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COA overturns trust validity case

March 10, 2016

A redacted copy of a living trust did not stop a woman from challenging and winning her charge that a trial court improperly dismissed her complaint contesting validity of the trust.

In two cases involving Stephanie Schrage and The Audrey R. Seberger Living Trust, the Indiana Court of Appeals found the trust was justified in giving Schrage a redacted version of the trust, but also found a trial court erred in dismissing her complaint contesting validity of the trust.

In the first case, Schrage claimed she was entitled to a full unredacted copy of the trust because she was a remainder beneficiary, but the trial court said she is not because the net income of the trust is not payable to her. She is also not a remainderman, as she is not entitled to principal. She is a specific beneficiary.

The COA agreed with the trial court in its ruling, saying she is a specific distributee. It says Indiana Code 30-4-4-5(e) says just because a person has an interest in the trust does not necessarily make that person a beneficiary of the trust. She is not entitled to trust principal, and the trust would not terminate based upon her specific distribution. She received a certification of trust from the trustee and is entitled to nothing further.  

But the redacted copy of the trust did not stop her from winning a charge saying her complaint was improperly dismissed. In the second case, the appeals court reversed a trial court decision which dismissed her complaint contesting the validity of the trust. The COA found the trial court erred because Schrage did not miss any person in her complaint, but instead the appellees said “alleged tortfeasors” were not notified. However, the appellees in the case did not cite any other case where a complaint had been dismissed for this reason. Because of that, the trial court erred.

However, the COA did find that Schrage must amend her complaint to plead her allegations with more specificity, because it agreed with the appellees that her complaint was not specific enough.

Also, the COA found Schrage did not have to docket the trust before bringing a challenge to its validity. It cites I.C 30-4-6-7 which says “if it is necessary to the determination of any issue of law or fact in a proceeding the court may direct a copy of the trust instrument, if any, to be kept in its records.” This language means the decision on whether to docket the trust is within the discretion of the trial court.

The COA also found Schrage commenced her action contesting the validity of the trust within the 90-day time period, and that any failure to docket the trust did not deprive the trial court of subject matter jurisdiction.

The court remanded proceedings consistent with its opinion to the trial court.

The cases are Stephanie A. Schrage v. In the Matter of the Seberger Living Trust u/t/d April 27, 2009,45A03-1506-TR-685; and
Stephanie A. Schrage v. The Audrey R. Seberger Living Trust u/t/d April 27, 2009; John R. O'Drobinak as Successor Trustee; et al., 45A04-1506-TR-686.
 

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