The Supreme Court of Idaho upholds the decision of the district court in a case concerning the reformation of a trust to remove male beneficiary restrictions and replace them with gender-neutral language. In RE: the Terteling Trust No. 6 (2024) (Idaho No. 50736, November 1, 2024).
This case involves a male trust beneficiary arguing that the trust language stipulates that only male descendants are beneficiaries, thus excluding his three sisters from trust benefits. The magistrate court determined that evidence contradicts his argument and that the trust can be reformed. The district court affirmed the magistrate court’s decision. The Supreme Court affirms the district court’s decision.
On June 30, 1970, an irrevocable trust called Terteling Trust No. 6 was created by six trustors for the benefit of successive generations of the Joseph L. Terteling family. Joseph L. Terteling (Joseph) was one of the trustors.
The trust originally had three co-trustees. The purpose of the trust was to benefit the co-trustees’ heirs, not the trustors or co-trustees. Article III of the trust contains language that restricts the class of beneficiaries to male children named Terteling, so long as they are not one of the original co-trustees.
In 1995, Brooke J. Terteling, the first female heir of Joseph Terteling, was born. Joseph realized that the male-restrictive language in the trust would prevent Brooke from being a contingent residual beneficiary of the trust. Joseph discussed this with his wife at that time. In 1998, Brooke’s parents had triplets, two daughters and a son: Alyssa, Darcy, and Thomas J.
Knowing that his three granddaughters would probably be excluded from the trust, but not their brother, Joseph sought legal counsel to find out if the language in the trust could be corrected to provide for the benefit of successive generations of the family, regardless of gender, as was the original intention. He was told that the trust could not be reformed judicially.
In 2013, the interested parties to the trust executed a nonjudicial binding agreement, pursuant to the Trust and Estate Dispute Resolution Act, Idaho Code section 15-8-101, et, seq. (“TEDRA”), modifying the trust to reflect the intentions expressed in a 1978 affidavit regarding the trust’s purpose.
The 2013 TEDRA agreement explained that the original intent of the trustors was “retention and management of all the shares of the family corporation within [the Trust] for the benefit of successive generations of the family.” The agreement modified Article I of the trust and provided that the trust’s purpose is to benefit successive generations of the Terteling family.
In 2021, another TEDRA agreement was executed to clear up a matter of compliance for the family business. In addition to clearing up the business matter, this agreement stated that, “[t]he original intent of the Trustors was retention and management of all the shares of the family corporation known as J.A. Terteling & Sons, Inc., an Idaho corporation or its successor, within [the Trust] for the benefit of successive generations of the Terteling family.” This agreement also modified Article VI of the trust to state, “There shall be a sole Trustee, who may be male, female, or gender neutral.”
On February 21, 2022, Joseph, Carolyn E. Terteling (Joseph’s former wife), Brooke, Alyssa, and Darcy filed a verified petition to reform the trust, along with their declarations. They filed the petition to remove the male-only restrictions in Article III of the trust and replace them with gender-neutral language in accordance with the alleged intentions of the trustors. Thomas J. filed an objection. None of the other beneficiaries objected to the petition.
The magistrate court granted the verified petition and concluded that the facts demonstrated, by clear and convincing evidence, that a mistake had been made in the drafting of the trust and that the intent of the trustors was not realized by the language in the trust.
The magistrate court concluded that the trustors did not intend for only male descendants of Joseph L. Terteling to be beneficiaries of the trust.
Thomas J. appealed to the district court. He argued that the petitioners did not demonstrate by clear and convincing evidence that the male-restrictive language in Article III was a mistake or that it was the intent of all trustors to benefit a gender-neutral class of heirs. The district court affirmed the magistrate court’s decision. Thomas J. appealed to the Supreme Court of Idaho.
Thomas J. contends that the district court erred in affirming the magistrate court’s decision to reform the trust because the stipulated facts are insufficient to meet the clear and convincing evidence standard required for reformation. The Court concludes that the magistrate court’s findings were supported by substantial and competent evidence and the Court finds no error in the district court’s affirmance of the magistrate court’s decision granting reformation of the trust.
Under Idaho Code section 15-7-201, the magistrate court has exclusive jurisdiction over registered trusts and the authority “to determine any question arising in the administration or distribution of any trust including questions of construction of trust instruments.”
Although the Court has not specifically addressed reformation of a trust, it has a history of recognizing that reformation of an instrument is a proper remedy when the evidence demonstrates that the instrument does not reflect the parties’ intentions. Therefore, a trust can be reformed if it is established by clear and convincing evidence that a mistake of fact or law, whether in expression or inducement, affected terms of the document and contradicted the trustor’s intention.
Reformation of a trust “to conform the terms to the settlor’s intention” is recognized under the Uniform Trust Code, even when the terms of the trust are unambiguous. Reforming a trust can involve the addition or deletion of language.
Thomas J. argues that the unambiguous usage of the word “male” in several places throughout Article III, along with the trustors’ signatures on each page of the trust, is conclusive evidence that the trust’s restriction of benefits to male children only was not a mistake but was the original intent of the trustors. Reformation of a trust does not depend on ambiguity in the trust document. Trusts can be reformed even when unambiguous. The Court finds Thomas J.’s argument on this point unavailing.
In sum, substantial and competent evidence supports the magistrate court’s findings that “a mistake occurred in the drafting of Article III of the Trust Agreement” and “[t]he Trustors did not intend to restrict the beneficiaries of the Trust to male members of the Terteling family but rather to provide that beneficiaries may be gender neutral so long as they are the children of or descendants of Joseph.” Accordingly, the district court did not err in affirming the magistrate court’s decision to grant reformation of the trust.
For the foregoing reasons, the Court affirms the district court’s decision affirming the magistrate court’s grant of reformation of the trust.
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