Engelke v. Estate of Engelke

Paul Engelke, decedent, owned a home as tenants in common with his wife, Judy Engelke (defendant). Prior to Judy and Paul’s marriage, they had executed a prenuptial agreement in which each waived surviving-spouse homestead rights. Paul and Judy each placed their respective one-half interests in the home into revocable inter vivos trusts. Paul was the trustee and principal beneficiary of his revocable trust. Paul’s trust held his interest in the home and minimal liquid assets. Paul’s trust gave Judy a life interest in his one-half share if Paul predeceased Judy, with his share then passing to his son, Michael Engelke (plaintiff), upon Judy’s death. Paul’s revocable trust further directed that trust assets could be used to satisfy any allowable claims against his estate after probate assets were exhausted. After Paul’s death, his probate assets were insufficient to satisfy all claims against his estate, including Judy’s entitlement to a family allowance. Judy, as the personal representative of Paul’s estate, petitioned to have Michael, as Paul’s successor trustee, use all available trust assets to satisfy the claims against Paul’s estate, including Paul’s one-half interest in the home. Michael countered, arguing that Paul’s one-half interest in the home was protected by the constitutional homestead exemption. The probate court ordered Michael to use all available trust assets to cover the claims against Paul’s estate. Michael appealed.