Title: Norman R. Carlson, Jr., et al v. Sweeney, Dabagia, Donoghue, Thorne, Janes & Pagos; and John H. Sweeney
Citation: N/A
Docket Number: 46S05-0801-CV-27
State: Indiana
Issuer: Indiana Supreme Court
Date: October 21, 2008

ATTORNEY FOR APPELLANTS  
 
 
 
ATTORNEY FOR APPELLEES 
Scott A. Weathers 
 
 
 
 
 
Robert G. Devetski 
The Weathers Law Office, P.C. 
 
 
 
 
Barnes & Thornburg LLP 
Indianapolis, Indiana 
 
 
 
 
 
Indianapolis, Indiana 
 
______________________________________________________________________________ 
 
In the 
Indiana Supreme Court  
_________________________________ 
 
No. 46S05-0801-CV-27 
 
NORMAN R. CARLSON, JR., INDIVIDUALLY 
AND AS EXECUTOR OF THE ESTATES OF NORMAN 
R. CARLSON AND HILDA D. CARLSON,  
DECEASED, AND AS TRUSTEE OF THE TRUSTS 
ESTABLISHED UNDER THE LAST WILLS AND  
TESTAMENTS OF NORMAN R. CARLSON AND  
HILDA D. CARLSON; MARGARET ANN CARLSON; 
BETH CARLSON MONTIGUE; AND DAVID R. 
CARLSON, 
 
 
 
 
 
 
 
 
Appellants (Plaintiffs below), 
 
v. 
 
SWEENEY, DABAGIA, DONOGHUE, THORNE, 
JANES & PAGOS; AND JOHN H. SWEENEY, 
 
 
 
 
 
 
 
 
Appellees (Defendants below). 
_________________________________ 
 
Appeal from the LaPorte Circuit Court, No. 46C01-0501-PL-036 
The Honorable Robert W. Gilmore, Jr., Judge 
_________________________________ 
 
On Petition To Transfer from the Indiana Court of Appeals, No. 46A05-0602-CV-94 
_________________________________ 
 
October 21, 2008 
 
Rucker, Justice. 
 
 
FILED
CLERK
of the supreme court,
court of appeals and
tax court
Oct 21 2008, 12:02 pm
Arising in the context of a legal malpractice action, this case involves the reformation of 
trust provisions in two wills to comport with the testators’ intent to avoid adverse federal estate 
tax consequences.  We hold the trusts were properly reformed to include ascertainable standards 
in accordance with the Internal Revenue Code.  
 
Facts and Procedural History 
 
 
In 1988, Norman R. Carlson, Sr., and his wife Hilda Carlson (referred to collectively as 
“Testators”) hired the Indiana law firm of Sweeney, Dabagia, Donoghue, Thorne, Janes & Pagos 
(“Law Firm”) to prepare their wills.  Among other things, Testators instructed Law Firm to draft 
the wills in a way that upon the deaths of their son Norman R. Carlson, Jr., and daughter in-law 
Margaret Ann Carlson property passing from them would not be subject to federal estate or state 
inheritance tax.  In essence Testators intended that their grandchildren would avoid federal and 
state estate tax liability.  Law Firm prepared separate wills purporting to accomplish this end.  In 
part each will left some property to the other spouse, if surviving, and put the residue into a trust, 
with the First Citizens Bank as Trustee.  Among other things the Trustee was instructed that 
upon the death of the last of Norman, Jr., and Margaret, any remaining balance in the trust was to 
be distributed to two named grandchildren, Beth Carlson and David Carlson.  In addition each 
will provided that the Trustee could be replaced by a majority of the current beneficiaries.  
Relevant to this litigation the wills directed the Trustee to pay Margaret and Norman, Jr., “such 
sums from principal as the Trustee deems necessary or advisable from time to time for either of 
their medical care, comfortable maintenance and welfare, considering the income of either from 
all sources known to the Trustee.”  App. at 49, 58 (emphasis added).   
 
