Court Opinion

ID: 4250319
Source: CourtListenerOpinion
Date Created: 2018-02-28 21:24:40.229739+00
Date Added: 2024-06-11T14:44:14.836167
License: Public Domain

IN THE SUPREME COURT OF IOWA

                              No. 06 / 04-1219

                            Filed March 17, 2006

MARY JANE SIEH, Executor of the Estate of Edward A. Sieh,

      Appellant,

vs.

RODGER ALAN SIEH and CARENE ELLEN LARSEN, Trustees under the Edward A.  Sieh
Trust Agreement Dated May 19, 1992;  RODGER  ALAN  SIEH,  Individually;  and
CARENE ELLEN LARSEN, Individually,

      Appellees.

      Appeal from the Iowa  District  Court  for  Grundy  County,  Thomas N.
Bower, Judge.

      Surviving spouse electing against will appeals from order refusing  to
include assets of  revocable  inter  vivos  trust  created  by  decedent  as
property subject to the surviving spouse’s statutory share under  Iowa  Code
section 633.238 (2003).  REVERSED AND REMANDED.

      Paul C. Peglow of Johnson, Sudenga, Latham, Peglow &  O'Hare,  P.L.C.,
Marshalltown, for appellant.

      Mark E. Kirk and Jen Bries of Ball, Kirk & Holm, P.C.,  Waterloo,  for
appellees.

CARTER, Justice.
      Mary Jane Sieh, surviving spouse of Edward A. Sieh, deceased, who  has
elected against his will, appeals from  an  order  in  probate  refusing  to
include the assets of a  revocable  inter  vivos  trust  created  by  Edward
during his lifetime as  property  subject  to  Mary Jane’s  statutory  share
under Iowa Code section 633.238 (2003).  The appellees are Rodger Alan  Sieh
and  Carene  Ellen  Larsen,  Edward’s  son  and  daughter,   who   are   the
beneficiaries of the inter vivos trust.   After  reviewing  the  record  and
considering the arguments presented, we conclude  that  because  Edward  had
full control of the assets of the inter vivos  trust  at  the  time  of  his
death, including the power to  revoke  the  trust,  the  trust  assets  were
property possessed by the decedent during the marriage and thus  subject  to
the  spouse’s  statutory  share  under  section  633.238.   We  reverse  the
judgment of the probate  court  and  remand  the  case  to  that  court  for
recomputing Mary Jane’s statutory share under that statute.
      The revocable inter vivos trust at issue here was  created  by  Edward
on May 19, 1992.  At that time, he was unmarried.  On the day the trust  was
created,  Edward  transferred  all  of  his  personal  effects,   furniture,
appliances,  vehicles,  tools,  and  shop  equipment  to  the   trust.    On
December 23, 1992, he transferred a  substantial  amount  of  Grundy  County
farmland owned by him to  the  trust.   On  June 21,  1998,  Edward  married
Mary Jane.  They remained married  until  Edward’s  death  on  September 25,
2003.
      Rodger and Carene caused Edward’s will to be proved and filed  without
present administration and notice of that act was  published  on  October 9,
2003,  and  October 16,  2003.   They  also  caused  to  be   published   on
October 16, 2003, and October 23, 2003, the following notice:

            To all persons regarding Edward A. Sieh, deceased, who  died  on
      or about September 25, 2003.  You  are  hereby  notified  that  Carene
      Ellen Larsen and Rodger Alan Sieh are the trustees of  the  Edward  A.
      Sieh trust . . . .

            Any action to contest the validity of the trust must be  brought
      in the district court of Grundy County,  Iowa,  within  the  later  to
      occur of sixty days from  the  date  of  second  publication  of  this
      notice, or thirty days from the date of mailing  this  notice  to  all
      heirs of the decedent, spouse of the decedent, and beneficiaries under
      the trust whose identities are reasonably ascertainable . . . .

            Creditors having claims against the trust must mail them to  the
      trustee at the address listed below via certified mail, return receipt
      requested.  Unless creditor claims are mailed by the later to occur of
      sixty days from the second publication of this notice or  thirty  days
      from the day of mailing this notice, a claim shall be forever  barred.

