Hey there, Legal Tea Listeners –This is your host, Jenny Rozelle. Welcome back – for another episode of Legal Tea! Today’s topic is a current trend … something going on in current time, that is pertinent to my world. So today’s topic is about a decision that recently came down from the Indiana Supreme Court – that, to be honest, I was a little surprised to hear the outcome, but understand the Court’s logic and explanation too. Anyway, the case is Rotert v. Stiles and it was argued on June 2, 2021 and the decision was released on October 8, 2021. Enough of this legal jargon, though, let’s talk about the juice…
So, what is this case about, you ask?
In 2009, Marcille Borcherding created a Revocable Living Trust leaving her estate, at her passing, to her son, Roger Rotert, daughter, Connie Stiles, and four stepchildren. The Trust contained both monetary assets, like cash accounts, and “hard” assets like property. In the Trust, Marcille created a specific provision for her son, Roger, which stated:
“In the event that [Roger Rotert] is unmarried at the time of my death, I give, devise, and bequeath his share of my estate to him outright and the provisions of this trust shall have no effect. However, in the event that he is married at the time of my death, this trust shall become effective, as set out below.”
You see, according to the facts of the case, Roger was on his third wife (no judgment here – just saying, he was on #3!). The third wife’s name was Donna – and Roger and Donna had been married for about 8 years or so. Shortly before Marcille created the Trust, Donna filed for divorce. Though, some time later, Roger and Donna reconnected and were actually married at the time of Marcille’s passing. (It’s not clear whether the divorce filing just never got finalized, or if they indeed remarried. Nonetheless, they were married at the time of Roger’s Mom’s passing.) So, in my personal and professional opinion, Marcille likely incorporated this specific provision in her Trust for Roger due to his marital history.
The manager of Roger’s Trust, or formally called “Trustee” of the Trust for him, was his sister, Connie. After their mother’s passing, Roger and Connie disagreed as to whether Roger’s share should go in this sub-trust for Roger. Of course, Connie likely wanted to “follow the rules” and Roger likely didn’t – and wanted his inheritance outright and free-of-trust. Connie attempted to appease Roger and distributed the sub-Trust’s cash assets outright to Roger, but kept the “hard” assets, like property, inside the sub-Trust.
So, THAT is what this case is about – Roger ended up suing and alleging that the provision in his mother’s Trust is a void restraint against marriage. When I first read the “synopsis” version of those Supreme Court decision, my head immediately went to restraint on marriage – I remembered that during my law school days and Bar Exam studying “restraints on marriage” are, sort of, frowned upon and not “really” allowed in my estate planning world. So I don’t spoil the ending on what the Court decided and how they made their decision, I won’t go into all that yet…
At the trial court level, Roger “lost” and Connie, as representative for the Trust, “won.” Roger appealed actually flip-flopped the decision meaning that they found in Roger’s favor, and Connie and the Trust “lost.” The Court of Appeals claimed the Trust provision is “an impermissible restraint against marriage.” Connie appealed to the Supreme Court, which is the decision I’m talking about today, and of course that means that the Supreme Court decided to take the case. (You know they don’t have to hear all cases, right?!)
Anyway, so the Supreme Court heard the case and in a multi-page opinion, the Court decided in favor of Connie and the Trust – so, Roger “lost.” Their reasoning for the decision primarily centers around that restraints against marriage prohibitions only apply to dispositions of assets to a spouse by a Last Will and Testament, and that the prohibition does NOT extend to a Living Trust (like a Revocable Living Trust, which is what Marcille created). Here, with Roger, Roger was Marcille’s SON (not spouse) and the disposition was made by Trust (not through a Will). So by a strict reading of the statutes, the restraint against marriage prohibition does not apply here.
For clarification and for anyone that has little to no experience with estate planning, in general, Wills and Trusts are two different creatures. While I won’t go into detail as to HOW they are different, they are indeed so different that there are two different parts of the Indiana Code that deal with them – one for Wills under the Probate Code and one for Trusts under the Trust Code. So, what the Supreme Court basically said was that the whole restraint on marriage thing IS something in the Probate Code for Wills, but it is NOT in the Trust Code for Trusts. For that reason, they did not extend the prohibition of restraint on marriage to Marcille’s TRUST because the Trust Code does not expressly DISallow it…
The Court further explained that YES, the Indiana Trust Code does NOT prohibit restraints on marriage, but what it DOES prohibit is “ignoring the settlor’s intent.” Here, Marcille was the settlor, and her intent was pretty darn clear to me. Sounds like the Supreme Court thought so too. They actually state in their opinion for this case, “Given this … mandate to honor Borcherding’s intent [that’s Marcille Borcherding], we decline to invalidate the challenged provision [by Roger] or to restrict what the legislature does not forbid.”