 
Norman, Sr., died in June 1992, and his wife Hilda died shortly thereafter in August 
1992.  Both wills were admitted to probate.  Thereafter in 1994 Norman, Jr., hired a Texas 
attorney to assist with management of the trust.  In counsel’s opinion the language of the trust 
provisions in the wills subjected the property to federal estate taxes.  Specifically, there were no 
“ascertainable standards” for the distribution of the trust principal.  Thus the trust created a 
general power of appointment under Internal Revenue Service (“I.R.S.”) Treasury Regulations, 
 
2
and property held under a general power of appointment is taxable upon the death of one holding 
the power.  I.R.C. § 2041(a)(2)(b)(1).1 
 
 
At the request of Norman, Jr., his wife Margaret, and their two children Beth and David 
(referred to collectively as “Beneficiaries”) on July 27, 1994, Law Firm filed in the LaPorte 
Superior Court a “Petition to Reform Testamentary Trust” with respect to Norman, Sr.’s will.  
App. at 65.  The trial court granted the petition on August 4, 1994, and entered an order that the 
will be reformed to read:  “The Trustee may also pay to my said son, Norman R. Carlson, Jr. 
and/or his said wife, Margaret Ann Carlson, such sums from principal as the Trustee deems 
necessary from time to time for either of their health and maintenance, considering the income 
of either from all sources known to the Trustee.”  App. at 67 (emphasis added).2  In support of its 
order the trial court entered the following pertinent findings:  
 
6. 
That if First Citizens Bank, N.A. is removed as Trustee and 
if Norman R. Carlson, Jr. or Margaret A. Carlson were appointed 
as Successor Trustee, the balance of the property in this Trust at 
the time of their respective deaths could be considered as an asset 
of their estates for federal estate tax purposes since they would 
have the power under Item III Section 2 [of the will] to make 
distributions of principal to themselves not limited by an 
ascertainable standard. 
 
* 
* 
* 
 
9. 
That the reformation of the trust to prevent any beneficiary 
as Trustee from exercising, for his own benefit the discretionary 
power of distribution authorizing invasion of principal not limited 
                                                 
1 A general power of appointment is defined as a power that is exercisable in favor of the decedent, his 
estate, his creditors, or the creditors of the estate.  See I.R.C. § 2041(b)(1).  However, a power to consume 
or appropriate property for the benefit of the decedent that is limited by an “ascertainable standard 
relating to the health, education, support, or maintenance of the decedent” is not deemed a general power 
of appointment.  I.R.C. § 2041(b)(1)(A).  According to a federal regulation, “A power to use property for 
the comfort, welfare, or happiness of the holder of the power is not limited by the requisite standard . . . .”  
Treas. Reg. § 20.2041-1(c)(2).  
 
2 A similar petition was filed September 21, 1994 concerning Hilda’s will, and a similar order was issued 
September 22, 1994.  App. at 68.  Throughout this opinion any reference to Norman, Sr.’s will or trust 
applies equally to Hilda’s will or trust and vice versa.  
 
3
by an ascertainable standard would be in the best interest of his 
children who are the remaindermen. 
 
10. 
That the [intent] of the Testator, Norman R. Carlson [Sr.], 
was to preserve the principal of the Trust for distribution to his 
grandchildren except for invasion of principal by Trustee pursuant 
to an ascertainable standard. 
 
11. 
That to subject the balance in the trust at the death of 
Norman R. Carlson, Jr. and Margaret A. Carlson under the existing 
standard of invasion could result in payment of death taxes, 
unnecessarily shrinking the amount that is passed on to the 
grandchildren, thereby substantially impairing the accomplishment 
of the purposes of the trust. 
 
* 
* 
* 
* 
 
16. 
That the Last Will and Testament of Hilda D. Carlson has 
been probated in this Court and her estate is now pending and the 
Court now finds that her Last Will and Testament is the same as 
the Last Will and Testament of Norman R. Carlson, [Sr.] 
supporting the contention of the Petitioner that his parents each 
intended that the principal of their Trust not be taxed again at the 
deaths of Petitioner and his wife, Margaret A. Carlson. 
 
