Justices consider pre-mortem family settlement agreements

The Indiana Supreme Court must decide whether pre-mortem settlement agreements addressing the division of an estate’s assets are enforceable after hearing oral arguments Thursday in a probate dispute between two siblings.

The case of In the Matter of the Estate of Gary Kent, et al. v. Cynthia Kerr, 55S01-1712-ES-00747, stems from a settlement agreement Gary Kent asked his children, Cynthia Kerr and John David Kent, to execute prior to his death. Kent’s will provided for the equal division of his assets between his children, but the settlement agreement discussed the specifics of how those assets — including real estate, a coin collection and cash — were to be distributed between the siblings.

According to Robert Hamlett, counsel for Kerr, Gary Kent knew he was dying when he asked his children to execute the agreement and, in fact, died one week after he signed off on it. Thus, assuming the agreement is approved by a probate court on remand, Hamlett said the fact that the agreement was signed before Kent’s death should not preclude its enforceability.

Though the trial court disagreed with that assessment, the Court of Appeals found in favor of Kerr. Ruling on an issue of first impression, the appellate panel determined the applicable statute — Indiana Code section 29-1-9-1 — does not explicitly prohibit pre-mortem family settlement agreements.

But Darla Brown, counsel for David Kent, offered a different reading of I.C. 29-1-9-1 during Thursday’s oral arguments. That statute seeks to resolve controversies regarding the admission to probate of a decedent’s will, Brown said, which cannot be done until the testator has died.

Further, if Gary Kent had wanted to provide specific instructions for the distribution of his assets, he could have executed a codicil or an entirely new will, Brown said. But in the context of a pre-mortem settlement agreement, it would not make sense for two siblings to assume they would be the beneficiaries of their father’s will and to divide assets they do not yet own, she said.

Hamlett, however, said section 29-1-9-1 is silent as to whether it addresses only post-mortem agreements or pre-mortem as well. Given that silence, there is nothing precluding the enforcement of the siblings’ agreement, so the best course of action would be to submit the agreement for a probate court’s approval, he said.

Asked by Justice Mark Massa why Kent’s children could not treat the agreement as an independent contract action outside of probate court, Brown noted her client sent notice of rescission of the agreement to his sister less than a week after signing it, and before his father died. But Hamlett said Indiana law only allows for rescissions in the case of fraud, mistake or oppression to one of the parties, none of which were present here.

The justices continually returned to the issue of the existence of questions of fact, including whether the rescission could be considered valid. Hamlett told the court he would not have an issue with sending the agreement back to the trial court for consideration of its validity and rescission, but Brown said it is unclear who the agreement was between – just the siblings, or their father, as well?

Brown also said allowing for pre-mortem agreements would change the nature of the practice of estate planning by complicating the interpretation of the decedent’s dying wishes. But Hamlett maintained that in this case, the agreement was executed pursuant to the decedent’s wishes.The oral arguments can be viewed here.