Appellate court reverses denial of request for third-party trustee

The Indiana Court of Appeals has reversed the denial of a woman’s request for a neutral third party to replace her brother-in-law as the personal representative and trustee of her father’s estate.

Donald Montgomery’s last will and testament bequeathed his estate to his daughters Sheri Montgomery and Pamela Shively, equally, upon his death. A determined settlement agreement provided that Steve Shively, Pamela’s husband, shall “prepare a Final Combined Personal Representative’s and Trustee’s Accounting and file any necessary closing documents with the court.”

The settlement agreement was ultimately approved and Steve was appointed as trustee of The Living Trust of Donald M. Montgomery and Betty M. Montgomery, and as personal representative of Donald’s estate “to do all things and execute all documents necessary to carry out the terms and conditions” of the agreement.

In December 2017, Steve filed a “Personal Representative’s Final Account, Petition to Settle and Allow Account, and Petition for Authority to Distribute Assets Remaining and Close Estate and Petition for Fees of Attorney and Personal Representative” in the estate cause, stating any income tax owed was paid by the personal representative.

However, Sheri objected to the accounting in both the estate and trust causes, asserting numerous errors, including that Steve “failed to explain how the partial distributions were allocated” to her and Pamela and “how each shall receive the amounts they are to receive.” She also asserted Steve “failed to show beginning and ending dates and balances from date of death to present” and “how real property and personal property was valued.”

Sheri thus moved to remove Steve as the estate’s personal representative and trustee in favor of a neutral third party, but the Miami Superior Court denied her request. It likewise rejected her motion to correct error and motion to reconsider.

On appeal, Sheri argued, among other things, that Steve’s accounting was statutorily deficient. She also alleged Steve’s testimony as to how he handled the accounting did not cure it “because it is conclusion-based in nature.”

Sheri further argued she did not release Steve from his obligation under the settlement agreement, including his obligation to file a final accounting.

The Indiana Court of Appeals agreed with Sheri’s arguments in Sheri Montgomery v. Estate of Donald M. Montgomery, Steve Shively, the Executor, and The Living Trust of Donald M. Montgomery and Betty M. Montgomery, Steve Shively, Trustee, 18A-ES-2191, observing that the signatories of the settlement agreement expressly agreed that they did not release any claim related to their rights and obligations created pursuant to the agreement, and that it required Steve to file a combined final accounting.

“Sheri was entitled to the distribution set forth in the Settlement Agreement and did not, by virtue of the partial distributions, forfeit her right to enforce the terms of the Settlement Agreement or to challenge the accounting,” Judge Elaine Brown wrote.

The appellate panel further sided with Sheri on her accounting assertions, finding the assets and distributions schedules did not reflect the division or transfer of funds at Raymond James into two separate accounts for Sheri and Pamela, as Steve testified. 

“While Appellees state that it would make no sense for Steve to complete the distribution of all assets, the distribution schedule does not reflect any amounts held in reserve, Steve did not file a supplemental report of distribution, and the court nevertheless closed the proceedings. A final distribution consistent with the Settlement Agreement should be verified and effected before the proceedings are closed,” Brown concluded.

The case was reversed and remanded for further proceedings.