App. at 65-66.  No challenge was made to the trial court’s findings and no appeal was taken from 
its order of reformation. 
 
 
Thereafter on June 2, 1999, Beneficiaries filed a complaint against Law Firm alleging 
malpractice in the preparation of Norman, Sr.’s and Hilda’s wills.  In essence Beneficiaries 
contended property in the trust at the time of the deaths of Norman, Jr., and Margaret would be 
considered an asset of their estates for federal estate tax purposes because they have the power to 
make distributions of principal to themselves “not limited by an ascertainable standard.”  App. at 
14.  According to the complaint, in drafting the wills, Law Firm used the phrase “‘medical care, 
comfortable maintenance and welfare . . .’ instead of terminology expressly set forth and 
approved in the Treasury Regulations (such as ‘health, support and maintenance’).”  App. at 15.  
“As a result, the Internal Revenue Service would assert that any property remaining on hand at 
 
4
the death of Norman R. Carlson, Jr. or Margaret Ann Carlson will be subjected to federal estate 
tax, notwithstanding the express contrary desire of the testators . . . .”  Id.   
 
 
In addition to filing its answer – along with a counter-claim for outstanding legal fees – 
Law Firm also filed a motion for summary judgment essentially contending: (1) the provisions in 
the original wills for “medical care, comfortable maintenance and welfare” created an 
ascertainable standard, (2) even if the provisions did not create an ascertainable standard, 
operation of an “adverse holder” rule (also referred to as the “adverse interest” rule) prevented a 
general power of appointment from arising,3 and (3) in any event the trust provisions in the 
original wills have been reformed such that ascertainable standards have now been established.  
App. at 39-40.  Rejecting the first contention and not addressing the second, the trial court 
granted Law Firm’s motion for summary judgment based on the last contention.  
 
Beneficiaries appealed contending the subsequent reformations did not insulate them 
from adverse federal tax consequences, and thus the trial court erred by granting summary 
judgment in favor of Law Firm on this issue.  In any case, according to Beneficiaries, the trial 
court erred in granting summary judgment because they sustained damages in attempting to 
correct the original wills regardless of whether the attempted correction may ultimately prove to 
be successful.  On cross appeal Law Firm argued the trial court erred in failing to grant summary 
judgment in its favor on the first two grounds set forth above. 
 
Affirming in part the trial court’s judgment, the Court of Appeals concluded the trial 
court properly determined that the original wills did not establish ascertainable standards 
regarding a Trustee’s ability to invade the trust corpus, and that the adverse interest rule did not 
                                                 
3 This rule is an apparent exception to the definition of a general power of appointment.  The exception 
provides: 
 
If the power is not exercisable by the decedent except in conjunction 
with a person having a substantial interest in the property, subject to the 
power, which is adverse to exercise of the power in favor of the decedent 
– such power shall not be deemed a general power of appointment. 
 
I.R.C. § 2041(b)(1)(C)(ii).  According to Law Firm under the original wills the adverse interests of 
Norman, Jr., and Margaret prevented either of them from holding a general power of appointment.  Br. of 
Appellee at 11-12. 
 
5
protect the trust from tax liability.  Carlson v. Sweeney, Dabagia, Donoghue, 868 N.E.2d 4 (Ind. 
Ct. App. 2007), aff’d on rehearing, 872 N.E.2d 626 (Ind. Ct. App. 2007).  We agree with both 
propositions and summarily affirm the opinion of the Court of Appeals on these two points.  
However, the Court of Appeals reversed that portion of the trial court’s judgment concerning the 
reformation of the trust.  On this point we disagree with our colleagues.  Having previously 
granted Law Firm’s petition to transfer, we now affirm in part the judgment of the trial court.  
 
Standard of Review 
 
When reviewing a grant or denial of a motion for summary judgment, our review is de 
novo.  Freidline v. Shelby Ins. Co., 774 N.E.2d 37, 39 (Ind. 2002).  Summary judgment should 
be granted only if the evidence authorized by Indiana Trial Rule 56(C) shows there is no genuine 
issue of material fact and the moving party deserves summary judgment as a matter of law.  Id.   
 
