Court Opinion

ID: 4250074
Source: CourtListenerOpinion
Date Created: 2018-02-28 21:23:00.354341+00
Date Added: 2024-06-11T13:27:19.493289
License: Public Domain

IN THE SUPREME COURT OF IOWA

                               No. 12 / 06–1485

                            Filed February 22, 2008

IN THE MATTER OF THE ESTATE OF EDWARD A. SIEH, Deceased,

RODGER A. SIEH and CARENE E. LARSEN, Trustees of the Edward A.
Sieh Trust,

      Appellants,

vs.

MARY JANE SIEH,

      Appellee.

      Appeal from the Iowa District Court for Grundy County, Todd A.

Geer, Judge.

      Trustees of inter vivos trust appeal from district court order

subjecting trust assets to a spousal allowance under Iowa Code section

633.374 (2003). AFFIRMED.

      Max E. Kirk and Jennifer L. Chase of Ball, Kirk & Holm, P.C.,

Waterloo, for appellants.

      Paul C. Peglow and Bethany J. Currie of Johnson, Sudenga,

Latham, Peglow & O’Hare, P.L.C., Marshalltown, for appellee.
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LARSON, Justice.

      The trustees of a revocable inter vivos trust have appealed from a

district court order subjecting assets of the trust to payment of a spousal

allowance ordered in the estate of the settlor pursuant to Iowa Code

section 633.374 (2003). We affirm.

      I. Facts and Prior Proceedings.

      Edward Sieh established a revocable inter vivos trust in 1992 and

transferred most of his property to the trust by a deed and a bill of sale.

Also in 1992, he executed a will leaving the residue of his estate to the

trust. He married Mary Jane in 1998, but did not change his trust or

will to reflect the change in his marital status. Edward died in 2003,

survived by Mary Jane, his widow, and four adult children. Mary Jane

elected to take against the will under Iowa Code section 633.238.

However, the assets of the estate were not sufficient to satisfy

Mary Jane’s elective share, so the question arose whether the assets of

the revocable trust could be distributed to her as payment of her elective

share. We answered that question in the affirmative in Sieh v. Sieh, 713
N.W.2d 194, 198 (Iowa 2006) (Sieh I). Our holding was informed by an

analogous Iowa case, In re Estate of Nagel, 580 N.W.2d 810 (Iowa 1998),

as well as cases from other jurisdictions and the Restatement (Third) of

Property. Sieh I, 713 N.W.2d at 198.
      After our reversal and remand in Sieh I, Mary Jane applied for a

spousal allowance under Iowa Code section 633.374, and the trustees

resisted on the ground the estate had no assets from which to pay such

an award. They contended that Sieh I held only that the assets of the

trust were subject to payment of Mary Jane’s distributive share, but

“does not direct the [district] court to augment the Sieh Estate in order to

provide assets from which a spousal allowance may be paid.”             The
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district court rejected that argument and ruled that the assets of the

revocable trust were subject to payment of the spousal allowance.       It

awarded Mary Jane $3000 per month for twelve months, payable in a

lump sum.

      II. The Issues.

      The trustees raise two issues: (1) did the district court abuse its

discretion in awarding a spousal allowance as part of the costs of

administration “when there are no assets in the estate from which the

allowance can be satisfied,” and (2) did the court abuse its discretion in

awarding the allowance “when defendants did not have an opportunity to

review and respond to plaintiff’s affidavit regarding her finances” in

advance of the hearing.

      III. The Controlling Statute.

      Iowa Code section 633.374 provides this with respect to spousal

allowances:

            The court shall, upon application, set off and order
      paid to the surviving spouse, as part of the costs of
      administration, sufficient of the decedent’s property as it
      deems reasonable for the proper support of the surviving
      spouse for the period of twelve months following the death of
      the decedent. . . . The court shall take into consideration the
      station in life of the surviving spouse and the assets and
      condition of the estate. . . . Such allowance to the surviving
      spouse shall not abate upon the death or remarriage of such
      spouse.

      IV. Application of Iowa Code Section 633.374.

      Under section 633.374, a district court shall order a spousal

allowance. Despite the “shall” language of the statute, we have held that

a court’s ruling on an application for spousal support is reviewed for

abuse of discretion. In re Estate of Spurgeon, 572 N.W.2d 595, 599 (Iowa

1998); In re Estate of Tollefsrud, 275 N.W.2d 412, 415 (Iowa 1979). In

this case, we review the support order for an abuse of discretion, keeping
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in mind the requirement of the statute that the court “take into

consideration the station in life of the surviving spouse and the assets

and condition of the estate.” Iowa Code § 633.374.

