Rockland Trust Co. v. Attorney Gen.

[463 Mass. 1004]The trustee of a trust established by Carol Vollmer (settlor) commenced this action in the Probate and Family Court, seeking reformation of the trust to comply with certain provisions of the Internal Revenue Code. A judge in that court reported the case to the Appeals Court, and we granted the trustee's application for direct appellate review. We conclude that the trust should be reformed as requested.

The facts are not in dispute. The settlor established the trust in 1993. The trust provides in relevant part that on the death of the settlor, the trustee would hold the trust property and pay from the income thereof as one or two $10,000 scholarships to students of Scituate High School and that if the net income is less than $10,000, the whole amount of net income is to be paid as a scholarship. Recipients are to be chosen by a committee consisting of the

[976 N.E.2d 802]

Scituate superintendent of schools, the Scituate High School principal, and the chairperson of the Scituate High School English department, who are to apply certain selection criteria specified in the trust. The trustee is to add any income not distributed as scholarships (that is, any income above an amount divisible by $10,000) to the principal. The scholarship fund is to be known as “The Carol Vollmer Scholarship Fund” (fund). The trust does not identify any other beneficiaries.³ The settlor died testate in 2006, leaving the bulk of her estate to the fund.

[463 Mass. 1005]The trust has applied to the Internal Revenue Service (IRS) to be treated as an income tax exempt private charitable foundation for purposes of the Internal Revenue Code (I.R.C. or Code). The IRS has declined to grant this status unless the trust is amended to demonstrate a general intent to benefit charity and not merely a specific intent to benefit a particular institution. Although the trust sets forth a specific charitable purpose, scholarships for education, it does not contain language evidencing a general charitable intent, as required by I.R.C. § 501(c)(3) (2006). If the trust does not qualify for a charitable exemption from income taxation, it will pay an income tax at a high marginal rate, substantially reducing the income available to distribute as scholarships. The trustee asserts that, due to a scrivener's error, the trust language does not reflect the settlor's general charitable intent. This is supported by an affidavit of the attorney who drafted the trust. In addition, two friends of the settlor have submitted affidavits attesting to her considerable charitable donations and...