Court Opinion

ID: 2789937
Source: CourtListenerOpinion
Date Created: 2015-03-30 15:09:19.215144+00
Date Added: 2024-06-11T11:11:16.252287
License: Public Domain

MEMORANDUM DECISION
Pursuant to Ind. Appellate Rule 65(D), this                     Mar 30 2015, 9:23 am
Memorandum Decision shall not be regarded as
precedent or cited before any court except for the
purpose of establishing the defense of res judicata,
collateral estoppel, or the law of the case.

ATTORNEY FOR APPELLANT                                   ATTORNEY FOR APPELLEE
Douglas L. Biege                                         Bradley J. Adamsky
Drayton, Biege, Sirugo & Elliott, LLP                    Newby, Lewis, Kaminski & Jones, LLP
LaPorte, Indiana                                         LaPorte, Indiana

                                             IN THE
    COURT OF APPEALS OF INDIANA

In the matter of the Donald L.                           March 30, 2015
Colbert Living Trust dated 5-27-                         Court of Appeals Case No.
2008 created by Settlor, Donald                          46A03-1408-TR-287
L. Colbert,                                              Appeal from the LaPorte Superior
                                                         Court; The Honorable Richard R.
Barbro Colbert,                                          Stalbrink, Jr., Judge;
                                                         46D02-1402-TR-11
Appellant,

        v.

Katherine Colbert Kraek,
Appellee.

May, Judge.

Court of Appeals of Indiana | Memorandum Decision 46A03-1408-TR-287 | March 30, 2015   Page 1 of 8
[1]   One of the named beneficiaries of the Donald L. Colbert Living Trust, Colbert’s

      widow, Barbro, appeals an “Order Providing for the Interpretation of a Living

      Trust for [Colbert’s Daughter] Katharine Colbert Kraeck and the Credit Shelter

      Trust.” (App. at 4.) Barbro argues on appeal the trial court improperly

      interpreted the Trust provisions in such a way that the Marital Share portion of

      the Trust was not funded.1

[2]   We affirm.

                                    Facts and Procedural History
[3]   In 2008, Donald Colbert (“Colbert”) created the Donald L. Colbert Living

      Trust. The named beneficiaries were Donald’s wife, Barbro, and his daughter,

      Katherine Kraeck. Colbert died June 19, 2013. His will provided all his assets

      would pour into the Trust. The corpus of the Trust included personal property

      worth about two million dollars.

[4]   Article Seven of the Trust, “Creation of Trust Shares Upon My Death,”

      provides “If my wife survives me, my Trustee shall divide the remaining trust

      property into two separate shares as provided in Section 7.01 and Section 7.02.

      One share shall be designated the ‘Marital Share’ and the other share shall be

      designated the ‘Non-Marital Share.’” (Id. at 91). Barbro survived Colbert.

      1
        As the trial court correctly interpreted the Trust language in a manner that reflected Colbert’s intent, we do
      not address Barbro’s alternative argument that the trial court should have reformed the Trust so that it would
      conform to Colbert’s intent.

      Court of Appeals of Indiana | Memorandum Decision 46A03-1408-TR-287 | March 30, 2015                 Page 2 of 8
[5]   The Trust assets were to be divided differently depending on the status of the

      federal estate tax.2 Section 7.01, “Division of my Trust (No Federal Estate

      Tax),” provided:

               If there is no federal estate tax in effect at my death and Section 1022
               of the Internal Revenue Code is in effect, my Trustee shall allocate to
               the Non-Marital Share assets from the remaining trust property
               selected by my Trustee that shall collectively have a sufficient amount
               of appreciation to fully utilize the entire aggregate basis increase
               allowed under Section 1022(b) of the Internal Revenue Code.
               From the remaining trust property, my Trustee shall allocate to the
               Marital Share trust property selected by my Trustee that, taking into
               account any other property passing to my wife by reason of my death
               (whether under or outside of this agreement) shall collectively have a
               sufficient amount of appreciation to fully utilize the spousal property
               basis increase available to my estate under Section 1022(c) of the
               Internal Revenue Code.
      (Id.). The remaining Trust property would be allocated to the Non-Marital

      Share.

