Court Opinion

ID: 4249542
Source: CourtListenerOpinion
Date Created: 2018-02-28 21:19:24.489758+00
Date Added: 2024-06-11T07:48:12.121405
License: Public Domain

IN THE SUPREME COURT OF IOWA
                                   No. 11–1378

                          Filed November 2, 2012

IN THE MATTER OF THE ESTATE OF KAREN J. MYERS, Deceased.

REX A. PICKEN,
     Appellant.

      Appeal from the Iowa District Court for Hamilton County, Carl D.

Baker, Judge.

      Executor appeals probate court ruling that pay-on-death assets are

included in the surviving spouse’s elective share.          REVERSED AND

REMANDED.

      James     L.   Kramer   of    Johnson,     Kramer,   Good,   Mulholland,

Cochrane & Driscoll, P.L.C., Fort Dodge, for appellant.

      William D. Kurth of Kurth Law Office, Lake City, for appellees.
                                          2

WATERMAN, Justice.

       This appeal presents a question of first impression: whether a

surviving spouse’s elective share, as defined in Iowa Code section

633.238 (Supp. 2009), includes pay-on-death (POD) assets. 1                      The

probate court ruled that three of Karen Myers’s assets, a checking

account, certificate of deposit, and an annuity, all payable on her death

to her daughters, should be included in the elective share of her

surviving spouse, Howard Myers.

       The assignees of Howard’s elective share (assignees) argue the

elective share should include POD assets under Sieh v. Sieh, 713 N.W.2d
194, 198 (Iowa 2006), which held the elective share includes assets in a

revocable trust. The executor argues the general assembly, by amending

section 633.238 in 2009, expressly limited the surviving spouse’s elective

share to the four categories of assets listed in the statute, none of which

include POD assets.         The probate court, however, ruled against the

executor by comparing Karen’s POD assets to the revocable trust at issue

in Sieh. This interpretation would ensure the surviving spouse’s elective

share rights are not defeated through the use of nonprobate assets, such

as POD accounts and annuities.

       For   the   reasons     explained      below,   we   conclude     the    2009

amendment to section 633.238 trumps Sieh. The controlling statutory

language omits POD assets from the surviving spouse’s elective share.

Accordingly, we reverse the ruling of the probate court.

       1We  use “POD assets” to refer to the POD accounts and annuity at issue in this
case. Although the accounts in this case were POD accounts, the same analysis would
apply to transfer-on-death (TOD) accounts.
                                            3

       I. Background Facts and Proceedings.

       Karen died on November 2, 2009, survived by her spouse, Howard.

Rex Picken, Karen’s brother and the executor of her estate, admitted

Karen’s will to probate on November 20. At the time of her death, Karen

owned a number of assets, either jointly or individually, which were

valued at $479,989.29. Howard became the sole owner of real estate and

other property he and Karen owned as joint tenants with right of

survivorship. Karen left no other property to Howard in her will, aside

from some household furnishings.                Karen bequeathed the rest of her

property to her daughters and stepson.                The assets at issue in this

appeal are a checking account and certificate of deposit at the First

Federal Savings Bank valued at $91,085.71 and an annuity with River

Resource Funds valued at $18,978.80.                All three of these assets were

accompanied by beneficiary designations that made them payable on

death to Karen’s daughters.

       Howard filed for an elective share on June 30, 2010, and an

application for support allowance on July 8. The probate court denied

Howard’s application for support allowance because it found Howard

lacked need for such support. On February 9, 2011, Howard assigned

his interest in Karen’s estate, including his right to an elective share, to

the heirs of DeLillian Peterson, the Ramona Russell Trust, and the

Helen B. Anderson Trust. 2            Howard, a former attorney who had

       2The   executor argues for the first time on appeal that Howard’s assignment of
his elective share violated Iowa Code section 633.242 (2009), which states:
               The right of the surviving spouse to take an elective share, and
       the right of the surviving spouse to receive a life estate in the homestead,
       are personal. They are not transferable and cannot be exercised for the
       spouse subsequent to the spouse’s death. If the surviving spouse dies
       prior to filing an election, it shall be conclusively presumed that the
       surviving spouse does not take such elective share.
                                             4

surrendered his law license, assigned his interest in Karen’s estate to

satisfy a restitution judgment against him in a criminal action.