Discussion 
 
 
At the heart of this litigation is a federal court’s recognition vel non of a state court’s 
determination concerning the reformation of a will or trust.  Although federal law dictates how a 
decedent’s estate will be taxed, state law controls in determining the nature of the legal interest 
the taxpayer had in the property or income sought to be reached by the statute.  Drye v. United 
States, 528 U.S. 49, 58 (1999); United States v. Kollintzas, 501 F.3d 796, 802 (7th Cir. 2007); 
see also Estate of Vissering v. Comm’r of Internal Revenue, 990 F.2d 578, 580 (10th Cir. 1993) 
(“We look to state law . . . to determine the legal interests and rights created by a trust 
instrument, but federal law determines the tax consequences of those interests and rights.”).  The 
United States Supreme Court has made clear that neither the I.R.S. nor the federal courts are 
bound by a state trial court’s decision.  “[W]here the federal estate tax liability turns upon the 
character of a property interest held and transferred by the decedent under state law, federal 
authorities are not bound by the determination made of such property interest by a state trial 
court.”  Comm’r of Internal Revenue v. Estate of Bosch, 387 U.S. 456, 457 (1967).  Rather, “the 
State’s highest court is the best authority on its own law.”  Id. at 465.  
 
 
6
Essentially, in the last analysis this Court will determine whether, how, and to what 
extent a trial court’s reformation of a will or trust comports with Indiana law.  Whether a federal 
court deems itself bound by such a determination is a question of federal law – a matter about 
which we express no opinion.4  But see Griffin v. Griffin, 832 P.2d 810, 812-13 (Okla. 1992) 
(“In considering the terms of the trust agreement as a whole, this Court may make rulings 
concerning the grantor’s intent which will be binding upon the IRS in its Federal tax litigation 
pending in the United States Tax Court.”).  
 
Interpretation of the Testators’ Wills 
 
The interpretation, construction, or legal effect of a will is a question to be determined by 
the court as a matter of law.  Retseck v. Fowler State Bank, 782 N.E.2d 1022, 1025 (Ind. Ct. 
App. 2003).  In construing the language of a will, our primary focus is upon the intent of the 
testator.  Id.  We look to the four corners of the will and the language used in the instrument in 
determining the testator’s intent.  Id.  Also, the will in all its parts must be considered together. 
Epply v. Knecht, 141 Ind. App. 491, 230 N.E.2d 108, 111 (1967).  When construing the 
language of a will, the court should strive to give effect to every provision, clause, term, or word 
if possible.  Hershberger v. Luzader, 654 N.E.2d 841, 843 (Ind. Ct. App. 1995). 
 
As the Court of Appeals correctly points out, “‘a general intent in a will is to be carried 
into effect at the expense of any particular intent,’ and that ‘when there are conflicting intents, 
that which is the most important must prevail.’”  Carlson, 868 N.E.2d at 19 (quoting Fowler v. 
Duhme, 143 Ind. 248, 42 N.E. 623, 626 (1896)) (internal quotation omitted).  Examining the 
                                                 
4 The issues of trust or will reformation to avoid federal estate tax liability have been frequently litigated.  
See Ike v. Doolittle, 70 Cal. Rptr. 2d 887, 909-10 (Cal. Ct. App. 1998) (reforming based on drafting 
error); Erickson v. Erickson, 716 A.2d 92, 101 (Conn. 1998) (reforming based on scrivener’s error); 
Robinson v. Robinson, 720 So. 2d 540, 543 (Fla. Dist. Ct. App. 1998) (reforming inter vivos trust due to 
drafter’s mistake because the pour-over trust testamentary element did not require adherence to the state’s 
more traditional, restrictive law on reformation of wills); Hillman v. Hillman, 744 N.E.2d 1078, 1081 
(Mass. 2001) (reforming the unqualified words “my issue” in a power of appointment to exclude the 
settlor’s son (and the estate of the son) to whom the power was granted to avoid an apparently unintended 
general power of appointment); Simches v. Simches, 671 N.E.2d 1226, 1229-30 (Mass. 1996) (relying on 
frustration-of-purpose and mistake doctrines to grant reformation to avoid undesirable tax consequences); 
In re Will of Case, 585 N.Y.S.2d 1004, 1005-06 (N.Y. Sur. 1992) (reforming two trusts to minimize 
estate taxation); Griffin, 832 P.2d at 814 (reforming trust to delete objectionable language for marital 
deduction purposes; evidence of mistake clear; tax objectives can be considered in determining intent).  
 
