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In re Revocable Trust Agreement Created by the Settlor

Court of Appeals of Indiana

September 20, 2017

In the Matter of the Revocable Trust Agreement created by the Settlor, Anil Kumar Sarkar
Anuradha ("Mili") Sarkar Naugle, Appellee-Respondent Dipa Sarkar, Appellant-Petitioner,

         Appeal from the Vigo Superior Court The Honorable David R. Bolk, Judge Trial Court Cause No. 84D03-1503-TR-1438

          ATTORNEYS FOR APPELLANT Karl L. Mulvaney Gregory J. Duncan Nana Quay-Smith Bingham Greenebaum Doll LLP Indianapolis, Indiana Gerald H. McGlone McGlone Law Terre Haute, Indiana.

          ATTORNEYS FOR APPELLEE Mark D. Hassler Jacob H. Miller Hunt, Hassler, Kondras & Miller LLP Terre Haute, Indiana.

          CRONE, JUDGE.

         Case Summary

         [¶1] Eighty-six-year-old Dipa Sarkar, the surviving spouse of Anil Kumar Sarkar, appeals the trial court's entry of summary judgment in favor of Anuradha Sarkar Naugle ("Mili") as successor trustee of the Anil Kumar Sarkar Revocable Trust Agreement dated August 23, 1993 ("the Trust"). In short, at the time of Anil's death, his probate estate had minimal assets because the lion's share of his assets, totaling close to $2, 000, 000, had been placed in or diverted to the Trust. However, the Trust provided for Dipa, Anil's wife of fifty-six years, to receive only $50, 000 or roughly 2.5% of his total assets. Similarly, Anil's will ("the Will") made little provision for Dipa, bequeathing her only his clothes and tangible personal property while providing that the remaining assets, if any, be transferred to the Trust.

         [¶2] Dipa filed a petition to docket the Trust, which made numerous allegations regarding the validity of the Trust as well as questions regarding the propriety of certain assets being diverted to the Trust (rather than to Dipa personally or to the probate estate) in an attempt to disinherit Dipa. Thereafter, while that proceeding was pending, Dipa filed an election to take against the Will. Mili subsequently moved for summary judgment on Dipa's petition to docket the Trust, but she did not address Dipa's election to take against the Will. Dipa then filed a motion for leave to file a second amended petition to docket the Trust, bringing her election to take against the Will to the trial court's attention, and alleging more specifically her claims regarding the validity of the Trust. The trial court denied Dipa's motion to amend, simply concluding that it would be prejudicial to Mili to allow Dipa to amend her petition. The trial court made no statement as to the timeliness of Dipa's election. Thereafter, the trial court entered summary judgment in favor of Mili on the narrow issue of whether the Trust was the proper beneficiary of a certain asset, and further declaring that such order disposed of all outstanding issues between the parties. The trial court failed to address Dipa's election to take against the Will or the timeliness thereof.

         [¶3] On appeal, Dipa asserts that her election to take against the Will was timely, and because it is a statutory right of a surviving spouse, the trial court erred as a matter of law in failing to honor the election. We agree and conclude that: (1) Dipa made a timely election to take against the Will; (2) the trial court abused its discretion in denying Dipa's motion to amend her petition to docket the Trust; and (3) genuine issues of material fact remain, precluding summary judgment. Accordingly, we affirm in part, reverse in part, and remand for further proceedings.

         Facts and Procedural History[1]

         [¶4] Anil and Dipa Sarkar were married in 1958, and remained married for fifty-six years until Anil's death on February 24, 2015. They had one child, a daughter named Rumu. Anil had two children from a brief previous marriage, daughter Mili, and son Ashoke. During their marriage, Anil and Dipa, who were both medical doctors, operated a private pathology practice in Terre Haute called Sarkar Medical Corporation.

