A lot of divorce settlements include a promise about the kids. One parent agrees to leave the children of that marriage a share of everything when he dies. Then life moves on. He remarries, builds new wealth with a new spouse, and puts most of it in both their names. When he dies, the jointly owned property goes straight to the new spouse and never touches probate.
So what happens to the old promise? If the parent never signed the will he agreed to, can the children reach property that passed to the surviving spouse automatically at death? And can they go after that spouse even though she never agreed to anything?
That was the fight in Crain v. Crain, No. 22-1674, 72 F.4th 269 (8th Cir. June 23, 2023). Four adult children sued their stepmother over a promise their father made in his 1988 Arkansas divorce to leave them at least half of his estate. The court had to decide what “estate” meant, whether a federal court could hear the case while a state probate case was open, and whether a constructive trust could reach nearly $100 million in property the father had owned with his second wife.
Facts & Procedural History
H.C. “Dude” Crain, Jr. married Marillyn Crain in 1954. In 1960, the couple and Dude’s parents founded Crain Sales Company to make foam products. Both Dude and Marillyn helped grow it. They had four children: Lisa Crain, Cathee Crain, Marillyn Crain Brody, and Kristan Snell. By 1976, Dude and Marillyn had separated.
Dude started dating Shirley in 1984 and filed for divorce in Logan County, Arkansas in 1988. By then the company, renamed Crain Industries, had become one of the largest private companies in Arkansas. Dude and Marillyn signed a property settlement agreement. Dude kept most of the property, including the entire business. Marillyn kept the house (with its debt), her Mercedes, some personal property, her bank accounts, a $250,000 payment, and a $1.5 million annuity. In return, both parents agreed to “maintain in full force and [e]ffect a valid Last Will and Testament” leaving “at least one-half of their estate” to the four children. The divorce court declared the agreement “contractual and nonmodifiable” and made it part of the decree. Months later, Dude married Shirley.
Dude and Shirley owned real estate, bank accounts, investments, and businesses together. Much of their wealth came from Dude’s 1995 sale of Crain Industries for $130 million. They also gave the children large gifts, including $1.6 million each at Christmas 2012, which were understood as “advances on their inheritance.”
Dude’s estate planning never matched his promise. His 1993 will left everything to Shirley and nothing to the children. His 2012 will told Shirley, as executor, to set up two trusts for his separate property. One, the Bypass Trust, would benefit the children and Shirley’s son. The other, the Marital Deduction Trust, would hold everything else, with Shirley as sole trustee and sole direct beneficiary, and the children and her son as remainder beneficiaries. Shirley could pay herself as much income and principal from that trust as she wanted during her life.
Dude suffered a serious head injury in 2014 and died in 2017. Nobody opened a probate case. Shirley never created either trust. She took Dude’s separate property, and the jointly owned property passed to her by operation of Arkansas law.
In March 2020, almost three years after Dude died, the children opened an estate administration in Sebastian County, Arkansas. Ray Fulmer was appointed executor, and the 2012 will was eventually admitted to probate. Days after opening the probate case, the children sued Shirley and the estate in federal court in the Western District of Arkansas. The children lived in Texas, and Shirley and the estate were Arkansas citizens, so the case was in federal court on diversity jurisdiction. The children claimed they were third-party beneficiaries of Dude’s promise to their mother. They asked for specific performance and a constructive trust on at least half of everything Dude owned right before he died, including the joint property that had already gone to Shirley.
The district court ruled that Dude breached the agreement and that “estate” meant everything he owned and controlled, however it was titled. After a three-day bench trial, it identified and valued the assets, gave Shirley “an equitable right to ownership of 10%” of certain assets, and essentially split the rest down the middle. In the end, it imposed a constructive trust on nearly $100 million in property. Shirley appealed.
How Does a Contract to Make a Will Work, and What Does Texas Require?
To understand Crain, we first have to look at how a promise to leave property in a will is different from the will itself. A will can be changed or revoked any time before death. A contract to make a will is a separate obligation. If the person who made the promise dies without keeping it, the people the promise was meant to benefit can sue to enforce it, even though the will itself says something else.
Texas recognizes these contracts but is strict about proof. Under Texas Estates Code § 254.004(a), a contract made on or after September 1, 1979 “to make a will or devise, or not to revoke a will or devise, may be established only by: (1) a written agreement that is binding and enforceable; or (2) a will stating: (A) that a contract exists; and (B) the material provisions of the contract.” Signing a joint will or matching wills is not enough on its own. § 254.004(b). A signed settlement agreement incorporated into a divorce decree, like the one in Crain, is the kind of written agreement the statute contemplates.
The harder question is what property the promise reaches. A will only controls the probate estate. Joint property with a right of survivorship skips probate and goes to the surviving owner at death. In Texas, that survivorship right does not happen automatically. Joint owners have to agree in writing that a deceased owner’s interest passes to the survivor, and that agreement “may not be inferred from the mere fact that property is held in joint ownership.” Tex. Est. Code § 111.001. Spouses can do the same thing with community property, but the agreement “must be in writing and signed by both spouses.” §§ 112.051, 112.052(a). Once that paperwork is in place, though, the property passes outside the will. If the promise to the children only covers what passes under the will, a remarried parent can shrink it to almost nothing just by retitling assets.