7
wills in this case, the Court of Appeals determined that “[a]lthough the testators may have 
wished to avoid federal estate taxes, this intent or purpose was clearly secondary to their intent or 
purpose to supply for the wants and needs of Norman, Jr., and Margaret.”  Id.  We respectfully 
disagree.   
 
First, reciting the facts in this case the trial court noted in part, “In 1988, Norman & Hilda 
Carlson retained the Defendant’s law firm to prepare their respective last will & testaments.  
Upon meeting with [one of the firm’s lawyers] it was determined that it was the Carlsons’ 
intention to have these documents drafted in a manner that would ensure that no part of the 
property passing to their descendants would be subjected to federal estate or state inheritance tax.  
The defendants agreed to prepare the wills to effectuate this intention.”  App. at 7 (emphasis 
added).  Beneficiaries do not dispute these facts, and indeed the very basis of their complaint for 
malpractice was the “Internal Revenue Service would assert that any property remaining on hand 
at the death of Norman R. Carlson, Jr., or Margaret Ann Carlson will be subjected to federal 
estate tax, notwithstanding the express contrary desire of the testators . . . .”  App. at 15 
(emphasis added).  Second, in its 1994 order of reformation the trial court specifically found, 
among other things, that Testators “intended that the principal of their Trust not be taxed again at 
the deaths of Petitioner and his wife, Margaret A. Carlson.”  App. at 66.   
 
Importantly, neither the facts before the instant trial court, nor the facts before the trial 
court reforming the trust provisions in Testators’ wills, suggest that the Testators’ most important 
intent was anything other than to avoid federal estate or state inheritance tax.  Indeed this has 
never been a contested point.5  Rather, the issue has been joined over whether the wills were 
drafted in a way to accomplish this end.  This leads to the following discussion on reformation.  
 
                                                 
5 During extended discussion at a hearing on the motion for summary judgment the trial court inquired, 
“Is there any dispute—well it appears that there is no dispute as to what was intended by the settlor, i.e. 
we’re gonna skip, we’re gonna skip a generation here.  And there is no dispute that everyone intended that 
this not be includable in, in the son’s estate.”  Tr. at 40-41.  All parties agreed.  Id. at 41.  
 
8
Reformation Under Indiana Law 
 
 
In granting partial summary judgment in favor of Law Firm, the trial court determined 
that the 1994 reformation of the wills modified the wording of the trust to conform with 
Testators’ original intent “to create a will and testament that would transfer property without any 
tax consequences.”  App. at 11.  As mentioned earlier in this opinion the original language, 
“either of their medical care, comfortable maintenance and welfare” was reformed to read 
“either of their health and maintenance.”  App. at 67, 70.  The parties apparently agree that as 
reformed the trust now includes the necessary “ascertainable standards” and thus now complies 
with I.R.S. Treasury Regulations.6  The Court of Appeals concluded however that the 
reformation “was contrary to Indiana law.”  Carlson, 868 N.E.2d at 18.  
 
