# FILED
June 18, 1999 Cecil W. Crowson Appellate Cou rt Clerk IN THE COURT OF APPEALS OF TENNESSEE,

AT NASHVILLE

_______________________________________________________

) IN RE: ESTATE OF HAROL D L. ) Sumner County Chancery JENKINS, Deceased ) Probate Court No. 93P-30 ) ) ) C.A. No. 01A01-9804-PB-00223 )

______________________________________________________________________________ From the Chancery Probate Court of Sumner County a t Gallatin. Honorable Tom E. Gray, Chancellor Timothy L. Warnock , BOWEN, RILEY, WARNOCK & JACOBSON, PLC, Nashville, Tennessee Michael D. Sontag , BASS, BERRY & SIMS, PLC, Nashville, Tennessee Attorneys f

or Appellant Dolor

es Henry Jen

kins. Charles W. McElroy , WHITE & REASOR, Nashville, Tennessee Brenda Rhoton Little

, PARKER & CROFFORD, Nashville, Tennessee Attorneys f

or Appellees/Cross Appellants Joni L . Jenkins and Kathy

A. Jenkins. Denty Cheatham , Rose Palermo , CHEATHAM & PALERMO, Nashville, Tennessee Attorneys f

or Appellee Co-E

xecutors of the Esta

te Of Harold L

. Jenkins, Decease

d, Hugh C. Carden and Donal

d W. Garis. Jimmy Harold Je

nkins , Pro Se Michael Lloyd Jenkins , Pro Se
OPINION FIL

ED: AFFIRMED IN P

ART, REVERSED IN PA RT AND REMANDED FARMER, J. HIGHERS, J. : (Concurs) CANTRELL, J. : (Concurs)Factual and Procedura l History

Harold L. Jenkins (“Decedent”), professionally known as C onway Twitty, died on June 5, 1993. Prior t

o his death, the Dec

edent executed

a last will

and testament and

two codicils bequeathing $50,000.00 to Velma Dunaway, the Decedent’ s mother, and the r emainder of his

estate to Joni Jenkins, Kat

hy Jenkins, Jimmy

Jenkins, and Michael Jenkins (“Children”), the Decedent’s four adult children. On June 14, 1993, these documents were admitted to probate and Hugh Carden andDonald

Garis (“Co-Executors”) were appointed to serve as the co-executors of the Decedent’s estate.

The Decedent’s surviving spouse, Dolores Henry Jenkins (“Surviving Spouse”), fi le d
a petition for an ele

ctive share of th

e Decedent’s e

state on Decembe

r 10, 1993. A dispute subsequently

arose among the parties regarding the proper cal culation of the Surviving Spouse’s elective share. Conseq u ently, the Decedent’s daughters Joni and Kathy Jenkins filed a motion requesting that the trial court make a determination regarding the value of the Surviving Spouse’s ele ctive sh are. Additionally, the Co-Executors filed a motion seeking partial summary judgment regarding cert

ainlegal issues pertinent to the calculation of the Surviving Spouse’s elective share. After a hearing, the tr

ial court held (1)

that the Decede

nt’s net estate did

not include procee ds of certain life insurance policies that had been assigned to

and were paid directly to Temple Medley, the Decedent’s ex-wife, (2) that, when calculating the amount of the Decedent’s net esta te, the value of the Decedent’s real property s hould be reduced by the a mount of indebtedne

ss secured by this property, (3) tha t th e value of the Decedent’s net estate should reflect any appreciation or depreciationof the Decedent ’s assets occurr

ing prior to

the setting aside of

the Surviving Spouse’s elective share, and (4) that the Surviving Spouse

is entitled to receive a one-third fixed share of the income earned by theDecedent’s assets prior to the distribution of her elective share. The Surviving Spouse filed a motion to reconsider, arguing that the changing fraction method, rather than the fixed fractionmethod, should

be used when cal

culating her shar

e of the income ge

nerated by the a

ssets in the Decedent’s estate prior to the distribution of her elective share . The trial court granted the1 This asset consists of three categories of property including (1) the right to receive future songwriter roy

alties, (2) the ri

ght to receive f

uture recording

artist roya

lties, and (3) the

right to receive income

from licensing a

greements and

other enumerate

d intellectual pro

perties. motion and amended its prior ruling to reflect that the Surv iving Spouse ’s share of this inc ome should be calculated using the changing fraction method.

