In the Matter of the Estate of Karen J. Myers, Rex A. Picken
State Court (North Western Reporter)11/2/2012
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Full Opinion
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.