Pond v. Pond

On the same day, Sidney M. Pond executed his last will and testament and a revocable trust to which he and his wife transferred almost all of their assets (Trust). The Trust provided that Sidney and his wife serve as co-trustees and that they receive all of the income and as much principal as they may need during the settlor’s lifetime. Although the trust provided that the trust assets be distributed to their children after both Sidney and his wife had died, the trust contained no provision for payment of income or principal to Sidney’s wife after his death. Sidney’s will, however, made his wife executrix of his estate and in that role authorized her “to determine whether to elect . . . to qualify all or a specific portion of the [Trust] for the federal estate tax marital deduction.” Since the trust did not provide for payment of the trust income to Sidney’s wife at least annually for life, the trust failed to qualify for the marital deduction under I.R.C. § 2056(b)(7)(B), exposing the estate to an additional $70,000 in estate tax liability. After Sidney’s death, his wife brought an action in the Probate and Family Court seeking reformation and requested that the court reserve and report the case to the Appeals Court in order to seek direct appellate review in the Supreme Judicial Court. In light of the rule in Commissioner of Internal Revenue v. Estate of Bosch, 387 U.S. 456 (1967) that only decisions of the highest state court are binding on the Internal Revenue Service, the Supreme Judicial Court of Massachusetts granted the application for direct appellate review. Sidney’s wife argued that as a result of scrivener’s errors, the trust failed to accomplish the two goals of Sidney’s estate plan – providing support for his wife and ensuring that the trust benefitted from the marital deduction as a qualified terminable interest property (QTIP) trust – and without reformation of the trust, his intent would be defeated.