The Co-Executors subsequently filed a motion seeking instructions from the court regarding the disposition of the Decedent’s intellectual property. 1 After a hearing on the matter, the trial court entered a

n order allowing th

e Childr en and the Survivin g Spouse to determin

e the fair market value of the intellectual property by bidding on this property. The cour t’s order further providedthat the intellect ual property

would be distribute

d to the highest bidder and that the amount of the winning bid would be char g ed against that party’s share of the Decedent’s estate. After placing the highest bid, the Children filed a motion requesting the court to direct that the Surviving Spouse is not entitled to a share of the income generated by the Decedent’s intellectual property. The trial court

ent ered an order denying the motion. Additionally, the court entered an order designating several of its prior rulings as final and appealable. This appeal followed.
Issues and Standard of Review

The issues raised

on appeal, as we

perceive them, a

re as follows:
I. Whet

her the proceeds of certain life insurance policies that had been assigned to and

were paid

directly to the Decedent’s e x-wif

e should be included in the Decedent’s net estate. II. Whether, when calculating theDecedent’s net estate, the value of the Decedent’s property should be reduc e d by the amount of indebtedness secured by this property. III. Whether

the Surviving Spouse is entitled to a share of the income earned by the Dece dent ’s assets prior to the distribution of the Su rviving Spouse’s e

lecti ve share. IV. Assum i ng that the Surviving Spouse is entitled to a share of this income, whethe r he r share should be determinedusing the ch a nging fraction method of calculation. V. Assuming that the changing fraction method should be usedwhen calc ulating the Survivin g Spouse’s share o

f this income , whether the chan ging fraction method should also be used when calculating her share of the a dminis trative expenses associated with the generation of the income. VI. Whether

the Surviving Spouse is entitled to a share of the income generate

d by the Deceden

t’s in tel lectual property.

Eachof the foregoing issues involves a question of law. Thus, we review the ruling of the trial court de novo with no presumption of correctness. See, e.g., Bell v. Icard, Merrill, Cullis, Timm, Furen and Ginsburg , 986 S.W.2d 550, 554 (Tenn. 1999)(citations omitted); T.R.A.P. 13(d).
Life Insurance Proceeds

Prior to his marriage to the Surviving Spouse, the Decedent was married to Temple Medley. In conjunction with their divor ce, the D ecedent and Ms. M edley entered in

to a property settl ement

agreement requiring the Decedent to assign to Ms. Medley life insurance pro ceed s sufficient to pay his outstanding alimony obligation. The Decedent then executed collat er al assignments

of five insuranc

e poli cies pur chased by the Decedent from Executive Life Insurance Company (“Executive Life”). With these assignments, the Decedent transferred to

Ms. Medley “all right, title and inte

rest” in these pol

icies, including th

e following enume

rated rights:

1. The solerig ht to collect from the Insurer the net proceeds of the Policy when it becomes a claim by death or maturity; 2. The sole right to surrender thePolicy and receivethe surren der value thereof a

t any time provided

by th e terms of t h e Policy and at such other times as the Insurer may allow; 3. The soleright to obtain one or more loans or advances on the Policy, either

from the Insurer or, at

any time, from other persons, and to pledge or assign the Policy as security for s

uch loans or adva

nces; 4. The sole right to collec t and receive an

y and all distributions or

shares of surplus , dividend deposits or additions to the Policy now or hereaft ermade or apportionedthereto, and to ex ercise any and a

ll options contained in the Policy with respect thereto; provided, that unless and unti l the Assignee sha

ll no tify the Insurer in writing to the contrary, t h e distributions or shares of surp lus, dividend depos

its2 In 1997, the Te nnessee Genera

l Assembly el

iminated this provis

ion and replace

d it with an accrual-type elective share statute. See 1997 Tenn. Pub. Acts ch. 426, § 17. Under the current statute, the surviving spouse’s share of the decedent’s net estate is calculated according to the length of time that the decedent was married to the surviving spouse. See Tenn. Code Ann. § 31- 4-101(a) (Supp. 1998)(effective January 1, 1998).

andadditions shall continue on the plan in force at the time of this assignment; and 5. The sole right to exercise all n onforfeiture r

ights permitted by the terms of the Policy or allowed by the Insurer and to receive all ben efits and advantages derived theref

rom.
However, the De

cedent express

ly reserved the f

ollowing specific

rights:

1. The right to collect f rom the Insurer a

ny disability benefit payabl e in cash that does not reduce the amount of insurance; 2. The right to designate and change beneficiary; and 3. The right to elect any optional mod e of s ettlement permitted by the Policy or allowed by the Insurer; but the reservation

of these rights sha

ll in no way impair the right of the Assignee to surren de r the Policy completely

with all i ts in cidents or impair any other rightof the Assignee hereunder, and any designation or change of beneficiary or election of a m ode of se ttlementshall be made subject to this assignmen t and to the rights of the Assignee hereunder.

The Decedent exer

cised the second

of these reserv

ed rights, naming his estate as the beneficiary of eachof the five life insurance policies. After the Deceden t’s death, Execu tive Life paid $2,045,000.00 of th e proceeds of these policies directly to Ms. Med

ley. After rece

iving a release from Ms . Medl ey, Executive Life then paid the remaining $2,090,488.80 of these proceeds to the Co-Executors of the Decedent’s estate.

