Failing to properly identify beneficiaries in accounts, trusts, or other estate documents can mean that your wishes will not be carried out. While a court may try to reform a document to match the intent of the settlor, it can only do so when both the existence of a mistake and the intentions of the settlor are proven.
The Massachusetts Appeals Court recently considered a case in which an IRA listed a beneficiary who did not exist, and the possible beneficiaries did not agree on who was the intended beneficiary. In Ciampa v. Bank of America, the decedent died intestate after the death of her husband. The couple had two children together, and the decedent had a stepson. The decedent had opened an IRA in 1997 that named her husband as the sole primary beneficiary and named two contingent beneficiaries, each identified as the decedent’s son: “James Cotgageorge, Jr.” and “J. Edward Cotyup.” The document did not include a Social Security number or date of birth for either of them. The parties agreed that “J. Edward Cotyup” was a reference to the decedent’s stepson, Edward, even though Edward’s name in the case is listed as J. Edward Cotgageorge. There was no one named “James Cotgageorge, Jr.” in the family. The parties stipulated that the decedent had signed the form, but the other handwriting on the form was not hers.
Two years after the decedent’s death, the holder of the IRA expressed an intent to distribute the entire account to the stepson. When the daughter, Jamie, who also served as the estate’s administratrix, claimed the other share should be paid to the estate, the IRA holder agreed to wait for a court order before distributing the funds. The daughter filed a complaint seeking instructions and a court order in the Probate and Family Court. She ultimately intervened in her individual capacity and made a claim on the share for herself.
The daughter and the stepson each claimed the 66% share that the form indicated was to go to “James.” The judge determined the daughter had not proven that the form did not reflect the decedent’s intent. Furthermore, the decedent had been a legal secretary, and her husband was an attorney. The judge found that the decedent knew how to change beneficiaries and would have done so if that is what she intended. The judge ordered that the contested share be paid to the stepson.
An IRA is treated as a trust. In Massachusetts, the court may reform the trust instrument because of a scrivener’s error if the presence of a mistake is shown by “full, clear, and decisive proof.” A trust instrument can be reformed if a scrivener’s error fails to capture the settlor’s intent. A trust, or in this case, an IRA, is to be read to give effect to the settlor’s intentions as determined based on the entire instrument and the surrounding circumstances.
The appeals court found that the designation of a person who did not exist was a scrivener’s error. The appeals court further found that the judge’s findings of fact did not support her conclusion that the decedent had made her wishes clear by signing the form and funding the account. These facts did not mean the form had been correctly completed, especially when it was agreed that the decedent had not filled out the form herself. The appeals court found the trial judge had erred in finding that the document reflected the decedent’s intentions.
The appeals court, however, did not accept the daughter’s claim that “James, Jr.” referred to her. The daughter’s argument was, in significant part, that her name, Jamie, was similar to “James.” She also argued that her father had left her 66% of his estate and Edward 34% and that her mother had intended to do the same. The trial judge found it unlikely that the decedent would misspell her daughter’s name and refer to her as her son. The appeals court noted that parties successful in seeking reformation generally present much stronger evidence of the settlor’s intent. The trial judge found the daughter’s argument to be speculative. The appeals court, noting that this determination likely also included an evaluation of the daughter’s credibility as a witness, agreed that the daughter had “not clearly and decisively proven that she was the intended beneficiary…”
The appeals court further found, however, that the evidence did not support the trial court’s decision to award the 66% share to the stepson. There was no evidence that he was intended to receive the entire IRA. The decedent had named two beneficiaries, and the court found that she intended to give the account to two beneficiaries. Neither party had proven a claim for the contested share. Without evidence that the decedent had intended one of them to receive the share, the court could not reform the instrument. The portion of the IRA designated to the unascertainable beneficiary must fail, and the share must go to the estate. The appeals court vacated the decree and ordered the entry of a new decree stating that the 66% share designated to “James, Jr.” be held in a resulting trust for the estate and the 34% designated to Edward be paid to him.
A skilled Massachusetts estate planning attorney can ensure that your entire estate plan reflects your true intentions. Call the Law Offices of Richard Mucci at (781) 729-3999 for assistance with estate planning or probating or administering an estate in Massachusetts.