Specifically, Howard had been convicted of second- and third-degree

felony theft for stealing client funds.

       On May 6, the assignees filed an application to set off the surviving

spouse’s share.         The assignees requested that the probate court

determine, as an initial matter, whether the checking account, certificate

of deposit, and annuity should be included in Howard’s elective share.

The probate court relied on our 2006 decision in Sieh.                         There, we

concluded that assets in a revocable trust were to be included in the

surviving spouse’s elective share, even though they were not explicitly

mentioned in section 633.238 at that time. Sieh, 713 N.W.2d at 198. In

reaching that conclusion, we emphasized the fact that “the decedent had

complete control over the trust assets at all times prior to his death.” Id.

Similarly, the probate court emphasized that Karen retained control over

the POD assets before her death and, thus, concluded that these assets,

like the assets of a revocable trust, should be included in Howard’s

elective share. This issue has divided the trial courts of our state. 3
____________________________
Because the executor failed to raise this argument in probate court, we decline to reach
it. See Bowman v. City of Des Moines Mun. Hous. Agency, 805 N.W.2d 790, 797 (Iowa
2011) (“We decline to consider an argument that is raised for the first time on appeal.”).
In any event, this argument lacks merit. This provision states that it is “[t]he right . . .
to take an elective share” that is not transferable. Iowa Code § 633.242 (emphasis
added).
       3The   Iowa Practice Series noted uncertainty as to whether Sieh’s rationale could
be applied to “any asset controlled by the decedent during life for which a beneficiary
designation has been made.” 2 Marlin M. Volz, Jr., Iowa Practice Series, Methods of
Practice § 21:24, at 249 (2012). Iowa district courts have reached conflicting decisions
on whether such assets should be included in a surviving spouse’s elective share. See
id.; see also Rich v. Rich, No. EQCV141699 (Woodbury Cnty. Dist. Ct., Sept. 14, 2011)
(concluding the elective share included one-third of the decedent’s POD accounts and
annuities and all of an individual retirement account); In re Estate of Albers, Probate No.
ESPR039413 (Pottawattamie Cnty. Dist. Ct., Dec. 2, 2009) (ruling the surviving
spouse’s elective share does not include POD or TOD accounts).
                                     5

      We retained the executor’s timely appeal to resolve this question of

first impression.

      II. Standard of Review.

      A surviving spouse’s claim against the estate for an elective share

under Iowa Code section 633.236 is tried in equity.         Section 633.33

provides:

             Actions to set aside or contest wills, for the involuntary
      appointment of guardians and conservators, and for the
      establishment of contested claims shall be triable in probate
      as law actions, and all other matters triable in probate shall
      be tried by the probate court as a proceeding in equity.

Iowa Code § 633.33 (2009). Cases tried in equity are reviewed de novo.

Iowa R. App. P. 6.907. But, when there are no disputed facts and the

appeal turns on whether the probate court’s interpretation of a statute

was erroneous, as is the case here, our review is for correction of errors

of law. See In re Estate of Thomann, 649 N.W.2d 1, 3–4 (Iowa 2002).

      III. Analysis.

      Because the probate court relied on Sieh, we begin by discussing

that decision. We then analyze the controlling statutory language.

      A. Sieh v. Sieh. In Sieh, Mary Jane Sieh, the surviving spouse of
Edward Sieh, argued that she should receive, as part of her elective

share, assets of a revocable inter vivos trust created by Edward several

years before their marriage. Sieh, 713 N.W.2d at 195. The beneficiaries

of this trust, Edward’s children, argued that the revocable trust should

not be included in Mary Jane’s elective share, and the probate court

agreed. Id. We reversed, emphasizing 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.
                                            6

Id.