The amount of a surviving spouse’s elective share is governed by section 31-4-101 of the Tennessee Code Annotated. Under the version of this statute that was in effect on the date of the Decedent’s death, the Surviving Spouse’s elective share is equal to one-third of the Decedent’s net estate. See Tenn. Code Ann. § 31-4-101(a) (Supp. 1993). 2 T his statute def ined the term “net estate” as follow

s:3 This provision was also amended in 1997. See 1997 Tenn. Pub. Acts ch. 426, § 17.

Currently, s

ubsection (b) pro

vides as follows: The value of the net estate includes all of the decedent’s real and personal property subject to disposition under the provisions of the decedent’s will or the laws of intestate succession, reduced by the following: secure d debts to the extent that secured creditors are entitled to realize on the applicable collateral, funeral and administration expenses, and award of exempt property, homestead allowance and year’s support allowance. Tenn. Code Ann. § 31-4-101(b) (Supp. 1998)(effective January 1, 1998).

The net estate includ

es all of the decedent’s real and personal property subject to

disposition under the terms of the decedent’s will or the laws of intestate succession reduc ed by f uneral and administrative expenses, homestead, exemptions andyear’s support.

Tenn. Code Ann. § 31-4-101(b) (Supp. 1993). 3 The crucial que stion in the instant c

ase is whether the life insurance p roceeds t hat were paid dir

ectly to Ms. Medley

qualify as “prope

rty subject to disposition under the terms of the decedent’s will or the laws of intestate succession.” Noting that the Decedent’s

estate was the na

med beneficiar

y of these policies, the Surviving Spouse contends that the proceeds pa

id to Ms. Medley are subject to disposition under the Decedent’s will. The CoExecutors and the Children, however, argue that these proceeds never became part of the Decedent’s estate and thus are not subject to disposition under the Decedent’s will.

In Phipps v. Watts , 781 S.W.2d 863 (Te nn. App. 1989), this

Court considered a

life insurance issue similar to the one raised in the case at bar. The decedent’s estate received $94,000.00 as the beneficiary of a life insurance policy. See id. at 864. The executor argued that the proceeds of this policy qualified as “exemptions” within the meaning of section 31-4-101(b) and thus should not be included in the decedent’s net estate when calculating the amount of the surviving spouse’s elective share. See id. at 865. We disagreed, findi ng that these exem

ptions include only the items of personal property listed in section 30-2-1 01. See id. We recognized, however, that there are some circumstances under which life insurance proceeds should not be included i n the decedent’s net e

state, stating as f

ollows:
[T]herehave been cases where insurance proceeds have been held to be exempt from the claims of the dissenting widow. But, these cases turn edon the fact that the insurance never became a par t of th e decedent’s estate—not on the f act that th e in surance was one of the exemptions mentioned in Tenn. Code Ann. § 31-4-101(b).Id. at 866. We then co ncluded as follow

s:

We thi nk that the plain language in the 1972 amendmen t makes the proceeds of life insurance payable to a testate estate a part of the estate regardless of

the disposition of the

insurance proc

eeds in the will. The insurance is still exempt from the cla ims of creditors butis an asset of the estate “as ordinary cash.” Thus , the i nsurance would be part of the estate for the purpose of calculating the dissenting widow’s elective share.

Id.
Applying Phipps to the facts of the case at bar, we agree with the Co-Executors and the Children that the lif

e insurance pro

ceeds that were

paid directly to Ms.

Medley should not b e includedin the Decedent’s ne t estat e. Unlike the insurance proceeds in Phipps , these funds were not“payable to a tes

tate estate.” Ea

ch of the collate

ral ass ignm ents executed by the Decedent transferred

to Ms. Medley “[t] he sole right to collect from the Insurer the net proceeds of the Policy when it becomes a claim by death or maturity.” Thus, the insurance proceeds were payable to Ms. Medl ey rat her than to the De cedent’s estate . Recognizing its ob ligation under the

assignments, Executive Life paid $2,045.0 00.00 of the insura

nce proceeds di

rectly to Ms. Medley. These funds
were not deposited into the estate’s bank account and at no time did they become subject to t he control o f the Co-Executors. Consequently, the insurance proceeds paid directly to Ms. Medley
never became part of

the Decedent’s estate and thus were not “sub

ject to disposition un

der the terms of the decedent’s will” as required by section 31-4-101(b). Accordingly, we affirm the trial court’s conclusion that these proceeds should not be included in the Decedent’s net estate when calculating the amount of the Surviving Spouse’s elective share.

Secured Debts

At the time of his death, the Decedent owned certain assets that were encumbered by secured debt. The trial co

urt held that, for purposes of calculating the Surviving Spouse’s elective share, only the Decedent’s equ ity in this property should be included in the net estate. The CoExecutors and the Children a gree with the ruli

ng of the trial cou

rt. The Surviving Spouse, however,contends that her elective share should be c

alc ulated w ithout regard to the secured debts of the Decedent.