As an initial matter we note that the propriety of the trial court’s 1994 judgment and order 
reforming the trust is not properly before us.  Rather, the judgment is a binding decree that is not 
subject to collateral attack.  Bd. of Comm’rs v. State ex rel. Gibson, 226 Ind. 633, 82 N.E.2d 
891, 892 (1948) (“The law is well-settled that where matters in issue between the parties to an 
action were, or might have been, litigated in a former action, such matters are considered 
‘forever at rest.’”) (citations omitted).  Further, in reforming the trust the trial court issued 
findings of fact declaring among other things, “The [intent] of the Testator, Norman R. Carlson 
[Sr.] was to preserve the principal of the Trust for distribution to his grandchildren except for 
invasion of principal by Trustee pursuant to an ascertainable standard.”  App. at 66.  Captioned 
“In The Matter of the Estate of Norman R. Carlson, Deceased,” the Petition to Reform the Trust 
was filed by Norman R. Carlson, Jr.  Carlson’s wife and the Carlson grandchildren were 
apparently specifically listed in the petition.7  “No matter how erroneous the finding and the 
                                                 
6 Although the Beneficiaries do not expressly concede this point, their complaint is that “the 
overwhelming weight of authority holds that the Internal Revenue Service is not bound to subsequent 
state trial court orders purporting to reform offending language in testamentary instruments.”  Br. of 
Appellant at 9.  
 
7 The actual petition is not in the record before us.  However in its reformation order the trial court found 
among other things: 
 
 
9
judgment of the court based thereon may have been, such finding and judgment cannot be 
attacked in a collateral proceeding by one who was a party to said judgment or by one in privity 
with such a party.”  Grantham Realty Corp. v. Bowers, 215 Ind. 672, 22 N.E.2d 832, 836 (1939).  
The question of reformation having been determined some five years before this action was filed, 
the matter is now settled and closed.  
 
In any event, assuming we were writing on a clean slate, we conclude the trial court 
properly reformed the trust provision in the original wills to include language establishing an 
ascertainable standard thereby complying with I.R.S. Treasury Regulation § 20.2041-1(c)(2).  As 
reformed the wills are consistent with the original intent of the Testators of avoiding adverse 
federal estate and state inheritance taxes.  
 
 
A written instrument, including a trust, may be reformed on grounds of mistake upon 
“clear and convincing evidence” not only of the mistake, but also of the original intent of the 
parties.  Estate of Reasor v. Putnam County, 635 N.E.2d 153, 160 (Ind. 1994); 4A. Scott, Trusts 
§ 333.4 (4th ed. 1987); 27 Samuel Williston & Richard A. Lord, Williston on Contracts § 70:104 
(4th ed. 2003); Restatement (Third) of Trusts § 62 comment b (2003).  We point out however, 
the doctrine of reformation for mistake with regard to trusts differs from instruments such as 
contracts in one important respect.  In contract law, reformation will not be granted unless the 
parties’ mistake is mutual.  Harlan Bakeries, Inc. v. Muncy, 835 N.E.2d 1018, 1029-30 (Ind. Ct. 
App. 2005) (“In Indiana, a trial court is permitted to reform written documents only in cases in 
which one party mistakenly executed a document which did not express the true terms of the 
agreement, and the other party has acted under the same mistake, or has acted fraudulently or 
inequitably while having knowledge of the other party’s mistake.”); Johnson v. Sherwood, 34 
                                                                                                                                                             
14.  That Beth Carlson, age 25, grandchild and one of the two (2) 
remaindermen of the trust has consented to the relief sought by this 
petition. . . . 
 
15.  That David Carlson, [brother] of Beth Carlson and remainderman is 
fourteen (14) years of age and the Court now finds that the relief 
requested by this Petition is in the best interests of Beth Carlson and 
David Carlson and that it is not necessary to protect the interest of David 
Carlson, a minor, to appoint a guardian ad litem. 
 
App. at 65-66.  
 
10
Ind. App. 490, 73 N.E. 180, 186 (1905) (“[T]hree things are necessary in a bill to reform a 
written instrument.  It must appear, first, that there was a mutual mistake; second, the agreement 
actually made; and third, that which the parties intended to make.”).  But mutuality of mistake is 
not always required where trusts are concerned.  Because a settlor usually receives no 
consideration for the creation of a trust, a unilateral mistake on the part of the settlor is ordinarily 
sufficient to warrant reformation.  4A. Scott, Trusts § 333.4 (4th ed. 1987); Restatement supra, § 
62 cmt. a.   
 