      We reached this conclusion even though revocable trusts were not

mentioned in section 633.238 at that time. 4 Section 633.238 lists the

assets that are to be included in the surviving spouse’s elective share.

The general assembly added revocable trusts to section 633.238 in 2005

after the Sieh case had been decided by the district court, but before we

decided the appeal. See Sieh, 713 N.W.2d at 197 n.2 (citing 2005 Iowa

Acts ch. 38, § 14); see also Iowa Code § 633.238(1)(d) (Supp. 2005)

(stating the surviving spouse’s elective share includes “[o]ne third in

value of the property held in trust . . . over which the decedent was a

grantor and retained at the time of death the power to alter, amend, or

revoke the trust”). We noted this amendment “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.”                       Sieh, 713

N.W.2d at 197 n.2. However, we concluded revocable trusts would have

been included in the surviving spouse’s elective share even under the

preamendment version of section 633.238. Id. at 198. 5

      4The   version of section 633.238 applicable in Sieh read:
             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.
Iowa Code § 633.238 (2003).
      5Althoughwe determined that the statutory language of section 633.238 could
be read more expansively in Sieh, the legislative history to the 2005 amendment
                                          7

We reached this conclusion by relying on the Restatement (Third) of

Property:

             “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.”

Id. at 197 (quoting Restatement (Third) of Property: Wills and Other

Donative Transfers § 9.1 cmt. j (2003), at 212 (emphasis added)). Based

on this Restatement provision, we concluded the fact Edward “had

complete control over the trust assets at all times prior to his death . . .

would allow the assets in the revocable trust to be included in the

statutory share of Edward’s spouse electing against the will.” Id. at 198.

      The assignees understandably argue Sieh should be read broadly

to sweep into section 633.238 property within the decedent’s control at

____________________________
suggests the legislature intended otherwise.     The explanation accompanying this
amendment states:
              The bill amends sections of the probate code relating to the right
      of a surviving spouse to take an elective share of the deceased spouse’s
      estate including the right to receive a share of the deceased spouse’s
      revocable trust assets and the right to elect a life estate in the
      homestead. Current law provides that a surviving spouse may elect
      against the will of a deceased spouse and claim a statutory share that
      does not include property held in trust by the deceased spouse or the
      right to elect a life estate in the homestead.
H.F. 799, 81st G.A., 1st Sess., explanation (Iowa 2005).    We did not mention this
legislative history in Sieh.
                                     8

the time of her death, such as the POD assets at issue here. The probate

court agreed. We reach the opposite conclusion, based on the controlling

statutory language as amended after Sieh.

      B. Section 633.238.       We now consider whether the general

assembly’s subsequent amendment of section 633.238 limited Sieh’s

holding. The general assembly amended section 633.238 in 2009. See

2009 Iowa Acts ch. 52, § 4.     This amendment, effective July 1, 2009,

“appl[ies] to estates of decedents and revocable trusts of settlors dying on

or after” that date. Id. § 14(3). Karen died in November of 2009, so the

statute applies as amended.

      By this amendment, the legislature added “limited to” to section

633.238(1), with the result that section 633.238 now reads:

             1. The elective share of the surviving spouse shall be
      limited to all of the following:
            a. 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 express written relinquishment of right.
            b. 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.
             c. One-third of all personal property of the decedent
      that is not necessary for the payment of debts and charges.
            d. One-third in value of the property held in trust not
      necessary for the payment of debts and charges over which
      the decedent was a grantor and retained at the time of death
      the power to alter, amend, or revoke the trust, or over which
      the decedent waived or rescinded any such power within one
      year of the date of death, and to which the surviving spouse
      has not made any express written relinquishment.
             2. The elective share described in this section shall be
      in lieu of any property the spouse would otherwise receive
      under the last will and testament of the decedent, through
      intestacy, or under the terms of a revocable trust.

