No More Compromise: Indiana Supreme Court Closes Door to Pre-Mortem Settlement Agreements, Leaves Open Window

On June 19, the Indiana Supreme Court decided In the Matter of the Supervised Estate of Kent v. Kerr, rejecting a pre-mortem settlement agreement the Court of Appeals had unanimously validated last year. Aging Hoosiers often seek to allay anticipated trust- and will-distribution disputes while living, so they can take solace in knowing a family feud won’t erupt after they pass. The Kerr decision closes the door to pre-mortem settlement agreements under Indiana’s Probate Code, but it leaves open the possibility of upholding such an agreement under general contract principles.

A portion of Indiana’s Probate Code, known as the “Compromise Chapter,” provides trust and will-contest litigants a device to settle their claims through a binding settlement agreement. See Ind. Code ch. 29-1-9. The agreement can be reviewed by the court overseeing administration and, so long as it conforms to statutory requirements, it will be lawful and binding on all parties. Kerr involved such a settlement agreement executed between the beneficiaries and the testator while he was still alive. Before the testator died, one of the beneficiaries attempted to rescind the agreement. After the testator died, the other beneficiary sued to enforce the agreement under the Compromise Chapter.

 

Will drafting and contests are complicated and ever-evolving areas of law. Questions on wills and estate disputes should be directed to legal counsel.

The Indiana Supreme Court applied judicial statutory interpretation rules to the Compromise Chapter, which it determined was “ambiguous” as to whether it could apply to pre-mortem contracts. Because the Compromise Chapter uses terms such as “decedent,” claims” and “probate,” the Court concluded it was not the General Assembly’s intent that the Compromise Chapter apply to pre-mortem agreements. However, the Court noted, “To be clear, we have not closed the courthouse doors to these types of agreements. Rather, we have held, in light of the statute’s text and purpose as well as our precedent, merely that parties cannot use one particular method—the Compromise Chapter—to enforce them.”

The Court concluded that the record on appeal was undeveloped as to whether the settlement agreement could be enforced under general contract principles, and the case was remanded for further proceedings. Justice Slaughter dissented on the grounds that pre-morten agreements should be enforced because nothing in the Compromise Chapter prohibits them and there is a general public policy in favor of enforcing settlements. Will drafting and contests are complicated and ever-evolving areas of law. Questions on wills and estate disputes should be directed to legal counsel.