A revocable trust is an inter vivos trust whereby the grantor retains the power to revoke the trust and reacquire the trust property. At the grantor’s death, the trust becomes irrevocable. At this point it may terminate or it may continue to exist with the grantor’s directions that certain distributions are to be made to named beneficiaries or to a class of beneficiaries.
Without specific instructions regarding its revocability, a trust is presumed irrevocable. A trust agreement may be set aside on the same grounds that contracts may be set aside: fraud, duress, undue influence, breach of a confidential relationship, or mistake. “The absence of a provision in the trust instrument reserving a power of revocation does not raise an inference that it was omitted by mistake.” Liberty Trust Co. v. Weber, 200 Md. 491, 519, 90 A.2d 194, 206 (1952). Affirmative evidence is required to show that the grantor genuinely mistakenly believed that he or she had the power to revoke. The mere fact that the grantor believed that he or she could revoke the trust and made statements to this fact is not a sufficient ground for reforming the instrument. See Id. at 520. Such statements may be sufficient if corroborated by other evidence, or the other evidence may be sufficient without his statement or testimony. Id.
The doctrine that a trust instrument may be reformed by a court to correct a mistake “is ordinarily applicable only in cases…involving inter vivos trust instruments.” Shriners Hospitals for Crippled Children v. Maryland Nat’l Bk., 270 Md. 564, 581-2, 312 A.2d 546, 555 (1973). Testamentary trusts are treated as wills and “the general prohibition against the reformation of a will would prevail” in cases seeking reformation of a testamentary trust. Id. But see Probasco v. Clark, 58 Md. App. 683, 687, 474 A.2d 221, 223 (1984) (“Courts do, however, have the inherent power to modify a [testamentary] trust so long as that authority is exercised with caution and not employed merely as a tool or device to enable beneficiaries to receive [an increased amount]…”).
Apparently, if a trust that is “irrevocable” by its terms is later reformed by a court to become revocable, the federal tax law may permit an amended gift tax return to reflect that there was no completed gift in the first instance. In Berger v. United States., 487 F. Supp. 49 (W.D. Pa. 1980), C. William Berger anticipated a high level job with the Nixon administration at the Federal Aviation Administration. He mistakenly believed that he had to place all of his assets into an irrevocable trust in order to comply with the Nixon administration’s conflict of interest policy but, in actuality, a revocable trust would have been sufficient. After his prospects of government service evaporated, he successfully argued in state court that the “irrevocable” aspect of the trust was a mistake and the trust was reformed.