Iowa Code § 633.238 (Supp. 2009) (emphasis added).
                                          9

       When interpreting a statute that has been amended, “we may

consider the previous state of the law, circumstances surrounding the

statute’s enactment, and the text both before and after the amendment.”

Davis v. State, 682 N.W.2d 58, 61 (Iowa 2004). We presume that the law

has been changed if the legislature added or deleted words from the

statute, “unless the remaining language amounts to the same thing.” Id.

“When interpreting amendments, we will assume that the amendment

sought to accomplish some purpose and was not a futile exercise.” Id.

       The postamendment version of section 633.238 states that “[t]he

elective share of the surviving spouse shall be limited to all of the

following.” Iowa Code § 633.238 (emphasis added). It is clear that the

legislature, by this language, intended to limit the property that would be

included in the surviving spouse’s elective share to the four categories of

property specifically identified in the statute.           This interpretation is

consistent with the general assembly’s explanation accompanying the

House version of the bill.       The explanation states, “The bill limits the

elective share of the surviving spouse who elects to take against a

decedent’s will to the elective share portions contained in Code section

633.238 and does not include nonprobate or nontrust assets.” H.F. 677,

83rd G.A., 1st Sess., explanation (Iowa 2009); 6 see also City of

Cedar Rapids v. James Props., Inc., 701 N.W.2d 673, 677 (Iowa 2005)

(“We give weight to explanations attached to bills as indications of

legislative intent.”).    We conclude the 2009 amendment legislatively

abrogated Sieh in part.            Under the controlling language of the

       6The   same explanation appears in the Legislative Services Agency’s summary of
the legislation cited by the executor. See Legis. Servs. Agency, 2009 Summary of
Legislation, S.F. 365—Administration of Estates and Trusts (Iowa 2009), available at
http://www.legis.state.ia.us/GA/83GA/Session.1/Summary/summary_2009.pdf.
                                    10

amendment, the elective share is limited to those assets specifically

enumerated in section 633.238(1) and cannot be judicially expanded.

      The assignees did not assert in probate court or in their appellate

brief that the POD assets fall into any of the four categories in section

633.238(1).   The assignees, however, belatedly contended for the first

time during oral argument to our court that these assets are included in

the elective share under section 633.238(1)(c) as “personal property of

the decedent.” While “[w]e [may] decline to consider an argument that is

raised for the first time on appeal,” Bowman, 805 N.W.2d at 797, we

reach the merits here and hold POD assets are not included in the

surviving spouse’s elective share under section 633.238(1)(c).

      POD accounts, such as the checking and certificate of deposit

accounts here, and annuities are nonprobate assets. 1 Sheldon F. Kurtz,

Kurtz on Iowa Estates: Intestacy, Wills, and Estate Administration § 11.1,

at 451 (3d ed. 1995) [hereinafter Kurtz on Iowa Estates].        Nonprobate

assets are interests in property that pass outside of the decedent’s

probate estate to a designated beneficiary upon the decedent’s death. Id.

Although these assets are the personal property of the grantor before

death, they become the personal property of the designated beneficiaries

upon the grantor’s death pursuant to a contract between the grantor and

the administrator of the account. See Karsenty v. Schoukroun, 959 A.2d
1147, 1158 (Md. 2008) (holding that a TOD account was not part of the

decedent’s testate estate because the decedent’s interest in the property

did not survive his death, which is when the TOD account “transferred to

[the beneficiary] . . . ‘by reason of the contract’ between him and [the

administrator of the account]”); Restatement (Third) of Property: Wills

and Other Donative Transfers § 1.1 cmt. b, illus. 12, at 10 (1999)

(“Because [the grantor’s] ownership interest in the account and in the
                                             11

securities expired on her death, no part of the balance in the account at

her death or of the securities is included in [the grantor’s] probate

estate.”); see also Iowa Code § 633D.11(1) (2009) (“A transfer on death

resulting from a registration in beneficiary form shall be effective by

reason of the contract regarding the registration between the owner and

the registering entity under the provisions of this chapter, and is not

testamentary.”).

