory vehicle for this argument is F.S. 736.0415 (Reformation to correct mistakes), which is based on Sect. 415 of the Uniform Trust Code (UTC). California hasn’t adopted the UTC.
Here’s how the UTC explains the difference between an “ambiguity” argument and a “reformation” argument:
Reformation is different from resolving an ambiguity. Resolving an ambiguity involves the interpretation of language already in the instrument. Reformation, on the other hand, may involve the addition of language not originally in the instrument, or the deletion of language originally included by mistake, if necessary to conform the instrument to the settlor’s intent. Because reformation may involve the addition of language to the instrument, or the deletion of language that may appear clear on its face, reliance on extrinsic evidence is essential. …
Reformation of inter vivos instruments to correct a mistake of law or fact is a long-established remedy. … This section applies whether the mistake is one of expression or one of inducement. A mistake of expression occurs when the terms of the trust misstate the settlor’s intention, fail to include a term that was intended to be included, or include a term that was not intended to be included. A mistake in the inducement occurs when the terms of the trust accurately reflect what the settlor intended to be included or excluded but this intention was based on a mistake of fact or law. … Mistakes of expression are frequently caused by scriveners’ errors while mistakes of inducement often trace to errors of the settlor.
By the way, there may be a good reason for why a reformation argument wasn’t made. On the other hand, maybe it was made and it was just ignored in the trial court’s order. If this case gets appealed, we may learn more then.
Finally, trust-reformation actions aren’t silver bullets. Even if your trust settlor is still around, and he’s ready and willing to testify, as I’ve previously reported here, the types of “mistakes” courts are authorized to fix in reformation actions are mistakes based on facts existing at the time the document was signed … not years later when events have taken a turn the settlor didn’t expect (like wanting to favor one line of descendants over another).
Biology vs. Settlor Intent:
The trial court order refers to “biological” grandchildren in one form or another on six separate occasions. The implication clearly being that if there’s a genetic link between a settlor and his children’s children, they’re his grandchildren. End of story. Well, it ain’t necessarily so. When construing trust terms the goal is figuring out settlor intent … even if it’s contrary to the “biological” facts.
For example, as explained in a fascinating 2d DCA opinion I wrote about here, for trust-construction purposes someone can be a settlor’s “blood relative,” even if DNA testing proves conclusively that the settlor’s not biologically related to that person. Does this make sense? Yes, if your primary goal is figuring out the settlor’s intent at the time he signed his trust agreement. When construing trusts it’s what’s going on in the settlor’s head at the time he signed his document that matters most, not the empirically-verifiable facts in existence years later at the time the trust is being litigated.
Which brings us back to Peter Bing’s use of the word “grandchildren” in his trust. Back in 1980 he might very well have intended to include all of his biological grandchildren as future beneficiaries, on the other hand, maybe he really did intend to exclude grandchildren born out of wedlock. Even if you think this case is all a subterfuge for Peter’s after-the-fact attempt to cut certain disfavored descendants out of the family fortune, it’s a fair question, and one that’s completely ignored in the trial court order.