         [¶5] In 1993, Anil created the Trust, which was restated in its entirety on March 31, 1997. The stated purpose of the Trust was "a simplified means of accomplishing both lifetime and death transfers" of Anil's assets. Appellant's App. Vol. 2 at 27. Anil amended the Trust seven times, with the seventh and final trust amendment occurring on March 14, 2014. From the original form through to the fourth amendment, Anil made no provision for distribution of any Trust assets to Dipa, stating "[b]ecause my spouse, [Dipa], has more assets than I have and will not need my money or property to support herself, I choose to leave nothing to her." Id. at 35. Beginning with the fifth amendment through the final amendment, Anil provided for Dipa to receive $50, 000. Specifically, in the final amendment, he named Mili as successor trustee and directed her to distribute $250, 000 to Rumu, $30, 000 to Ashoke, $50, 000 to his brother Sekhar, and $50, 000 to Dipa if she survived him by thirty days. The remainder of the Trust assets were to be distributed to Mili, or if she was then deceased, to her descendants per stirpes. Id. at 46.

         [¶6] The Trust was funded by two investment accounts owned by Anil. One account, titled in the name of the Trust and held by Anil as trustee, consisted of stocks and bonds and was valued at $924, 635 at the time of Anil's death ("the Morgan Stanley Trust Account"). During his later years, Anil had his monthly social security payments diverted into the Morgan Stanley Trust Account. The second account that funded the Trust was an Individual Retirement Account valued at $1, 007, 614 ("the IRA"). In December of 2003, Anil designated the Trust as the sole beneficiary of the IRA.

         [¶7] On January 20, 2014, Anil executed the Will. In the Will, Anil appointed Rumu as personal representative and directed that his body be disposed of without ceremony of any kind. He directed that his probate estate should be used to pay all his debts, medical expenses, funeral expenses, estate administration expenses, and "all inheritance, estate, and like taxes … payable by reason of [his] death and in connection with any property, whether passing under [the Will] or otherwise" without reimbursement from any person. Id. at 66. Anil made no provision for Dipa or his children in the Will other than stating that his clothing and tangible personal property would go to Dipa, if she survived him by thirty days; otherwise, the property would be transferred to the Trust. The Will provided that anything left in his net residuary estate would be transferred to the Trust.

         [¶8] Shortly after Anil's death, on March 10, 2015, Rumu filed a petition to probate the Will. The Will was admitted to probate and Rumu was appointed as personal representative the following day. Also on March 10, Dipa filed a "Petition to Docket Trust and for Relief." Id. at 18. Dipa averred that: (1) the Will had been admitted to probate and provided that Anil's residuary estate be distributed to the Trust; (2) at the time of Anil's death, the couple had been married for fifty-six years; (3) on the date of Anil's death, nearly all of his assets were owned by the Trust; (4) the Trust was created in 1993, restated in 1997, and amended seven times; (5) one of the Trust assets consists of an IRA and because Dipa signed spousal consent regarding the beneficiary of the IRA under duress, the IRA should be removed from the Trust; (6) prior to his death, Anil diverted his social security payments to the Trust, which has left the probate estate with no assets.[2] Based upon these facts, Dipa requested for the Trust to be docketed by the probate court and for her petition to be heard. She further requested the court to freeze the assets of the Trust and to remove the IRA from the Trust. The trial court set a hearing on Dipa's petition for April 24, 2015.

         [¶9] On March 20, 2015, Dipa filed a motion to remove Mili as trustee or require her to post a bond to ensure that she performed her duty to pay the estate's unpaid claims and expenses. Dipa asserted that Anil's probate estate was insolvent, and that the Trust was liable to pay the estate's unpaid claims including funeral expenses, costs of administration, and Dipa's surviving spouses's allowance. Mili responded with a request for continuance of the April 24 hearing date. Following a telephonic hearing on April 21, 2015, the trial court entered an order docketing the Trust and continuing the April 24 evidentiary hearing. The court ordered that the IRA assets be frozen and not distributed to the Trust, and that a pretrial conference (rather than an evidentiary hearing) be held on April 24 to clarify the issues. The trial court's order did not address Dipa's request to freeze the other assets of the Trust.

