Pennsylvania Superior Court Upholds Orphan’s Court Finding that Mistake of Law is Not an Unanticipated Circumstance to Warrant Termination of Trust
In the Matter of Peterson Family Irrevocable Trust, 333 A.3d 453 (Pa. Super. 2025)
Don I. and Marjorie R. Peterson (Appellants”) sought to terminate the Peterson Family Irrevocable Trust (the “Trust”), a noncharitable irrevocable trust they had established. Their petition was contested by one of the Trust beneficiaries, their granddaughter.
The Trust was created on April 7, 2011, with Appellants’ daughter serving as the trustee, and the beneficiaries being their two grandchildren. The Trust’s sole asset was Appellants’ personal residence. Appellants filed a petition to terminate the Trust, arguing that it violated federal and state guidelines for asset preservation as an unanticipated circumstance and that the relationship with the trustee had changed, making the Trust’s administration impracticable and wasteful.
The Orphan’s Court reviewed the petition under 20 Pa.C.S.A. § 7740.2(a) & (b), which provide for modification or termination of a noncharitable irrevocable trust by the Court. Under 20 Pa.C.S.A. § 7740.2(a):
The court may modify the administrative or dispositive provisions of a noncharitable irrevocable trust, make an allowance from the principal of the trust[,] or terminate the trust if, because of circumstances that apparently were not anticipated by the settlor, modification, allowance[,] or termination will further the purposes of the trust. To the extent practicable, the modification or allowance shall approximate the settlor’s probable intention.
At the same time, under 20 Pa.C.S.A. § 7740.2(b) “The court may modify the administrative provisions of a noncharitable irrevocable trust if adherence to the existing provisions would be impracticable or wasteful or impair the trust’s administration.”
The Orphans’ Court denied the petition, leading to this appeal.
The Pennsylvania Superior Court held, as a matter of apparent first impression, that Appellants’ mistake of law regarding the Trust’s impact on Medicaid eligibility did not constitute an unanticipated circumstance that would justify terminating the trust under Section 7740.2(a).
Appellants intended the Trust to protect their residence from Medicaid asset eligibility considerations and to preserve it for future generations. However, the Trust agreement did not explicitly state this purpose, and Appellants’ misunderstanding of the legal consequences was not considered an unforeseen fact. The Orphans’ Court found that the Trust’s terms were clear and that Appellants’ relationship with the trustee did not justify termination under Section 7740.2(b), which allows for modification but not termination of a trust due to impracticable administration. The Superior Court concluded that Appellants’ mistake regarding the legal effect of the Trust agreement did not warrant termination.
The Superior Court affirmed the Orphans’ Court’s decision, emphasizing that ignorance of the law does not provide grounds for relief. Appellants’ belief that the Trust would shield their residence from Medicaid claims was deemed a mistake of law, not an unforeseen circumstance.