COA affirms for grandchildren in trust property distribution dispute

The Indiana Court of Appeals has affirmed for more than a dozen grandchildren in their fight to secure heirship in the distribution of trust property.

Before her death, Janice Dray executed a Living Trust Agreement and created the revocable Janice A. Dray Living Trust. The income derived from the trust was intended to be distributed to Janice’s sister-in-law, Jacqueline Dray, in a life estate if Jacqueline survived Janice and her husband.

The trust property, upon Jacqueline’s death, was set to be converted into cash and distributed in equal shares, share and share alike, to Janice’s sister and brother, Alma Franke and Ralph Kelker. If either were not living at the time of the distribution, then the cash was to go their surviving children, per stirpes.

Janice died in 1997, effectuating the life estate for Jacqueline, who ultimately passed away almost 28 years after the creation of the trust. By that point, she outlived Ralph and Alma, two of Ralph’s daughters, and all of Alma’s five surviving children. Jacqueline was survived by three of Ralph’s children — the Kelker children — and three of Ralph’s grandchildren, as well as by Alma’s 13 grandchildren.

The Kelker children and the Franke grandchildren appeared as separate intervenors in the proceedings to docket the trust and determine heirship, with the Allen Superior Court ultimately granting summary judgment to the Franke grandchildren. The latter had asserted that the use of “per stirpes” language in the trusts’ distribution provision at the second-generation level reinforced the idea that each of the Kelker and Franke families should receive one-half of the trust property.

On appeal, the Kelker children argued that the living trust agreement was unambiguous because it created contingent remainder interests in the trust property. They alleged that there was no ambiguity in the distribution provision related to the use of the terms “in equal shares, share and share alike” and “per stirpes” because the terms describe two different distribution schemes applicable to separate classes of beneficiaries.

“We agree with this contention; however, the Kelker Children misunderstand the cause of the ambiguity,” Judge Patricia Riley wrote for the appellate court. “There is no conflict between the per capita and per stirpes distributions at the first- and second-generation levels of beneficiaries respectively. Rather, we conclude that the Distribution Provision is ambiguous because the terms surviving and per stirpes, both used within the same second-generation class of beneficiaries, are irreconcilable.”

The appellate court therefore found that if Alma and Ralph’s children must survive Jacqueline to advance an interest in the trust, there can be no per stirpes distribution because the condition of survival negates the right of representation inherent in a per stirpes distribution.

Additionally, it agreed with the trial court that no genuine issue of material fact exists that Janice intended a per capita division of the trust corpus between her siblings, with a per stirpes division among Alma and Ralph’s descendants.

“Therefore, the Franke Grandchildren are entitled to judgment as a matter of law,” the appellate court concluded in Jayne Murphy, Stephen Kelker, and Cristine Pisula v. Trustee of Star Financial Bank, Laura Lynne Bradford, Amy Myers, Abbie Fellrath, Courtney Ulrey, Eric Franke, Anne Marie Cochrane, et al., 19A-TR-1529.

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