[6]   Section 7.02, “Division of My Trust (Federal Estate Tax Exists),” provided:

               If federal estate tax is in effect at my death, my Trustee shall divide the
               remaining trust property into the Marital Share and the Non-Marital
               Share as provided in this Section.
               (a)      Creation of the Marital Share

      2
        When Colbert created the Trust in 2008 he presumably contemplated a changed federal estate tax scheme
      depending on when he died. The Economic Growth and Tax Relief Reconciliation Act of 2001 gradually
      reduced the maximum federal estate tax rate and gradually increased the applicable exclusion amount from
      $1 million in 2002 to $3.5 million in 2009. The federal estate tax was reinstated for 2010 with a five million
      dollar applicable exclusion amount. Steingass v. Steingass, 2012-Ohio-1647, ¶¶ 3-5 (Ohio Ct. App. 2012).

      Court of Appeals of Indiana | Memorandum Decision 46A03-1408-TR-287 | March 30, 2015                Page 3 of 8
         My Trustee shall allocate to the Marital Share a fractional share of the
         remaining trust property calculated as follows:
                  (1)      The Numerator
                  The numerator of the fraction shall equal the minimum value,
                  assuming the value qualifies for the federal estate tax marital
                  deduction, sufficient to reduce the federal estate tax to the
                  lowest possible amount. In computing the numerator, my
                  Trustee shall take into account my gifts (including gifts treated
                  as made by me) and all deductions, exclusions, credits and
                  reductions in value allowed in computing such tax; provided,
                  however, that any state death tax credit shall be taken into
                  account for this purpose only to the extent that it does not
                  increase the amount of state death taxes payable.
                  (2)      The Denominator
                  The denominator shall consist of the value of the remaining
                  trust property as finally determined for federal estate tax
                  purposes.
         The Marital Share shall carry its pro rata share of the income, provided
         that in no event shall the Marital Share receive less income than that
         required to be paid to my wife under applicable state law.3
(Id. at 92) (footnote and emphasis added).

3
  We acknowledge Barbro’s assertion “the result of the trial court’s interpretation disinherits Barbro Colbert
completely, leaving the entire trust to Katherine Kraeck.” (Reply Br. of Appellant/Barbro Colbert at 5.) It is
not apparent Barbro is “disinherit[ed] . . . completely.” Section 7.02 includes the language “in no event shall
the Marital Share receive less income than that required to be paid to my wife under applicable state law.”
Furthermore, Article Six of the Trust explicitly provides “any tangible personal property not disposed of by a
written memorandum” is to be distributed to Barbro. The parties do not direct us to a written memorandum
that otherwise disposes of any tangible personal property. Katherine also notes any jointly held property
would pass to Barbro by operation of law.

Court of Appeals of Indiana | Memorandum Decision 46A03-1408-TR-287 | March 30, 2015                Page 4 of 8
[7]   On Barbro’s death, the Marital Trust would terminate and the remainder would

      be administered pursuant to Section Nine, the Trust for Katharine Colbert

      Kraeck.

[8]   When Colbert died in June 2013, the federal estate tax was in effect and Section

      1022 of the Internal Revenue Code was not. Barbro asked the trial court to

      determine the proper funding of the marital share and the non-marital share of

      the Trust. The trial court entered an Order Providing for the Interpretation of a

      Living Trust for Katharine Colbert Kraeck and the Credit Shelter Trust, (id. at

      4), in which it determined the Marital Share would not be funded and the

      funding would instead be directed to the Credit Shelter Trust of which Colbert’s

      daughter was beneficiary.

                                     Discussion and Decision
[9]   The interpretation of a trust document is a question of law for the court. Kristoff

      v. Centier Bank, 985 N.E.2d 20, 23 (Ind. Ct. App. 2013), trans. denied. The

      primary purpose of the court in construing a trust instrument is to ascertain and

      give effect to the settlor’s intent. Id. Indiana follows “the four corners rule,”

      which provides extrinsic evidence is not admissible to add to, vary or explain

      the terms of a written instrument if the terms of the instrument are susceptible

      of a clear and unambiguous construction. Id. Thus, if a trust document is

      capable of clear and unambiguous construction, we must give effect to the

      trust’s clear meaning without resort to extrinsic evidence. Id. We are not at

      liberty to rewrite the trust agreement. Id. If a trust must be interpreted, its

      Court of Appeals of Indiana | Memorandum Decision 46A03-1408-TR-287 | March 30, 2015   Page 5 of 8
       interpretation is a question of law we review de novo, giving no deference to the

       trial court’s interpretation. Univ. of S. Ind. Found. v. Baker, 843 N.E.2d 528, 531

       (Ind. 2006).

