At issue in the recent Indiana Supreme Court decision of Rotert v. Stiles was whether a provision regarding the status of a child’s marriage in a decedent’s revocable living trust was considered to be an impermissible restraint. In 2009, Marcille Borcherding (hereinafter referred to as the “Decedent”) settled a revocable living trust (hereinafter referred to as the “Trust”) that divided her property between her son, Roger Rotert (hereinafter referred to as “Rotert”), her daughter, Connie Stiles (hereinafter referred to as “Stiles”) and Decedent’s four stepchildren. The applicable portion of the Trust contained a subtrust for Rotert’s share consisting of cash and real property. Stiles was designated as the trustee of Rotert’s subtrust. The Trust contained a provision stating:
In the event that [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.
In short, if Rotert is unmarried at the time of his mother’s death, he would receive his Trust share outright. If Rotert is married at the time of his mother’s death, then his Trust share would remain in trust for his benefit. At the time the Trust was drafted, Rotert had been married to his third wife for over eight years. However, prior to Decedent signing the Trust, Rotert’s wife filed for divorce. However, the couple later reconciled and were married at the time Decedent passed away in 2016.
After Decedent’s death, Rotert and Stiles disagreed as to whether the assets in the Trust being held for Rotert’s benefit should remain in trust. As a compromise, Stiles distributed the cash to Rotert and retained the real property in trust for Rotert’s benefit. Rotert later sued Stiles alleging that the Trust’s challenged provision was void against public policy because such provision was an impermissible restraint against marriage.
The trial court found in Stiles’ favor in that the Trust’s challenged provision was not void against public policy. On appeal by Rotert, the appellate court reversed the trial court’s decision by holding that the challenged provision was, in fact, void against public policy by being an impermissible restraint against marriage. Stiles thereafter appealed the appellate court’s decision to the Indiana Supreme Court (hereinafter referred to as the “Court”).
The Court reversed the appellate court’s decision by ruling that “the statutory rule prohibiting restraints against marriage applies only to dispositions to a spouse by will and not dispositions by trust.” As the challenged disposition in Rotert was from a parent to child in a revocable living trust (as opposed from one spouse to the other in a Will), the Indiana Supreme Court held that Rotert’s portion of the Trust was not an impermissible restraint on marriage as Indiana law does not include dispositions from trusts as potentially being able to prohibit restraint on marriage.
In its analysis, the Court first looked to the plain language of the Indiana Probate Code, the applicable section stating “[a] devise to a spouse with a condition in restraint of marriage shall stand, but the condition shall be void.” Based upon the Court’s interpretation of the statute’s plain meaning, such a prohibition applies only to gifts made via Will. A disposition via revocable living trust, according to the Court, was beyond the scope of the applicable statute.
The Court next analyzed whether the Indiana Trust Code prohibits the challenged provision. The Indiana Trust Code does not prohibit conditions with respect to the restraint of marriage. Instead, the Court reasoned that “[w]hat [the Indiana Trust Code] prohibits is ignoring the settlor’s intent (and where relevant, the trust’s purpose) as manifested in the trust’s plain terms.” According to Indiana Code Section 30-4-1-3, the rules of law contained in the Indiana Trust Code “shall be interpreted and applied to the terms of the trust so as to implement the intent of the settlor and the purposes of the trust.” Therefore, unless doing so would clearly violate the rules of law in the Indiana Trust Code, the Court was bound to implement the Decedent’s manifested intent. As no public policy was being violated by Decedent’s Trust, the Court found that the Trust’s terms were not void against public policy, and therefore, held in Stiles’ favor and against Rotert.