         [¶10] On April 24, 2015, Dipa again filed a motion requesting that, in addition to the IRA, the Trust assets be frozen until the time for filing claims against Anil's estate had expired. Dipa sought to ensure that the Trust retained sufficient assets to pay the estate's pending claims, costs of administration, and surviving spouse's allowance. On that same date, the trial court held an unrecorded pretrial conference. Regarding Dipa's motion to freeze the Trust assets, counsel for both parties agreed to a distribution of 85% of the non-IRA Trust assets to the Trust's beneficiaries. The remaining funds were not to be distributed "until such time as the Court determines which, if any, allowable claims and expenses of [the estate] shall be paid out of the Trust's assets pursuant to applicable Indiana law." Id. at 119. Dipa received $42, 500 from the Trust.

         [¶11] On May 29, 2015, Dipa filed a petition to collect her surviving spouse's statutory allowance from Anil's probate estate pursuant to Indiana Code Section 29-1-4-1. Dipa alleged that the value of the estate was zero and thus the transferees of Anil's nonprobate property (the Trust and its beneficiaries) were responsible to pay her claim. Mili, as trustee, objected to Dipa's petition. The parties disagreed on numerous issues, including who should pay Anil's funeral expenses and whether the Trust would be entitled to a setoff against Dipa's spousal allowance for Dipa's distribution as a beneficiary under the Trust.

         [¶12] On June 16, 2015, Rumu's counsel filed a report advising the trial court that he had received a check for $64, 569.58 from Terre Haute Savings Bank. He reported that this amount was the balance of two bank accounts Anil held at the bank. Counsel stated that he had known about the accounts but mistakenly believed that they were Trust assets rather than estate assets, thus causing him to believe that the estate was insolvent. Because the estate was not insolvent, on that same date, Dipa filed her election to take against the Will pursuant to Indiana Code Section 29-1-3-1.

         [¶13] Three months later, Mili filed a motion for summary judgment on Dipa's petition to docket the Trust. Mili's motion addressed only whether Dipa's consent was necessary to effectuate Anil's designation of the Trust as beneficiary of his IRA. Mili argued that there was no genuine issue of material fact that Dipa's consent was not required, and therefore Dipa's claim that she signed the consent under duress was irrelevant. Mili's summary judgment motion did not address Dipa's prior-filed election to take against the Will.

         [¶14] Thereafter, Dipa's counsel filed a motion to withdraw and new counsel entered an appearance on October 1, 2015. Dipa's new counsel moved for, and was granted, continuances regarding the trial date, discovery cutoff, and the time for response to Mili's summary judgment motion. On December 18, 2015, Dipa filed a motion for leave to file a second amended petition[3] to docket the Trust pursuant to Indiana Trial Rule 15(A). The second amended petition brought Dipa's prior-filed election to take against the Will to the trial court's attention, and also alleged more specifically her claim regarding the validity of the Trust and her request that the Trust assets be included in the probate estate for the purpose of calculating her elective share. Dipa's motion to amend noted that no prejudice would result to either party from the granting of the petition.

         [¶15] Mili objected to the proposed amendment, arguing that it was futile because Dipa's election against the Will was untimely pursuant to Indiana Code Section 29-1-3-2(a), in that it was filed more than three months after the date of the order admitting the Will to probate. Dipa responded by arguing that her proposed amendment was not futile as her election was timely pursuant to Indiana Code Section 29-1-3-2(b), because at the time the election was filed, litigation was pending to determine a matter of law or fact which would affect the amount of Dipa's elective share.

         [¶16] On July 13, 2016, the trial court entered its order denying Dipa's motion to amend, and instructing Dipa to respond to Mili's summary judgment motion regarding the narrow issue of the validity of the IRA beneficiary designation. In its order, the trial court mentioned Dipa's election to take against the Will, but made no finding regarding the timeliness or untimeliness thereof. Instead, the trial court determined that allowing Dipa to "now assert[] a claim for spousal rights pursuant to IC § 29-1-3-1 … is unduly prejudicial …." Id. at 17. Dipa filed a motion to reconsider which was also subsequently denied by the trial court. After her request to certify the order for interlocutory appeal was denied by the trial ...

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