      We reject the trustees’ argument that the estate may not look to

assets of the trust to fund a spousal allowance. We do so, first, based on

section 633.3104(2), which, at the time of this case, subjected the assets

of a revocable trust to payment of the costs of administration of the

settlor’s estate when “the settlor’s estate is inadequate to satisfy those

claims and costs.”     By definition, a spousal allowance is a cost of

administration and is, therefore, statutorily entitled to be satisfied out of

the assets of the revocable trust. Id. §§ 633.3(8), 633.3104(2).

      Our holdings in Sieh I and Nagel (which subjected trust assets to

the payment of general claims) are consistent with this conclusion. In

Sieh I, we built on Nagel’s holding and concluded “the rights of a

surviving spouse should not be less favored than the interests of general

creditors.” Sieh I, 713 N.W.2d at 198. Similarly, we believe in this case

the right of a surviving spouse to an allowance under section 633.374

should not be less favored than the claims of general creditors or the

payment of a distributive share.

      In addition to our case law supporting that result, the Restatement

provides:

            An inter vivos donative transfer to others than the
      donor’s spouse . . . that is revocable by the donor at the time
      of the donor’s death, is subject to spousal rights of the
      donor’s spouse in the transferred property that would accrue
      to the donor’s spouse on the donor’s death if the transfer
      had been made by the donor’s will.

Restatement (Second) of Property § 34.1(3) (1992). Comment k to this

section further explains that the assets of a revocable inter vivos trust

are subject to spousal rights, specifically “family allowances.”
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      We hold that the assets of the trust were properly subjected to

payment of the spousal allowance. The court of appeals decision in In re

Estate of Epstein, 561 N.W.2d 82 (Iowa Ct. App. 1996), decided before

Sieh I, reached a contrary result. In Epstein, the court of appeals held

that the assets of a revocable trust could not be used to pay a spousal

allowance because the trust and estate were separate entities and to

“commingle the assets of the estate and the trust run[s] contrary to the

purpose of establishing two separate entities.” Id. at 87. We reject that

reasoning, based on the authorities discussed above, and overrule

Epstein to the extent it does not allow revocable trust assets to be used to

satisfy a spousal allowance.

      V. The Procedural Argument.

      The trustees complain that the district court abused its discretion

by failing to allow them an “opportunity to review and respond” to

Mary Jane’s financial affidavit furnished in support of her application for

a spousal allowance. Her application was filed on August 14, 2006. The

trustees filed a resistance on August 16, complaining that they lacked

sufficient information regarding Mary Jane’s needs and “request[ing] that

an appropriate financial application be submitted to the court and the

parties for review prior to the court’s further consideration of this

matter.”   Mary Jane responded and furnished an affidavit of financial
status on August 28, 2006. The court’s order for support was entered

the same day, without allowing the trustees any additional time to

analyze the financial affidavit.

      We find no merit in the trustees’ procedural complaint.       Section

633.374 does not require that a financial affidavit be filed prior to the

court’s award of spousal allowance, and none of our cases suggest it. In

fact, a showing of necessity is not a prerequisite for receiving a spousal
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allowance. Spurgeon, 572 N.W.2d at 599; In re Estate of DeVries, 203
N.W.2d 308, 311 (Iowa 1972).

       A separate statute, Iowa Code section 633.375, provides for review

of an award made under section 633.374:

              The court may, upon the petition of the spouse, or
       other person interested, and after hearing pursuant to notice
       to all interested parties, review such allowance and increase
       or decrease the same.

This   section   requires   notice   and   hearing,   and   presumably   the

presentation of financial information, because it allows for increasing or
decreasing the award. However, it is clear from a reading of this section

that it applies only after the fact, i.e., only after the award has been

made. Moreover, the trustees have not attempted to use section 633.375

to challenge the amount of the allowance.

       The trustees understandably do not claim the spousal allowance of

$36,000 (in an estate of approximately $1.7 million) is excessive, and we
do not address that question.

       The district court correctly subjected the trust assets to payment of

the spousal allowance award, and we therefore affirm.

       AFFIRMED.