Court Opinion

ID: 9782809
Source: CourtListenerOpinion
Date Created: 2023-08-30 19:18:56.780026+00
Date Added: 2024-06-11T07:35:12.844129
License: Public Domain

BAKER, Judge,
dissenting.
I cannot agree with the conclusion that John and Roger committed a breach of *574trust. The majority asserts that “where there is no question that a substantial portion of the trust corpus is ripe for distribution and the trustees are so aware, the trustees’ failure to distribute will sustain a probate court’s finding that the trustees breached their duty to administer.” Op. at 571.
It is undisputed that John and Roger were required to act with “reasonable care and prudence,” in accordance with the terms of the trust. Appellant’s App. p. 358. And when a question’ arises as to whether a breach of duty has occurred, such a determination is generally a question of fact. However, that issue can also be a question of law “where the facts are undisputed and only a single inference can be drawn from those facts.” N. Ind. Publ. Serv. Co. v. Sharp, 790 N.E.2d 462, 466 (Ind.2003).
As the majority aptly points out, the trustees may withhold trust property where there is a reasonable dispute with the trust beneficiaries over their fair shares. More particularly, Indiana Code section 30-4-3-18(a) provides that “if there is reasonable doubt with respect to any matter relating to the administration of the trust, the trustee is entitled to be instructed by the court.” Also, in accordance with In re Trust of Johnson, 469 N.E.2d 768, 771 (Ind.Ct.App.1984), this court has determined that “ ‘[a] trustee is not compelled to act at his peril in the administration of the trust. He need not act first and discover later whether his act was in breach of trust.’ ” (quoting 3 A. Scott, The Law of Trusts § 259 (1967)), trans. denied. Where a trustee determines that it is necessary and proper to use trust assets for a certain purpose, the court “will not interfere unless the trustee acted in bad faith or in some way abused or unreasonably exercised his discretion.” Goodwine v. Goodwine, 819 N.E.2d 824, 828 (Ind.Ct.App.2004).
In this case, the record demonstrates that when Nick realized that he would not receive the distribution he demanded, he “stalked out of the [meeting] room,” refused to discuss the matter further, and told John and Roger that they would be hearing from his attorney. Appellant’s App. p. 64. In short, Nick clearly rejected John and Roger’s distribution proposal.
I would also note that John and Roger’s proposed $1,000,000 distribution that was initially presented at the October 2004 meeting was based on a projected future potential tax liability of about $2,000,000. Id. at 394-95. John had been a CPA for approximately thirty years before he analyzed the trust’s future tax liability. Id. at 223. He had also served as a trustee on nine or ten other occasions in those thirty years. Id. at 224. John put that experience and training to use, and deemed the $2,000,000 holdback appropriate.
By October 2004, the trust had paid about $6,200,000 in estate taxes. Tr. p. 63. Thus, about $6.5 million remained in assets in the trust, slightly more than $3 million of which were liquid. Id. at 382, 389-90. After subtracting John’s projected $2,000,000 in estimated future tax liability, about $1,000,000 in liquid assets remained, which was the very amount that John and Roger proposed to distribute to Nick and Jack. Id. at 394-95; 398. "When Nick declined to accept a lesser distribution and conveyed his intention to consult with legal counsel, John and Roger pursued the course of action that we have recommended so frequently: they asked the trial court for guidance. See, e.g., Stowers v. Norwest Bank Ind., N.A., 624 N.E.2d 485, 489 (Ind.Ct.App.1993) (observing that if the trustee “had any question with regard to the proper distribution of the trust’s assets, it could have asked the court for *575guidance prior to distribution”). When Nick and Jack took the issue of distributions to court, John and Roger appropriately petitioned for instructions and awaited direction from the trial judge. Tr. p. 556, 559, 965-66. Thereafter, when the trial court gave its direction in July 2005, and ordered John and Roger to make a distribution, they did so immediately and distributed everything that had been originally proposed the previous fall, plus an additional $200,000. Id. at 420-21, 530, 540, 662.
In my view, to penalize John and Roger for doing that which we consistently direct trustees to do — and which they are statutorily entitled to do — is misguided and contrary to law. Nick invited this unfortunate set of circumstances when he rejected the proposed distribution, and I can only conclude that John and Roger’s withholding of funds was an exercise of “reasonable care and prudence” when considering Nick and Jack’s behavior, the threat of litigation, and the need to seek the advice of legal counsel. In short, the record is devoid of evidence that John and Roger abused their discretion or acted in bad faith. To the contrary, they were careful, measured, and responsible in their actions as trustees.
I would reverse the trial court’s finding that John and Roger committed a breach of trust in this instance.