Interestingly, Justice Goff, who wrote a separate opinion on this case, but ultimately agreed with the result – shared that he was concerned that the outcome of this case would lead to a “Pandora’s box of unintended and harmful consequences” such as “someone creating a Trust with conditions such as the recipient not marrying a person from a different race, refusing to pay property taxes, or participating in another illegal act.” I thought Justice Goff’s opinion poses an interesting issue. Like I have talked about before on Legal Tea – where does the line get drawn? I’m not saying I agree, disagree, whatever – I’m just saying I appreciate Justice Goff’s piece of wisdom here. He said in his opinion, “Surely, the Legislature would not have intended such an unjust or absurd result.”
In Justice Slaughter’s written opinion, he explained that the Trust Code references one time about “public policy.” And that’s what the issue is here – the statutory prohibition against restraint on marriage is claimed to be “against public policy.” Justice Slaughter references said one section that claims “XYZ” is against public policy, and that is Section 30-4-2-12 which states that “terms of the Trust may not require the Trustee to commit a criminal or tortious act or an act which is contrary to public policy.” Which obviously that makes sense, right? You can’t write in a Trust to require your Trustee to go rob a bank to add more money to your Trust!
So yeah, this case was an interesting one – at least for me, but I hope for you too! So as we sit right now, thanks to this Supreme Court decision, you can include fairly restrictive language in a Trust if you don’t super love your in-law or whoever your beneficiary is married to. But because this decision, right now it’s only allowed in a Trust, not a Will. It’s possible that this decision shines a big light on the Indiana Trust Code and maybe legislatively, they modify the Trust Code to prohibit this restraint on marriage. Who knows! Nonetheless, it’s ALLOWED right now, for all of you that want to put restrictions on people inheriting based on their marital status.
I’m curious as to how this may work alongside a “no contest clause.” You see, a few years back, Indiana was the SECOND TO LAST state to finally allow for “no contest” clauses in estate planning instruments. So, where my head goes is … what if you did have a desire to restrict a beneficiary’s inheritance based on, for example, their marital status – and you include a “no contest” clause in your Trust.
IF the Trust Code stays as-is and allows for restraints on marriage, having a “no contest” clause would encourage the beneficiary from not filing a lawsuit like Roger did. And IF the Trust Code DOES get modified to prohibit it, would the “no contest” clause being in the Trust document deter beneficiaries from kicking up a fuss and filing a suit?
Interesting stuff here, huh! And they say my little estate and elder law is boring! You know what this topic reminds me of, though, and maybe it’s just the way my weird brain works – but what Marcille did in her Trust is, on its face, a custom estate plan. To be honest, I like seeing the thought that Marcille put in her estate planning – so often, I see people just put together an estate plan without much thought. They don’t consider things like age (do you REALLY want someone like 18 inheriting without restrictions!?), lifestyle choices (do you REALLY want someone who is terrible with money inheriting outright?), addictions (do you REALLY want someone who battles an addiction to walk into an inheritance without oversight?), etc. etc.
There are ways to do your estate plan in a way to give to who you want, but do it in a way that is SMART. It requires thought on your part and a qualified estate planning attorney to walk you through the “how” – but that’s what we are here for, what I’m here for … to help get your wishes, whatever those wishes are, on paper. I love, love, love to see that Marcille’s wish on how Roger inherited stood up – I take Justice Goff’s point that this Supreme Court decision could be stretched and allow for people to take advantage of the flexibility our Trust Code offers, but that’s what the Court is there for – to hear cases, make decisions, and ultimately those decision can provide parameters for us in the future.
When it is time to #DoYourEstatePlan, remember that it is YOUR estate plan – that, you’re in the driver’s seat and can pick and customize what you want to have happen. If there are legal restrictions (like not being able to put a restraint on marriage through a WILL!), the attorney, so long as they are qualified, will be able to explain what’s allowed (or not). I often tell my clients, “You figure out WHAT you want to happen, and it’s my job to make it legal and get it in writing.”
Next week’s topic is on estate planning of the rich and the famous – on that episode, we’re going to talk about the great, great actor, Philip Seymour Hoffman. So yeah, we will talk about him and his estate next Tuesday, Legal Tea Listeners!
Talk to you then and stay well!
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