       Section 633.238(1)(c) includes “[o]ne-third of all personal property

of the decedent that is not necessary for the payment of debts and

charges” in the surviving spouse’s elective share.                  Id. § 633.238(1)(c)

(Supp.    2009).        The    legislative    history    accompanying         the   2009

amendment confirms that this section is limited to personal property in

the decedent’s probate estate. 7             Specifically, the explanation section

accompanying that amendment states the surviving spouse’s elective

share is limited to those categories of property explicitly mentioned in

section 633.238(1) and that it “does not include nonprobate . . . assets.”

H.F. 677, 83rd G.A., 1st Sess., explanation (Iowa 2009).8

        7This  interpretation is supported by persuasive authorities from other
jurisdictions. See, e.g., Karsenty, 959 A.2d at 1158 (holding that the surviving spouse’s
elective share did not include a TOD account because decedent’s interest in the account
did not survive his death and thus was not part of the decedent’s testate estate); Dalia
v. Lawrence, 627 A.2d 392, 402 (Conn. 1993) (“[P]roperty . . . owned by the decedent at
the time of his or her death . . . refers to property owned by the decedent in such form
that it would, if willed, pass under such will.” (Citations omitted.)); see also 1 Kurtz on
Iowa Estates § 8.9, at 307 (“[Section 633.238] does not purport to permit the spouse to
reach personal property owned by the decedent during life that forms no part of the
decedent’s probate estate.”).
       8Although   section 633.238 exclusively controls what property is included in the
surviving spouse’s elective share, we note that the assignees’ interpretation is also
unsupported by the statutes governing POD accounts and securities. These statutes
allow POD accounts and securities to be reached to satisfy certain obligations of the
estate, yet they do not mention elective share rights. See, e.g., Iowa Code § 524.805(8)
(“A state bank may receive deposits from one or more persons with the provision that
upon the death of the depositors the deposit account shall be the property of the person
or persons designated by the deceased depositors as shown on the deposit account
                                           12

       The assignees make a strong public policy argument that elective

share rights may be defeated by the use of POD assets if we interpret

section 633.238 to omit them. See 1 Kurtz on Iowa Estates § 8.9, at 307

(“[T]he policies underlying elective share legislation could easily be

defeated if the property owning spouse could transfer a substantial

portion of her personal property during life, reduce the size of her

personal estate and minimize or eliminate the value of property available

to a spouse who elects against the will.”). The assignees’ policy argument

is properly directed to the legislature.            The Iowa legislature chose to

include revocable trusts in the elective share under section 633.238(1)(d).

See 2005 Iowa Acts ch. 38, § 14 (adding revocable trusts to the property

included in the elective share). We conclude further legislation would be

required to include POD assets in the elective share.

       Based on the plain meaning of the operative statutory language as

amended in 2009, we hold that only the assets specifically enumerated in

section 633.238 may be included in the surviving spouse’s elective share.

POD accounts and annuities are not included under section 633.238.

We overrule Sieh to the extent it is inconsistent with this opinion.

Because Karen’s POD assets should not be included in Howard’s elective

share, we reverse the ruling of the probate court and remand the case for

recalculation of payments owed to the assignees.

____________________________
records of the state bank. After payment by the state bank, the proceeds shall remain
subject to the debts of the decedent and the payment of Iowa inheritance tax, if any.”);
id. § 633D.8(1) (“If other assets of the estate of a deceased owner are insufficient to pay
debts, taxes, and expenses of administration, including statutory allowances to the
surviving spouse and children, a transfer at death of a security registered in beneficiary
form is not effective against the estate of the deceased sole owner . . . to the extent
needed to pay debts, taxes, and expenses of administration, including statutory
allowances to the surviving spouse and children.”).
                                 13

      IV. Conclusion.

      For these reasons, the probate court erred by including Karen’s

POD assets in Howard’s elective share.    The probate court order is

reversed and the case remanded for further proceedings consistent with

this opinion.

      REVERSED AND REMANDED.