October 14, 2017

Family Settlement Agreements Prior To Death Are Enforceable, Kent v. Kerr

Category: Indiana Law Review | Author: | Share:

Just about anything that can be litigated can be settled. But sometimes there are legal restrictions which keep a settlement from being enforceable. And the question in this case is whether statutory restrictions prohibit pre-mortem family settlement agreements. The Court held that they do not.

Gary is the father of John and Cynthia. Gary had a will, but while he was terminally ill, he asked John and Cynthia to enter into a settlement agreement regarding how their inheritance would be divided. Each signed the agreement and Gary’s attorney notarized it. A few days later, John sent Cynthia a notice purporting to rescind the agreement, but he did not tell Gary about this. Gary died about a month later.

John and Gary’s cousin, Kevin, filed a verified petition for probate of Gary’s will. Cynthia challenged this, relying on the family settlement agreement. However, the trial court would not enforce the agreement because John and Cynthia “had no vested interest” in Gary’s estate as he was then living, and John had rescinded the agreement. Cynthia appealed.

The Court of Appeals noted that the question of whether family settlement agreements could be executed prior to a decedent’s death was one of first impression. The statute which authorizes family settlement agreements (I.C. § 29-1-9-1) does not explicitly address this question. But when construing the statute, the Court relied heavily on the public policies of encouraging such agreements and of enforcing contracts, and held that such agreements were enforceable unless the legislature “clearly and unambiguously” stated otherwise. The Court then noted that enforcing such agreements is what other states do, too.

John argued that even if such agreements were enforceable in principle, this one was not as it lacked consideration and was rescinded before Gary’s death. Again, the Court disagreed.

[I]t is well settled that an exchange of mutual promises is consideration for a contract, and the agreement expressly includes promises by both Cynthia and John. … Further, it is well settled that a contract may be rescinded “only when a party avers that he has performed a substantial part of his obligations under a contract and that the other party refused to perform its obligations.” John has not averred, either to the trial court or to this court, that Cynthia refused to perform her obligations under the agreement. John contends only that he had a right to rescind the agreement because Gary was still alive when he executed the rescission. But John does not support that contention with citation to authority, and we are not aware of any such authority. In sum, the agreement is supported by adequate consideration, and John’s purported rescission was a nullity.

Therefore, the trial court erred when it denied Cynthia’s motion to enforce the agreement.

Lesson:

A pre-mortem family settlement agreement is enforceable.