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In re Estate of Gantner

Supreme Court of Iowa

April 21, 2017


         Appeal from the Iowa District Court for Linn County, Sean McPartland, Judge.

         A surviving spouse appeals the denial of an application for temporary spousal support. AFFIRMED.

          Benjamin M. Lange of Swisher & Cohrt, P.L.C., Independence, for appellant.

          Abbe M. Stensland and Crystal R. Pound of Simmons Perrine Moyer Bergman PLC, Cedar Rapids, for appellees.

          MANSFIELD, Justice.

         This case requires us to determine whether a decedent's individual retirement accounts (IRAs) may be used to pay an allowance to a surviving spouse who was not a beneficiary of those IRAs. The spouse argues that under Iowa Code section 633D.8, she may reach the IRAs because they were "a transfer at death of a security registered in beneficiary form." We conclude otherwise. In our view, an IRA is a multifaceted crystallization of federal tax law. It is not a security or securities account registered in beneficiary form whose ownership automatically transfers to a beneficiary on death. Accordingly, we affirm the judgment of the probate court.

         I. Background Facts and Proceedings.

         Joseph Gantner died on December 10, 2015, survived by his wife, Rachel Gantner, and two daughters, Meredith and Paige Gantner, aged twenty-three and twenty years old. Joseph had previously executed a will that provided for the distribution of his personal property and established a trust for the benefit of his daughters. The will also left ninety percent of Joseph's residual estate to his daughters. Joseph's will was admitted to probate on February 2, 2016, and a bank was appointed executor that same day.

         On February 16, Rachel Gantner filed for an elective share of Joseph's estate and also requested a spousal support allowance. See Iowa Code §§ 633.236, .374 (2016). In her application for spousal support, Rachel sought a $4000 per month allowance based on her station in life and living arrangements during the marriage.

         Meredith and Paige jointly resisted Rachel's application for spousal support. Of particular relevance to this appeal, the daughters maintained that several retirement accounts did not constitute part of the probate estate and were therefore beyond the reach of Rachel's spousal allowance. The daughters also submitted an unsigned and undated prenuptial agreement between Joseph and Rachel that purported to waive spousal support rights.

         A preliminary inventory of Joseph's estate was filed by the executor. The report indicated that Joseph individually owned real estate in Cedar Rapids and jointly owned real estate in Hiawatha with Rachel. The report also showed Joseph as holding three separate retirement accounts-two IRAs and one account identified on the report as an "SEP with Hartford Funds, " presumably a simplified employee pension IRA (SEP IRA).[1] The executor valued the accounts at a combined $214, 100 and confirmed that Meredith and Paige were their cobeneficiaries.

         The probate court held an unreported hearing on Rachel's application for spousal support allowance on April 1. At the hearing, it became clear that without the retirement accounts, Joseph's estate had insufficient assets from which to pay a spousal allowance to Rachel. Following the hearing, Meredith and Paige filed several summary documents concerning the three retirement accounts.

         While Rachel acknowledged the Gantner daughters were designated as cobeneficiaries on all three retirement accounts, she maintained the accounts should be deemed part of Joseph's estate for spousal support purposes. Rachel pointed to Iowa Code section 633D.8(1), which provides that "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 . . . statutory allowances to the surviving spouse." Iowa Code § 633D.8(1). Because the investment holdings within the retirement accounts were likely mutual funds or index funds, Rachel argued those accounts should be considered "securities" within the meaning of the statute.

         The Gantner daughters disputed that either an IRA or a SEP IRA qualifies as a "security" under section 633D.8(1). The daughters reasoned that the retirement accounts were not securities simply because they contained securities. Meredith and Paige also argued that the definition of "security" within the Uniform Iowa Securities Act specifically excludes any interest in a pension or welfare plan subject to the Employee Retirement Income Security Act of 1974 (ERISA). See id. § 502.102(28)(c)(1). On these grounds, the Gantner daughters maintained that the accounts were unavailable to pay any spousal support for Rachel.

         In a written order, the probate court denied Rachel's application for spousal allowance. Rather than focusing on the meaning of the term "security" as used in section 633D.8(1), the court concluded that the retirement accounts were not available for spousal support purposes because they were nonprobate assets. Relying on our decision in In re Estate of Myers, 825 N.W.2d 1 (Iowa 2012), the court determined that the proceeds from each retirement account became the personal property of the Gantner daughters at the time of Joseph's death because they had passed outside the estate. The court further concluded that "legislation would be required in order to make the beneficiary accounts available to satisfy a spousal allowance."

         Rachel appealed, and we retained the appeal.

          II. Standard of Review.

         A claim for spousal support under Iowa Code section 633.374 is tried in equity, and we review a court's ruling on an application for spousal support for abuse of discretion. See Iowa Code § 633.33; In re Estate of Sieh, 745 N.W.2d 477, 479 (Iowa 2008). However, "when there are no disputed facts and the appeal turns on whether the probate court's interpretation of a statute was erroneous, . . . our review is for corrections of errors of law." Myers, 825 N.W.2d at 3-4.

         III. ...

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