The statutory procedure for calculating a surviving spouse’s

elective share

is set forth in section 31-4-10 1 which, on the date of the Decedent

’s death, provide

d as follows:
(a) A decedent’s surviving spouse has the right to elect to take an elective share. The elective sh are is one third (1/3) of the decedent’s net

estate as define

d in subsection (b). The right to elect an electiv e share is availab le to the surviving s

pouse of an intesta

te decedent anda testate decedent if the surviving spouse elects aga inst the decedent’s will.

When the electiv

e share is deter

mi ned, it i s exempt from the unsecured de

bts of the decede

nt incurred afte

r April 1, 1977. In determini

ng the elective sh

are, it is no t reduced by any estate or inherit

ance taxes. (b) The net estate includes all of the de ced ent’s real and personal property subject to disposition under the terms of the decedent’s will or the laws of intestate succession reduced by funeral a nd ad ministration expenses, homestead, exemptions and year’s support.

Tenn. Code Ann. § 31-4-101 (Supp. 1 993) . When construing this statute, we mus

t attempt to ascertain and give effect to the intent of its drafters, looking primarily to the natural and ordinary meaning of the words used. See, e.g., Browder v. Morris , 975 S.W.2d 308, 311 (Tenn. 1998). If, after examining these

words, the purpose

of section 31-4-1 01 remains unclea r, we may then look

to the history of this

provision as evidence of legislative intent. See Kendrick v. Kendrick , 902 S.W.2d 918, 923 (Tenn. App. 1994)(citations omitted).

Section 31-4-101(a) specifically provides that the surviving spouse’s elective share is exempt from

the decedent’s unsecured debts. See Tenn. Code Ann. § 31-4-101(a) (Supp. 1993). Th e Co-Executors and

the Children argu

e that this languag

e implicitly suggest

s that the electiv

e share is not exempt from the Decedent’s secured debts and that, therefore, the value of the Decedent ’s encum bered property must be reduced by the amount of the Decedent’s secured debt before this property is included in the net estate. Although we agree that there is no exemption under section 31-4-101(a) for the secured debts of the Decedent, we do not think that this

omission in any way affects the calculation of the Surviving Spouse’s el ective share. Rather, it affects only the priority of payment. The unsecured debt exemption is preceded by the phrase “[w]hen the electivesh are is determined,” in dicating that the e

xemption becomes r

elevant only afte

r the Survivin g Spouse’s elective share is ca lculated. Thus, we find that the failure of the drafters to provide an exemption for the Decedent’s secured debts in section 31-4-101(a) has no impact on the resolution of the case at bar.

In support of their position, the Co-Executors and the Children also rely o n the language in subsection ( b) stating that the n et estate include

s all property tha

t is “subject to disposition under the terms of the decedent’s will or the laws of intestate succession.” Essentially, they argue that only the equity in the Decedent’s encumbered property, rather than its full fair market value, is subject to disposition under the terms of the Decedent’s will. This argument, however, addresses the value that should be assigned to the Decedent’s encumbered pro perty, not whethe

r this property should be included in the Decedent’s net estate. The encumbered assets were owned by the Decedent at t he time of his death

. Although this prope

rty remained subj ect to valid secur ity interests, the Decedent w as entitled to and did in fact di spose of the encu

mbered assets und

er his will. Thus , we r eject the conten tion of the Co-Exec

utors and the Childr

en that the “subje

ct to disposition” language in section31-4-101(b) requires a reduction in the net estate by the amount of the Decedent’s

secured debt.
Contrary to the position of the Co-Executors and the Children, the Surviving Spouse contends that section 31-4- 101(b) does not re quire a reductio

n for the Decede

nt’s secured deb

ts. Subsection (b) expressly provides that, when calculating the net estate, the decedent’s property must be reduced by certain enumerated items including (1) funeral and admini stratio n expenses, (2) hom estead , (3) exemptions, and (4) year’s support. See Tenn. Code Ann. § 31-4-101(b) (Supp. 1993). The drafters of

this provision did not include the Decedent’s sec ured debts among th

e items listed above. Although th is omission does not con

clusively resolve

the issue in the ca

se at bar, it

is consistent with the Surviving Spouse’s contention that the net estate should be calculated without regard to the De

cedent’s secur

ed debts.

As stated above, the Decedent’s encumbered property is subject to dispositionunder the Decedent’s will and thus should be includ ed in the net estate. The parties disagree, however, regarding the value that

should be assigned to this pro perty. Section 31-

4-101 does not spec

ifically4 This provision was renumbered in 1984. See Tenn. Code Ann. § 31-2-103

(1984)(amended by 1985 Tenn. Pub. Acts ch. 140, § 28 (codified as Tenn. Code Ann. § 31-4- 101(b) (Supp. 1985))). address t his disputed issue. Consequently, we think that, with respect to the value that should be assigned to a decedent’s encumbered property, there is more than one reasonable interpretation of this provision. When a statute being construed does not yield a sin gle, clear inter pretation, it is appropriate

to consider the le

gislative history of

the provision in

order to ascertain the

intent of its drafters. See State v. Carter , 952 S.W.2d 417, 419 (Tenn. 1997) (citations omitted). See also State
v. Patton , 898 S.W.2d 732, 737 (Tenn. Crim. App. 1994) (“If, h owever , reasonably informed persons could

differ as to the meaning of that section in the context of the chapter, there must be an authoritative interpretation.” ). Thus, in the cas

e at bar, we find

it necessary to

examin e the legislative history of section 31-4-101.