A copy of the foregoing notice, which  was  in  compliance  with  Iowa  Code
section 633.3109, was mailed to Mary Jane.
      On  February 20,  2004,  Mary Jane  caused  herself  to  be  appointed
executor of Edward’s estate and published notice thereof  pursuant  to  Iowa
Code section 633.304.  She immediately filed an  election  to  take  against
the will.  She then sought a  declaratory  decree  in  probate  establishing
that the assets of the revocable trust should be included in  the  statutory
share that she would receive  as  a  result  of  her  election  against  the
will.[1]  Both Mary Jane and the appellees moved for summary judgment.   The
court overruled Mary Jane’s motion and granted appellees’ motion.
      I.  Scope of Review.
       Because  the  ruling  being  appealed  was  made  by  sustaining  the
appellees’ motion for summary judgment, we review the issues  presented  for
errors at law.  Wernimont v. Wernimont, 686 N.W.2d 186,  189  (Iowa  2004).
We examine the record to determine whether any  genuine  issue  of  material
fact exists and whether the court correctly applied the law.   Id.;  Hegeman
v. Kelch, 666 N.W.2d 531, 533 (Iowa 2003).
      II.  Probate Court’s Ruling.
      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,  715 A.2d 791  (Conn.  Ct.  App.  1998);  Taliaferro  v.
Taliaferro, 843 P.2d 240 (Kan. 1992); Soltis v.  First  American  Bank,  513
N.W.2d 148 (Mich. Ct. App. 1994); and Dumas v. Estate of Dumas,  627 N.E.2d
978 (Ohio 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,
664 A.2d 142, 147 (Pa. Super. Ct. 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 Nagle,  580
N.W.2d 810, 811 (Iowa 1998).  Although the  appellees  point  out  that  the
trust in Nagle 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.

      III.  Whether Mary Jane’s Election is Time  Barred  Pursuant  to  Iowa
Code Section 633.3109.

      The district court concluded that, even if Mary Jane was  entitled  to
subject the assets of the revocable trust  to  her  spousal  election,  that
election was time barred by reason of  Iowa  Code  section  633.3109.   That
statute provides for the giving of notice of the type  served  on  Mary Jane
by the trustees and provides that, unless an action to contest the  validity
of the trust is brought within the later to occur of  sixty  days  from  the
date of the second publication of the notice or thirty days  from  the  date
of mailing the notice, such claims are barred.  Iowa Code  § 633.3109(3)(d).
 This statute further provides creditors having claims against a trust  must

      mail proof of their claim to the trustee via  certified  mail,  return
      receipt requested, within the later to occur of sixty  days  from  the
      second publication of the notice or  thirty  days  from  the  date  of
      mailing of the notice, or thereafter be forever barred.

Iowa Code § 633.3109(3)(e).
      Mary Jane urges that this statute does not operate to bar  her  effort
to include the assets of the revocable  trust  in  the  statutory  share  to
which she is entitled by reason of  her  timely  election  against  Edward’s
will.  We agree. Pursuant to her election to  take  against  the  will,  the
district court had authority to decide whether her statutory share  embraced
the trust assets by  a  ruling  in  the  estate  proceedings.   It  was  not
necessary for Mary Jane to file a claim in the trust  or  bring  a  separate
action involving the trust in order to obtain the relief  she  was  seeking.
An analogous situation exists with regard to creditors filing claims  in  an
estate following the publication of notice under Iowa Code sections  633.230
or 633.304.  Those creditors may seek to subject revocable trust  assets  to
their claims in the estate proceeding through  the  regular  claims  process
and are not subject to the requirements of section 633.3019(3).   Iowa  Code
§ 633.3019(2).  The notice and bar provisions  of  section  633.3019(3)  are
conditioned on an absence of  proper  notice  to  creditors  in  the  estate
proceeding.  See id.
      We  have  considered  all  issues  presented  and  conclude  that  the
judgment of the district court must be reversed.  The case  is  remanded  to
that court for a determination of Mary Jane’s spousal  share  under  section
633.238 in accordance with the directives of this opinion.
      REVERSED AND REMANDED.
-----------------------
      [1]Pursuant to Iowa Code section 633.238 (2003),  a  surviving  spouse
electing against the will is entitled to the following share of the  estate:

           If the surviving spouse elects to take  against  the  will,  the
      share of such surviving spouse will be:
           1.  One-third in value of all the legal or equitable estates  in
      real property possessed  by  the  decedent  at  any  time  during  the
      marriage, which have not been sold  on  execution  or  other  judicial
      sale, and to which the surviving spouse has made no relinquishment  of
      right.
           2.  All personal property that, at the time of death, was in the
      hands of the decedent as the head of a family, exempt from  execution.

           3.  One-third of all other personal  property  of  the  decedent
      that is not necessary for the payment of debts and charges.

      [2]Section 2-202 of the Uniform Probate  Code  also  provides  for  an
augmented estate in computing the spousal elective share,  including  assets
in revocable trusts created by the deceased’s spouse.  After this  case  had
been decided in the district court, the  Iowa  legislature  amended  section
633.238 to include the assets in revocable  trusts  created  by  a  deceased
spouse in the surviving spouse’s statutory share.  2005 Iowa  Acts  ch.  38,
§ 14.  This legislation would be significant to  our  present  consideration
only if our attempt to determine what the law was  prior  to  the  amendment
leaves us with some doubt.  Bob Zimmerman Ford, Inc.  v.  Midwest  Auto.  I,
L.L.C., 679 N.W.2d 606, 610 (Iowa 2004).  For the  reasons  we  indicate  in
our opinion, it does not.