This is a proceeding for reformation of an inter vivos trust. The petitioner is the grantor of The Genevieve D. Scheib Irrevocable Trust dated March 4, 1996. The petition is unopposed, with all other interested parties having executed waivers and consents.

Petitioner requests that the last paragraph of Article One and paragraph 11 of Article Eight of the trust be reformed to reflect her intent and that of the trustee, as they expressed it to the attorney-draftsman at the time the trust was created, that petitioner receive distributions from the trust of income only and that the trustee be expressly precluded from invading the trust's principal for petitioner's benefit. The last paragraph of Article One currently reads as follows:

The trustee is also authorized to pay over or apply at any time or from time to time such part or all of the principal of the trust as the trustee may in his sole discretion deem necessary for the support in reasonable comfort and maintenance in health of the grantor, so she shall be supported in her accustomed manner of living. Specifically included therein are expenditures for medical, dental, hospital, and nursing expenses, and expenses of invalidism. The trustee shall not be responsible for, or required to see to the use of, any payments made to the grantor pursuant to this paragraph. The judgment of the trustee as to the amount of such payments and as to the advisability thereof shall be final and conclusive upon all persons, and upon making any suchpayments the trustee

shall be fully released and discharged from all further liability or accountability therefor.

Article Eight of the trust sets forth the trustee's powers. Paragraph 11, which petitioner asks the court to reform, currently states:

Power to make loans to the grantor's children and other beneficiaries of the trust in such amounts, for such periods and upon such terms, with or without security, or to pledge trust property for loans made to the grantor's children or other beneficiaries, as the trustee shall in his sole discretion determine. The trustee shall not be responsible for any loss resulting from such loan or pledge.

Petitioner avers that she is concerned that the trustee's powers to use the trust principal for petitioner's benefit to pay, among other things, her medical and nursing needs, and to make loans to her from the trust make the trust assets available resources for Medicaid purposes. To the extent that distribution of trust principal or the income earned by the trust corpus can be made for [*2]the benefit of the grantor of a self-settled irrevocable inter vivos trust, it is considered a resource available to that individual (42 U.S.C. 1396p[d][3][B][i][I]; 18 NYCRR 360-4.5[b][1][ii]). Petitioner states that the language she seeks to have the court reform is a result of a drafting error, which she discovered only recently. According to petitioner, the requested reformation is consistent with her objective to protect the trust assets from inclusion as available resources for Medicaid purposes. Petitioner represents that she is not presently ill and that she is not currently receiving or applying for Medicaid benefits.

Petitioner's son, who is the trustee and a remainderman of the trust, has submitted an affidavit in support of petitioner's request for relief. In it, he attests that petitioner's intent in creating the trust was for Medicaid planning. The trustee states that the attorney-draftsman explained to petitioner and him that, according to the terms of the trust they executed, the trustee had no authority to distribute any portion of the trust principal to petitioner or to make any loans to her from the trust. The trustee represents that he has not distributed or loaned any portion of the trust principal to petitioner.

Annexed to the petition is a letter dated December 4, 1995 to petitioner from her then attorney, who later prepared the trust. In the letter, the attorney stated that petitioner's "primary concern" in redoing her estate plan was her "ownership of five parcels of property, and the potential loss thereof in the event you require being institutionalized, and the rights of Medicaid to seek reimbursement from your personal assets." Petitioner's attorney then outlined three estate-planning options, including the creation of an irrevocable inter vivos trust into which petitioner's real property would be transferred, with petitioner having the right to live in her residence for her lifetime and to receive income from two parcels of income-producing real property. It is this option that petitioner' s attorney recommended as the best vehicle for implementing petitioner's intent.

Petitioner alleges that she followed her attorney's recommendation and created what she believed to be a trust that effectuated her intent. Having now become aware that the trust does not carry out her intent, petitioner requests that the last paragraph of Article One be reformed to read as follows:

The Grantor expressly precludes the Trustee from invading the principal of this trust for the benefit of the Grantor. The Grantor directs that the provisions of §7-1.6 of the Estates, Powers and Trust[s] Law of the State of New York, or any successor statute thereto, shall not be available to require any invasion of principal by the Trustee or any Court. This provision is intended to negate and eliminate any discretion granted by §7-1.6 of the New York Estates, Powers and Trusts Law.

Petitioner also requests that Paragraph 11 of Article Eight be reformed as follows:

Power to lend or borrow monies with security upon such terms as to rate and maturity and in other respects as the Trustee may deem proper. All such payments(s), including any Trustee's fee incurred by reason of such payments, shall be charged generally against and made from the Trust Estate; provided, however, that no such payment shall be made from the proceeds of any qualified pension or profit-sharing plan received by the Trustee. Notwithstanding the foregoing, the Grantor expressly prohibits the Trustee from making any loan to the Grantor or the Grantor's [*3]spouse, if any, whether individually or as Trustee of any Trust or otherwise, to the estate of the Grantor or the estate of the Grantor's spouse, or to an estate in which either the Grantor or the Grantor's spouse has an interest.

Although courts will rarely reform a trust to correct mistakes (Matter of Snide, 52 NY2d 193 [1981]), in the case of an inter vivos trust, reformation to reflect the settlor's intent is allowed upon "clear proof" of mistake (Matter of Shapiro, 10 Misc 3d 1071(A), 2006 WL 88488 [2006)], citing Matter of Gottfried, NYLJ, Apr. 11, 1997, at 25, col. 6). Where the settlor's intention is clear, the draftsman's mistake should be corrected (Delap v Leonard, 189 App Div 87 [1919] [citations omitted]). Reformation "is retrospective. It necessarily goes back to the writing of the instrument and it therefore affects the course of any rights and obligations after the origination of the instrument" (Heath v State, 278 App Div 8, aff'd 303 NY 658 [1951]).

The letter of the attorney-draftsman, which predates the preparation and execution of the trust, is strong evidence that petitioner's intent at the time she created the trust was to create one from which she would receive distributions of income only and the right to reside in her home for her lifetime and whereby the trustee would be expressly precluded from invading the trust's principal for petitioner's benefit. The letter also evidences that petitioner's objective in creating the trust was as a Medicaid planning device. The court is satisfied that the reformation is consistent with petitioner's intent at the time the trust was created. Further, the rights of the other beneficiaries of the trust are unaffected by the reformation.

Accordingly, the petition is granted.

Submit decree.

Dated: January 26, 2007

JOHN B. RIORDAN Judge of the

Surrogate Court [*4]