In 1977, the Tenness

ee General Asse

mbl y enacted a statute defining the term “net estate” as follow

s:

The net estate shall

include all

of the decedent’s property reduced by funeral and administration expenses, the pa

yment of taxes, homestead, exemp

tions, and year’s

support.

1977 Tenn. Pub. A cts ch. 25, § 3 (codified as Tenn. Code Ann. § 31-602(b) (Supp. 1978)). 4 As originally drafted, this statute provided that the property in the net estate shall be reduced by “funeral andadministrative expenses, homestead, exemptions and year’s support, and debt s and char

ges against the estate .” H. R. 334, 90th General Assembly (1977)(emphasis added). The phrase “and debts and charges against the estate” was removed, however, prior to the enactment of the statute. This suggests that the General Assembly considered the secured debt issue raised in the case at bar andconcluded that, when calculating the net estate, the decedent’s property should not be reduced by the amount of debt that is secured by this property.

Section 31-4-101(b) was further amended in 1997 and currently provides as follows:

The value of the net estate includes all of the decedent’s real andpersonal property subject to disposition under the provisions of5 Assume for example that the deceden

t died owning a pie

ce of real prope

rty with a fa

ir market value of $200,000.00. At the time of the decedent’s death, however, this property was subject to secure

d debt totaling $50

,000.00. Under the

interpretation of

the “subject to disposition” language espoused by the Co-Executors and the Children, this property would be included in the decedent’s net estate only to the extent of the decedent’s equity in the property or $150,000.00. The c

urrent version of

section 31-4-101 (b), which share s the same “subjec

t to disposition” language as the statute that is applicable to the case at bar, further provides for a reduction in the net estate equal to the amount of the decedent’s secured debts. Thus, the $150,000.00 in the decedent’s net estate would again be reduced by $50,000.00. Because we do not think this was the

result intended by

the drafters of

section 31-4-101 (b), we decline to construe the “subject to disposition” language of the statute in the manner suggested bythe CoExecutors and the Children.

the decedent’s will or

the laws of intestate succession, reduced by the fo llowing: secured debts to the extent that secured c

reditors ar e entitled to realize on the applicable collateral , funer al a nd admini s tration expenses, and award of exempt property, homestead allowance and year’s support allowance.

Tenn. Code Ann. § 31-4-101(b) (Supp. 1998)(emphasis a dded). This

version of the sta

tute became effectiveon January 1, 1998 and thus wa s not in ef fect on the date of the Decedent’s death. See 1997 Tenn. Pub. Acts ch. 426, § 26. Nevertheless, we think that this amendment is relevant to our construction of the prior statute. Unlike the version of section 31-4-1 01(b) that applie s to the case at bar, the current version of this statute specifically provides that the surviving spouse’s elective share should be reduced by the dec ed ent’s secured debts. Although the drafters of the 1997 amendment

included this language regarding secu red debts, they did not alter th e “subject to disposition” language of the statute. This sug gests that “ all of the decedent’s real and personal property subject to disposition under the provisions of the decedent’s will” must be included in the net estate based

on its fair market value rather that the decedent’s equity in this property. Otherwise, the current version of section 31-4-101(b) would effectively provide for a double reduction in the net estate by the amount of the decedent’s secured debt. 5 Thus, the fact that the drafters of the 1997 amendment

did notalte r the “subject to disposition” language supports the Surviving Spouse’s contention that this language does not require a reduction for the secured debt of the decedent before inclusion of the decedent’s property in the net estate.

Although we are unaware of any Tennessee cases addressing the prec ise issue raised in the case at bar, we have examined three cases involving a related estate and inheritance tax issue. In Williams v. Commissione r of Internal Revenue , 103 T.C. 451 (1994)(“ Williams I ”), the probate court calculated the surviving spouse’s elective share without regard to the decedent’ s secured debtsandsatisfied the ele ctive share using

certain unencu

mbered assets

contained

in the decedent’s estate. See id. at 453, 453 n.4. In a subsequent action in federaltax court, the estate argued that its marital deductio n included the entire amount of the surviving spouse’s elective share. See id. at 453-54
. The tax court disagre

ed, holding that, wh

en determining the

marit al deduction, the surviving spous e’s elective share

must be reduced b

y a proportionate

share of the dec

edent’s secure

d debts. See id. at 464. Additionally, in Estate of Williams v. H uddle ston , 938 S.W.2d 415 (Tenn. 19 97) (“ Williams II ”), the Tennessee Supreme Court considered whether the entire amount of the surviving spouse’s elective share qualifies for the marital deduction for purposes of calculating the amount of state inheritance tax

owed by the decedent’s estate. See id. at 418. The court reached a different conclusion than the tax court in Williams I , holding as follows :

[A]ssuming that the elective sha re was determined and funded according to law, which is not d ecid ed in this case, the pr operty constituting the elective share passed fr om the d ecedent to the surviving spouse, an d “an amount equal to” the full value of the elective share qualifies for the marital deduc t ion under Tenn. Code Ann. § 67-8-315(a)(6).