 
These general principles of trust reformation are not particularly controversial.  However, 
Beneficiaries argued, and the Court of Appeals agreed, that in this jurisdiction the mistake must 
be one of fact, not one of law.  The argument continued that the mistake in this case involved the 
misinterpretation of the legal effect of certain words used in the trusts and therefore was a 
mistake of law.   
 
It is true that a long line of Indiana authority has held that reformation may only be had 
for mistakes of fact.8  However, for the most part these cases involved reformations of 
instruments other than trusts.  See, e.g., Hudson v. Davis, 797 N.E.2d 277, 283 (Ind. Ct. App. 
2003) (reformation of a land contract); Estate of Spry v. Greg & Ken, Inc., 749 N.E.2d 1269, 
1275-76 (Ind. Ct. App. 2001) (reformation of a release contained in a settlement agreement); 
Peterson v. First State Bank, 737 N.E.2d 1226, 1229-30 (Ind. Ct. App. 2000) (reformation of a 
promissory note); Makeever v. Barker, 85 Ind. App. 418, 154 N.E. 692, 694-95 (1926) 
(reformation of a bond); Shoe v. Heckley, 78 Ind. App. 586, 134 N.E. 214, 216-17 (1922) 
(reformation of a deed); Heavenridge v. Mondy, 49 Ind. 434, 439 (1875) (reformation of a 
promissory note).9 
 
                                                 
8 This rule, observed in a number of jurisdictions, has its origins in the English common law.  However, 
“generally no reason for the rule is given, though sometimes it is based upon the policy against permitting 
a party to plead in court his ignorance of the law.”  Henry L. McClintock, McClintock on Equity 262 (2d 
ed. 1948).  
 
9 But see Essex Group, 543 N.E.2d at 396-97.  Although noting the doctrine of mistake, the Court 
affirmed the reformation of a trust agreement to include a lump sum distribution provision that was 
inadvertently omitted by scrivener’s error.  Id. at 397.  
 
11
We are of the view that a slightly modified rule is appropriate for a testamentary trust.  
Indiana Code section 30-4-3-25 provides, “Upon petition by an interested party, the court may 
rescind or reform a trust according to the same general rules applying to rescission or 
reformation of non-trust transfers of property.”  This provision mirrors Restatement (Third) of 
Trusts § 62 (2003).10  And the Restatement’s comment b is instructive: 
 
Even if the will or other instrument creating a donative 
testamentary or inter vivos trust is unambiguous, the terms of the 
trust may be reformed by the court to conform the text to the 
intention of the settlor if the following are established by clear and 
convincing evidence: (1) that a mistake of fact or law, whether in 
expression or inducement, affected the specific terms of the 
document; and (2) what the settlor’s intention was. 
 
Restatement, supra, § 62 cmt. b (emphasis added); accord Restatement (Third) of Property, § 
12.1 (4th ed. 2003).  We adopt the Restatement view on this subject.  As a practical matter most 
trust instruments are drafted by counsel, and the language in the instrument is the testator’s only 
by adoption.  In essence the testator informs counsel what she wants to accomplish and relies on 
counsel to carry out her wishes.  If counsel makes a mistake in drafting and fails in this effort, 
then the testator’s intent has not been realized.  And this is so whether the mistake is one of fact 
or one of law.  It appears to us that reformation is appropriate under such circumstances.  See 
John H. Langbein & Lawrence W. Waggoner, Reformation of Wills on the Ground of Mistake: 
Change of Direction in American Law, 130 U. Pa. L. Rev. 521, 582-83 (1982) (commenting that 
there is no principled distinction between a lawyer’s mistake involving the “misapprehension of 
the meaning of a term” [mistake of law] and “misrender[ing] a name or a sum” [mistake of fact].  
“In either case the lawyer’s mistake prevented the will from expressing an intent that the testator 
formed and communicated, and which a well-proven reformation case can correct.”). 
 