[10]   Trust language is ambiguous only if reasonable people could come to different

       conclusions about its meaning, but a trust is not ambiguous merely because the

       parties disagree as to its interpretation. Kelly v. Estate of Johnson, 788 N.E.2d
933, 935 (Ind. Ct. App. 2003), trans. denied. We cannot “interpret” an

       unambiguous trust or will; we can construe such a document to determine the

       testator’s intent only if there is ambiguity in need of interpretation. Unborn

       Beneficiaries of Kreigh Family Trust v. Kreigh, 554 N.E.2d 1167, 1168 (Ind. Ct.

       App. 1990). It is contrary to basic rules of contract interpretation to fail to give

       plain meaning to an unambiguous contract term that exists in the document. In

       re Stephen L. Chapman Irrevocable Trust Agreement, 953 N.E.2d 573, 580 (Ind. Ct.

       App. 2011) (applying rule to interpretation of trust language), trans. denied.

[11]   The portion of the Trust document that addresses creation of Trust shares on

       Colbert’s death has two sections. Section 7.01, “Division of my Trust (No

       Federal Estate Tax),” applies “[i]f there is no federal estate tax in effect at my

       death and Section 1022 of the Internal Revenue Code is in effect.”4 Section

       4
        Despite numerous references throughout the briefs, neither party provides a full citation to “Section 1022.”
       They are presumably referring to 26 U.S.C. § 1022. The parties agree section 1022 was not in effect when
       Colbert died.

       Court of Appeals of Indiana | Memorandum Decision 46A03-1408-TR-287 | March 30, 2015              Page 6 of 8
       7.02, “Division of My Trust (Federal Estate Tax Exists), applies “[i]f federal

       estate tax is in effect at my death.” As explained in note two above, the federal

       estate tax was in effect when Colbert died; therefore the trial court correctly

       determined the Trust property should be divided pursuant to Section 7.02,

       “Division of My Trust (Federal Estate Tax Exists).” (App. at 92.)

[12]   Under Section 7.02, the allocation of the Trust property to the Marital Share is

       determined by the following formula:

               My Trustee shall allocate to the Marital Share a fractional share of the
               remaining trust property calculated as follows:
               (1)     The Numerator
               The numerator of the fraction shall equal the minimum value,
               assuming the value qualifies for the federal estate tax marital
               deduction, sufficient to reduce the federal estate tax to the lowest
               possible amount. In computing the numerator, my Trustee shall take
               into account my gifts (including gifts treated as made by me) and all
               deductions, exclusions, credits and reductions in value allowed in
               computing such tax; provided, however, that any state death tax credit
               shall be taken into account for this purpose only to the extent that it
               does not increase the amount of state death taxes payable.
               (2)     The Denominator
               The denominator shall consist of the value of the remaining trust
               property as finally determined for federal estate tax purposes.
[13]   As the marital deduction exceeded the value of Colbert’s estate, the numerator,

       i.e., “the minimum value, assuming the value qualifies for the federal estate tax

       marital deduction, sufficient to reduce the federal estate tax to the lowest

       Court of Appeals of Indiana | Memorandum Decision 46A03-1408-TR-287 | March 30, 2015   Page 7 of 8
       possible amount” is zero.5 The trial court therefore correctly determined the

       Marital Share would not be funded, and we affirm its judgment.

[14]   Affirmed.

       Barnes, J., and Pyle, J., concur.

       5
         Barbro asserts “the minimum value of the estate to reduce the federal estate tax would be the value of the
       entire corpus/estate,” (Barbro Colbert/Appellant’s Br. at 12), relying on the phrase “assuming the value
       qualifies for the federal estate tax marital deduction.” She offers no explanation or citation to authority to
       support the premise that language has that effect. We accordingly decline to reverse the trial court on that
       ground. See, e.g., Dickes v. Felger, 981 N.E.2d 559, 562 (Ind. Ct. App. 2012) (a party waives an issue where the
       party fails to develop a cogent argument or provide adequate citation to authority and portions of the record).

       Court of Appeals of Indiana | Memorandum Decision 46A03-1408-TR-287 | March 30, 2015                Page 8 of 8