Id. at 419. The court expressly stated that its holding does not serve as authority for the resolution of certain pretermitted issues, including those related to th e calculation of the surviving spouse’s el ective share. See id. at 418. Despite this limitation, the court stated by way of dict a that “i f property subject to the dec

edent’s secure

d debts is included i

n the elective sha

re, as it may be, on

ly the value of the prop

erty in excess of the debt secured would be included in determining the value of the elective share and also the marital deduction.” Id . at 419 (footnote omitted). Additionally, the court commented t

h at “[t]he procedure followed by the probate court constitutes a significant departure from prior law and may invite examination of Section 31-4-101 by the legislature.” Id. at 418 n.2. Finally, in Estate of Tenenbaum v. Commissioner of Internal Revenue , 112 F.3d 251 (6th Cir. 1997), the Sixth Circuit Court of Appeals was presented with an issue identical to the one raisedin Williams I
. See id. at 252. Relying on t he ruling of the Te nnessee Supreme

Court in Williams II , the Sixth Circuit held that, when calculating the federal marital deduction, the es tat e is not required to reduce the surviving spouse’s elective share in order to reflect the extent to which the elective share is burdened by the decedent’s secured debts. See id.As noted above, the court in Williams II

limited its holding to the narrow tax issue withwhich it was presented. For the same reasons cited in Williams II , w e thi nk that Williams I andEstate of Tenenbaum should be similarly l imited. The specif

ic issu e rai sed in these cases involved the calculation of the marital deduction, not the proper method of calculating the surviving spouse’s elective share. Thus, although Williams I , Williams II , and Estate of Tenenbaum contain dicta regarding the c alculat ion of the elective share, we do not think that these comments are controlling with respect to the secured debt issue raised in the case at bar.

Basedon the legislative history of section 31-4-101, wefind that, under the version of this provision that was in effect on the date of the Decedent’s de ath, the net estate should be calculated

without regard to

any debts that were secured by the Decedent’s property. Thus, the trial court in the instant case e

rred in its conclu

sion that only

the Decedent’s equity in this property, rather than its fair market value, should be included in the net estate.

Income
During the administration of the Decedent

’s est a te, the Decedent’s assets have generated a substantial amount of income. The trial court held t hat the Surviving Spouse was entitled to a one-third fixed fractional shar e of this income. Th

e court subseque

ntly amended its ruling to reflect that the Surviving Spouse’s share of this income should be determined using the changing fraction, rather than the fixed fraction, method of calculation. A s an initial matter,

we must determine whether

the Surviving Spouse is entitled to a portion of the income rece

ived by the estate after the death of the D

ecedent. Assumin

g that this question is

answered in the a

ffirmative, we mu

st then consider the proper method of calculating the Surviving Spouse’s share of this income.

In Merchants & Planters Ba nk v. Myers , 644 S.W.2d 683 (Tenn. App. 19 82), this Courtwas presented w

ith facts somewhat a

nalogous to

those of the case

at bar. On the dat

e of his death, the decedent owned a one-half undivided interest in the Myers Chevrolet Building. See id. at 685. On tax return

s filed by the esta

te, th e ex ecutor estimated that the value of the decedent’s interest in this property was $95,000.00. See id. at 686. For purposes of determining the surviving spouse’s elective share, however, the parties stipulated that the value of the decedent

’s interest was$120,000.00. See id. at 685. The trial court subsequently granted a petition to sell the decedent’s interest in the Myers Chevrolet Building for $97,500.00, finding that this amount was equal to the “fair and reasonable market value” of the decedent’s one-half interest. Id. at 686. Thereafter, the
e xecutor filed a petition seeking instructions from the trial court regarding the calculation of th e surviving spouse’s elective share. See id. at 685. The trial court ruled that the effec tive da te for purposes of

determining the surviving spouse’s elective share was the date of the decedent’s death. See id. at 686. Although this Court upheld the trial court’s ruling onappeal, we further commented as follows:

An adjustment is requi red when there i

s either appreciation

or depreciationof assets prior to distribution of the spouse’s elective share. . . .

. . . . The evidence adduced at the partition hearing suggests the stipulated value of the Myers Chevrolet Building did not reflect the property’ s true value as the parcel was valued on tax returns at $95,000.00. The estate has been under administration for approximately

four years and the wid

ow should properly

share in any g ains or losses experienced prior to the distribution of her s hare
. Upon remand, the e

xecutor is directed to take into account all gains andlosses as of the time

of the distribution and adjust the widow’s elective share accordingly.