 
In this case the record is clear that as originally drafted, the trust provision in the 
Testators’ wills did not accomplish that which was intended: to ensure that property passing to 
Norman Carlson, Jr., and his wife Margaret A. Carlson would not be subject to federal estate or 
                                                 
10 The Restatement of Trusts reads, “A trust may be rescinded or reformed upon the same grounds as 
those upon which a transfer of property not in trust may be rescinded or reformed.”  Restatement, supra, § 
62.  
 
12
state inheritance tax upon their deaths.  The trust provision failed in this regard because it did not 
establish an “ascertainable standard” for the distribution of trust principal thereby creating a 
general power of appointment under I.R.S. Treasury Regulations.  To remedy this unintended 
result, the trial court reformed the first paragraph of Section 2, Item III of the wills by inserting 
an ascertainable standard governing trustee distribution of principal to Testators and deleting the 
problematic language that could be construed as liberal discretionary distributions.  Inclusion of 
an ascertainable standard will effectively negate a general power of appointment, see I.R.C. § 
2041(b)(1)(A), and thereby conform the trust to the Testators’ original intent.  
 
We reach three conclusions: (1) the record shows by clear and convincing evidence there 
was a mistake in the trust language of the original wills; (2) the record shows by clear and 
convincing evidence the Testators’ true intent as exhaustively discussed above; and (3) the trusts 
were reformed consistent with Indiana law.  
 
Reformation and Summary Judgment 
 
 
This case is before us in a rather unusual procedural posture.  It should be remembered 
that Beneficiaries sued Law Firm in part for damages flowing from alleged negligence in 
drafting the original wills.  The trial court granted summary judgment in favor of Law Firm 
based on the reformed wills declaring in part, “[t]he effect of this Order is to dismiss any claim 
by Plaintiffs against Defendants for adverse federal income taxation resulting from the drafting 
of the subject testamentary instruments.”  App. at 5.  The underlying thrust of the trial court’s 
judgment and order is that the trust language in the wills has now been reformed to comply with 
I.R.S. regulations and there will be no adverse federal estate consequences.  Thus Beneficiaries 
have not and will not suffer damages.  According to the trial court, “the Internal Revenue Service 
must accept the reformation as controlling given the fact situation in this case.”  App. at 11. 
 
 
There are at least two problems with the trial court’s position.  First, as the Beneficiaries 
point out and the Court of Appeals observed, “[T]he Carlsons have already expended time and 
money dealing with the Wills; if the Lawyers’ work with regard to the Wills is determined to be 
negligent, these costs may be considered damages flowing from the Wills regardless of whether 
 
13
 
14
the IRS assesses a tax penalty.”  Carlson, 868 N.E.2d at 22 n.12.  We agree.  Summary judgment 
in favor of Law Firm on this point was error.  Second, as for the I.R.S., it is clear that the agency 
as well as the federal courts are bound by this Court’s determination that the Testators’ wills 
were properly reformed in accordance with the laws of this State.  Bosch, 387 U.S. at 465.  It is 
also clear that the reformed wills include the “ascertainable standard” language that comports 
with I.R.C. § 2041(b)(1)(A).  What is less clear, however, is what reaction the federal authorities 
will have to all of this.  More precisely is there some reason the I.R.S. may find to avoid the 
effect of the reformation in spite of this Court’s opinion?  We have no way to know one way or 
the other, and decline to speculate.11  Because there is a dispute of material fact on this issue, 
summary judgment in favor of Law Firm was inappropriate on this point as well. 
 
Conclusion 
 
 
We affirm in part the judgment of the trial court.  This cause is remanded for further 
proceedings. 
 
Shepard, C.J., and Dickson, Sullivan and Boehm, JJ., concur. 
 
                                                 
11 Apparently the parties may request a Private Letter Ruling (PLR) from the IRS to resolve the question 
we pose.  Rev. Proc. 2008-1, 2008-1 I.R.B 16.  And we anticipate they will do so.