When that happens, the remedy children usually ask for is a constructive trust. A constructive trust isn’t a trust anyone signs. It is a court order saying that the person holding title to property has to hand it over to someone else because keeping it would be unjust. Texas courts recognize the same equitable remedy, and that is what the children in Crain asked for.
How Did the Court Reach Property That Never Went Through Probate?
The court first dealt with jurisdiction. Shirley argued that the probate exception kept the case out of federal court because the Arkansas probate case was still open. The court disagreed. The probate exception leaves to state courts the probate of wills, the administration of estates, and property already in a probate court’s custody. But federal courts can still hear claims by creditors, heirs, and others against an estate and declare their rights, as long as they don’t interfere with property the probate court controls. That is all the district court did. For the assets in probate, it declared the parties’ rights and left administration to the Arkansas court.
Shirley also invoked the domestic relations exception, since the case involved marital property and an agreement in a divorce decree. That failed too. The court relied on Lannan v. Maul, 979 F.2d 627 (8th Cir. 1992), where a daughter’s claim to life insurance her father had promised in his divorce settlement was a “third-party beneficiary claim based on contract law,” not a domestic dispute. Here, Dude and Marillyn had both died. There was no “feuding couple,” only children enforcing a contract made for their benefit.
Next came the meaning of “estate.” Shirley argued it meant only the probate estate, since the promise was to keep a will in place and a will only controls probate property. The court agreed that “estate” is ambiguous standing alone, but held the agreement used it more broadly. Another paragraph of the same agreement said personal property “now in possession of each party shall, except as provided herein be his or her sole estate.” There, “estate” plainly meant property in the broadest sense, and the court presumed the parties used the word the same way throughout.
The deal itself pointed the same way. Marillyn walked away from a business that netted Dude roughly $84 million when he sold it a few years later, and she took a comparatively small share. Both sides had lawyers. The court concluded that Marillyn gave up her share for the children. And Shirley’s reading would gut the promise: “If estate had such a meaning, then Dude could easily circumvent the Will Provision.” The Arkansas Supreme Court had already held, in Janes v. Rogers, 271 S.W.2d 930 (Ark. 1954), that a contract to make a will “is applicable to property held by the spouses in an estate by the entirety, even though it would not pass under the will of either spouse but would devolve on the surviving spouse by operation of law.” Dude could do what he wanted with half his property, including owning it jointly with Shirley. The other half “was subject to and encumbered by the superior contractual rights of [his four] children,” quoting Gregory v. Estate of Gregory, 866 S.W.2d 379 (Ark. 1993).
That left the remedy. Specific performance was the right remedy for breach of a contract to make a will, but by the time the children sued, Shirley had sold or exchanged some of the assets and many were no longer in their original form. So the district court imposed a constructive trust on everything Dude owned before death. Shirley argued that Arkansas doesn’t allow unjust enrichment remedies where there is an express contract. The court said that rule applies to a party to the contract, and Shirley wasn’t one. The court put it this way: “The district court did not encumber these assets with a constructive trust because Shirley breached the PSA; rather, it did so because Dude breached the agreement and thereby unjustly enriched Shirley at Appellees’ expense.”
The court found support in Orsini v. Commercial National Bank, 639 S.W.2d 516 (Ark. Ct. App. 1982), where a divorced father promised to keep life insurance for his daughter but named his new wife instead. The Arkansas Court of Appeals upheld a constructive trust for the daughter even without fraud or a confidential relationship. As that court noted, “Innocent parties may frequently be unjustly enriched.” The same reasoning answered Shirley’s standing argument. She didn’t break the promise, but she was holding property that belonged to the children, and that was enough to sue her.
Finally, the court upheld the way the district court divided the property. It gave Shirley a 10% share of the jointly owned property for her role in building the couple’s wealth, treated certain real estate as hers alone because of her efforts in building or creating it, and gave the children nothing more in Regional Jet Center because they already owned half of it. The district court also refused to count Dude and Shirley’s gifts, including the $1.6 million Christmas gifts, against the promise. The Eighth Circuit found no abuse of discretion and affirmed.
The Takeaway
Crain shows that a promise to leave property in a will can reach well past the probate estate. Retitling assets jointly with a new spouse did not get around a divorce-decree promise to the children of a first marriage, and the surviving spouse had to give up property she personally did nothing wrong to get.
Crain applied Arkansas law, and a Texas court would start with § 254.004 and the exact words of the agreement. But the lessons carry over. If you are signing a divorce settlement that promises an inheritance, spell out what property it covers, including joint and survivorship property, and whether lifetime gifts count against it. If you have made one of these promises and remarried, your estate plan has to honor it, or your new spouse may end up in a lawsuit. And if you are a child of a first marriage holding one of these promises, don’t wait. The Crain children waited almost three years, and by then some of the assets were gone or changed, which made the case far harder to untangle.
Our Corpus Christi Probate Attorneys provide a full range of probate services to our clients, including helping with enforcing a contract to make a will and constructive trust claims against a surviving spouse. Affordable rates, fixed fees, and payment plans are available. We provide step-by-step instructions, guidance, checklists, and more for completing the probate process. We have years of combined experience that we can use to support and guide you with probate and estate matters. Call us today for a FREE consultation.
Disclaimer
The content of this website is for informational purposes only and should not be construed as legal advice. The information presented may not apply to your situation and should not be acted upon without consulting a qualified probate attorney. We encourage you to seek the advice of a competent attorney with any legal questions you may have.