Id.

The issue c on sidered by the court in Myers was whether appreciation and d epreciati on should be taken into account when calculating the surviving spouse’s elective share. Thus, the Myers court did not specifically address whether income received duri ng the administration of the decedent’s estate should also b e consid ered when calculating the surviving spouse’s elective share. Nevertheless, we find t hat the rat ionale applied in Myers is equally
a pplicable

to the case at bar. The Decedent’s estate has been under administration for n early si x years. As a result of various disputes among the parties, the Co-Executors have yet to distribute the Surviving Spo use ’s elective share. Like the court in Myers , we think that the Su rviving Spouse should share in any gains or losses experienced by the Decedent’s estate prior to the distribution of6 At least fourteen other jurisdictions also recognize that a surviving spouse is entitled to a

share of the profits or income earned prior to the distribution of his or her elective share. See Charles C. Marvel, Annotation, Extent of Rights of Surviving Spouse Who Elects to Take Against Will in Profits of or Increase in Va

lue of Estate Accruing

After Testator’s D

eath , 7 A.L.R.4th 994-95 (1981)(citations omitted).

7 The appellant in Greenfield did not challeng e the trial court’ s ruling with resp ect to proper method of calculating income earned during the administration of the decedent’s e state. See Greenfield

, 398 A.2d at 986 n.3.
8 The trial court in Greenfield illustrated the difference between these two methods of calculation as f

ollows: her elective share. 6 Such gains include income generated by property owned by the Decedent at the time of hi s death. In light of the lengthy period of administration in the case at bar, we think thi s result is equitable for all interested parties. This result also encourages the prompt administration of estates. Thus, we conclude that the trial court properly determined that the Surviving Spouse is entitled to a share of the inco me receive d by the Decedent’s estate prior to the distribution of her elective share.

When ruling that the Surviving Spouse’s share of the aforementio

ned income should be determined using the changing fraction method of calculation, the trial cou rt relied on the rationale set

forth in Estate of Greenfie ld , 398 A.2d 983 (Pa. 1979). In Greenfield , the trial court directed that the changing fraction method, ra therthan the fixed fraction method, should be used when allocating appreciation of the decedent’s assets that occurred during the administration of the decedent’s estate. 7 See id. at 986. The trial court explained the difference between the fixed fraction and the changing f

raction method as

follows:

When the fixed fraction method is used, the p r incipal is d istributed and the gains and losses are charged according to th e statutory percentage. . . . In essence, the fixed fraction method

treats the legacies a

nd taxes which had been paid and the advance distributions which have been made as if they were still part of the corpus, when, in fact, they no longer are part of the e state. As a result, in many instances, the non-elective portion shares in gains and losses in a proportion which did not in f act exist when the gains or losses were realized. [T]he changing fraction method allocates the gains andlosses realized on the principal of an estate among those who are in fact owners of the principal at that time in the sam e propor tions as their respective interests in the existing balance.

Id. at 985-86. 8 On appeal, the Pennsylvania Su preme Court affi

rmed the ruling of

the trial court,Let us assume that the net probate estate of a decedent is $300,000 and the

widow’s statutory elective share is one-third. Thus, upon her election she becomes entitled to $100,000. If federal taxes and legacies are pa id out of the non-elective sha

re (as they

must be) in the amou

nt of $100,000, ther

e remains in the estate $200,000 in principal. The elective and non-elective shares then are $100,000 each. However, if this principal increases by $150,000 and bec omes $350,000, under the fixed fraction method, the widow receives one-third of the increase and her distributive share is $150,000. The non-elective share would get two-thirds of the increase, and its distributive share would be $200,000. Thus, the value of the non-elective share increased by 100% [a]nd the value of the elective share increased 50% [a]lthough both shares had exactly the same amount of money attributable to their respective shares in the estate. . . . Under the chang

ing fraction me

thod, each would r

eceive a propor

tionate share, i.e. $175,000. The method would also function if there were a loss of $15 0,0 00. Each wou ld ge t $2 5,0 00, thu s sh ari ng in the los s pr opo rti ona tel y. Greenfield

, 398 A.2d at 986 n.2.
9 The Surviving Spouse conceded that, if the changing fraction method of calculation was used, she would be entitled to much more than a one-third share of the income received by the Decedent’s estate prior to the distribution of her elective share. finding that the changing f raction method is e

quitable in that it pr

ovides for the all

ocation of growth in estate assets in proportion to the parties’ actual interest in the fund that generated the growth. See id. at 987, 990.

