Opinion ID: 1749422
Heading Depth: 1
Heading Rank: 2

Heading: Probate Court's Ruling.

Text: In granting summary judgment in favor of appellees, the probate court concluded that, because the revocable inter vivos trust existed as a legally recognized entity separate and distinct from the estate of the decedent, the trust assets were not subject to a surviving spouse's election under section 633.238. In so ruling, the court acknowledged a split of authority on this issue from other jurisdictions. Cases cited by the court that agreed with its view included Bezzini v. Department of Social Services, 49 Conn.App. 432, 715 A.2d 791 (1998); Taliaferro v. Taliaferro, 252 Kan. 192, 843 P.2d 240 (1992); Soltis v. First American Bank, 203 Mich.App. 435, 513 N.W.2d 148 (1994); and Dumas v. Estate of Dumas, 68 Ohio St.3d 405, 627 N.E.2d 978 (1994). The court also noted in its ruling that the Iowa Court of Appeals in considering a request for a spouse's twelve-month subsistence allowance under Iowa Code section 633.374 has held that the assets of a revocable trust created by the decedent are not available for the payment of such allowance. In re Estate of Epstein, 561 N.W.2d 82, 87 (Iowa Ct.App. 1996). Cases considered by the district court that subjected the assets of a revocable trust to a surviving spouse's election included Dunnewind v. Cook, 697 N.E.2d 485, 489 (Ind.Ct.App.1998), and In re Estate of Inter, 444 Pa.Super. 417, 664 A.2d 142, 147 (1995). The results in the latter two cases are consistent with the views that have been expressed by the American Law Institute in the Restatement (Third) of Property (Wills & Don. Trans.) and the Restatement (Third) of Trusts. The Restatement (Third) of Property provides: In a state whose statute subjects the decedent's estate to the [spouse's elective share], the elective share is applied to the value of the decedent's estate which, for purposes of calculating the elective share, includes (i) the value of the decedent's probate estate, (ii) the value of property owned or owned in substance by the decedent immediately before death but passed outside of probate at the decedent's death to donees other than the surviving spouse, and (iii) the value of irrevocable gifts to donees other than the surviving spouse made by the decedent in anticipation of imminent death. Restatement (Third) of Property: Wills and Donative Transfers § 9.1(c) (2003). Comment j to this section of the Restatement provides: Although property owned or owned in substance by the decedent immediately before death that passed outside of probate at the decedent's death is not part of the decedent's probate estate, such property is owned in substance by the decedent through various powers or rights, such as the power to revoke, withdraw, invade, or sever, or to appoint the decedent or the decedent's estate as beneficiary. Consequently, for purposes of calculating the amount of the [spouse's] elective share the value of property owned or owned in substance by the decedent immediately before death that passed outside of probate at the decedent's death to donees other than the surviving spouse is counted as part of the decedent's estate. The decedent's motive in creating, exercising or not exercising any of these powers is irrelevant. Restatement (Third) of Property: Wills and Donative Transfers § 9.1 cmt. j (2003) (emphasis added). The Restatement (Third) of Trusts provides: A trust that is not testamentary is not subject to the formal requirements of § 17 [requirements for execution and witnessing] or to procedures for the administration of a decedent's estate; nevertheless, a trust is ordinarily subject to substantive restrictions on testation and to rules of construction and other rules applicable to testamentary dispositions, and in other respects the property of such a trust is ordinarily treated as though it were owned by the settlor. Restatement (Third) of Trusts § 25 (2003). Comment d of this restatement provides: [I]n most American jurisdictions the surviving spouse of a married decedent is entitled to a share of the estate of which the spouse cannot be deprived by the decedent's will in the absence of an election by the spouse to accept something less or different, or nothing, as may be provided by the decedent's will. Although modern versions of these so-called forced or elective share statutes vary considerably in language and in details of implementation, a married property owner cannot properly circumvent the policy of such statutes through the use of an inter vivos trust that is revocable, directly or indirectly (such as through an unrestricted power of amendment or appointment), by the settlor. Restatement (Third) of Trusts § 25 cmt. d (2003). [2] The issue now presented to this court is one of first impression. Over ninety years ago, we determined that the assets in an irrevocable trust created by a deceased spouse during his lifetime could not be included in the surviving spouse's statutory share following an election against the will. Haulman v. Haulman, 164 Iowa 471, 484, 145 N.W. 930, 935 (1914). In so holding, we emphasized the lack of control that the decedent had over the trust assets. Id. In the present case, the decedent had complete control over the trust assets at all times prior to his death. Under the position adopted by the American Law Institute in the restatements to which we have referred, that fact would allow the assets in the revocable trust to be included in the statutory share of Edward's spouse electing against the will. We adopt the view of the American Law Institute on this issue. Although Edward very likely did not intend for Mary Jane to share in any of the trust assets, we are satisfied that this is her right by reason of section 633.238. In adopting this position, we are influenced by the fact that we have previously recognized the right of a general creditor to proceed against the assets in a revocable inter vivos trust for purposes of satisfying a valid claim filed in the estate of the settlor. In re Estate of Nagel, 580 N.W.2d 810, 811 (Iowa 1998). Although the appellees point out that the trust in Nagel contained language authorizing the payment of debts, we did not decide the case on that basis. We relied on the principle that a trust settlor should not be allowed to retain all the benefits of ownership without assuming any of the burdens. Id. We are convinced that the rights of a surviving spouse should not be less favored than the interests of general creditors. We conclude that the district court erred in not subjecting the assets of the revocable inter vivos trust created by Edward to Mary Jane's spousal election under section 633.238.