When determining whether the changing fraction method o f calculation should be utilized in the instant case, we must focus on the express language of section 31-4-101. On the date of the Decedent’s

death, this statute

provided that a sur

viving spouse is

entitled to an elective share equal to one-third of the decedent’s net estate. See Tenn. Code Ann. § 31-4-101(a) (Supp. 1993). As st ated above, the Surviving Spouse is also entitled to r

eceive a one-th

ird share of inco

me generated by the Decedent’s property prior to the distribution of her elective share. If the Surviving Spouse’s share of this income was calculated using the changing fraction method, the Surviving Spouse would ultimately receive more than a one-third share of the Decedent’s estate. 9 This result is contrary to

the language of section 31-4-101. We agree with the Pennsylvania court in Greenfield that, under certain c

ircumstances, th

e changi ng fraction method may be more equitable than the fixed fractionmethod of calculation. However, we also recognize that there are potential administrative difficulties associated with this method of distributing income. Despite our equitable concerns, we decline to adopt the chang ing fraction metho

d in Tennesse

e. Accord ingly, we reverse the trial court’s ruling to the contrary.In light of our conclusion that the Surviving Spouse’s share of the income earned by the Decedent’s estate should not be calcu lated using the changing fraction method,

we find it unnecessary to discuss whether the Surviving Spouse’s shar e of the administrative expenses associated

with the generation of this income should similarly be determined using this method of calculation.
Intellectual Proper ty
Finally, we consider

whether and to what extent the Surviving Spouse is e

ntitled to
a share of income g

enerated by the

intellectual prop

erty in the Dece

dent’s e st ate. The parties initially disagreed regarding the value of the Decedent’s intellectual property and to w hom this property should be awarded. In order to resolve these disputes, the trial court enter ed an ord er allowing the Surviving Spouse and the Children to determine the value of the Decedent’s intellectual property through a bidding process. The Co-Executors had previously retained the firm of Loeb & Loeb to appraise the va

lue of thisproperty. Accordingly, Loeb & Loeb submitted a report to theCoExecutors estimating the fair market value of the Decedent’s intellectual property as of June 1995. Pursuant to the trial court’s order, the bidding would start at the Loeb & Loeb appraisal price and would con tinue to in crease by increments of $1,000.00 until either the Surviving Spouse or the Children ceased bidding. The party placing the highest bid would receive the Decedent’s intellectual property in kind and the amount of the winning bid would be charged against that party’s share of the Decedent’s estate. At the conclusion of this process, the Ch

ildren had submitte

d the highest

bid. The Children subsequently filed a motion requesting the trial cou rt to dire ct that the Surviving Spouse was not entitled to receive any of the income generated by the Decedent’s intellectual property. This motion was denied by the trial court.

The Loeb & Loeb appraisaltook into account the estimated future income that the Decedent’s intellectual property was expected to generate over a twenty year period. Thus, the value assignedto this property thr ough the tri al court’s bidding process also encompasses this future income. The Children argue on appeal that the Surviving Spouse should not be permitted to receive
a share of the income generated by this property during the administration of the Decedent’s estate. We agree. The Surv

iving Spouse

is entitled to receive as part of her elective share assets equal to10 In light of our ruling, we are compelled to offer g uidance to the Co-Executors regarding the proper method of distributing the income earned by the intellectual proper ty during the administration of t

he Decedent’s e

state. The Lo

eb & Loeb ap

praisal estimate

d the value of this property as it existed in June of 1995. Thus, any income genera ted by the Decedent’s intellectual property between the Decedent’s date of dea th and June of 1995 should be distributed in the same manner as all other income received by the estate. A ny income earned by the intellec tual property after June of 1995, however, should be set aside and ultimately distributed to the recipient of the Decedent’s intellectual property rig hts. one-thirdof the value assigned to t he Decedent’s i

ntellectual prop

erty. Included in

this value is

an
amoun tequal to the projected future income that this property is expected to earn over t he nex t twenty years. If the Surviving Spouse is also permitted to receive a one-thirdshare of the inco me received by the Decedent’s estate during its administration, she would effectively be receiving the same income through two separate avenues. We decline to approve such a method of distribution that allows the Surviving Spouse to take a “double-dip” of the income generated by the Decedent’s intellectual property. Consequently, we reverse the trial court’s ruling with regard to this matter. 10

Conclusion

For the reasons set forth above, we conclud e (1) that the proceeds the insurance policies that were paid directly to the Decedent’sex-wife should no t be included in

the net estate, (2) that, when calculating the net estate, the value of the Decedent’s property should not be reduced by the amount of

indebtedness sec

ured by this prope

rty, (3) that the Su

rviving Spouse is en

titled to
a share of the income received by the Decedent’s estate prior to the distribution of the elective share, (4) that the Surviving Spouse’s share of this income should be determined using the fixed fraction, rather than the changing fraction, method of calcula

tion, and (5) that the Surviving Spouse is not entitled to receive a share of the income earned by the Decedent’s intellectual property after June of 1995.
The ruling of the trial court is thus affirmed in

part, reversed

in part, and remanded for furth er pr oceedings consistent with this opinion. The costs of this appeal are taxed to the CoExecutors as representatives of the Decedent’s estate, for which execution may issue if necessary.

____________________________________ FARMER, J.

______________________________HIGHERS, J. (Concu rs)

______________________________ CANTRELL, J. (Conc

urs)