Estate of Lamoureux, Matter of

• Decision Date: 23 September 1987
• Docket Number: No. 86-1333,86-1333
• Citation: 412 N.W.2d 628
• Parties: In the Matter of the ESTATE OF Evelyn LAMOUREUX, Deceased. Leo E. LAMOUREUX, as Personal Representative, Surviving Spouse and Individually, Appellant, v. IOWA DEPARTMENT OF REVENUE, Appellee.
• Court: Iowa Supreme Court

Page 628

412 N.W.2d 628

In the Matter of the ESTATE OF Evelyn LAMOUREUX, Deceased.

Leo E. LAMOUREUX, as Personal Representative, Surviving Spouse and Individually, Appellant, v. IOWA DEPARTMENT OF REVENUE, Appellee.

No. 86-1333.

Supreme Court of Iowa.

Sept. 23, 1987.

Gary W. Armstrong of Mack, Hansen, Gadd & Armstrong, P.C., Storm Lake, for appellant.

Thomas J. Miller, Atty. Gen., Harry M. Griger, Sp. Asst. Atty. Gen., and Marcia Mason, Asst. Atty. Gen., for appellee.

Considered by REYNOLDSON, C.J., and McGIVERIN, LARSON, SCHULTZ, and LAVORATO, JJ.

SCHULTZ, Justice.

This appeal concerns Iowa's disclaimer of succession to property statute, Iowa Code section 633.704. ¹ The issues involve interpretation of this section to determine (1) when the nine month period for disclaiming a joint tenant's survivorship interest commences, see section 633.704(2)(a), and (2) what constitutes an acceptance of that interest such that any disclaimer is barred, see section 633.704(4). On judicial review the district court held that although appellant disclaimed his survivorship interest within nine months of his wife's death, the disclaimer was ineffective because it was not filed within nine months of the date the joint tenancy was created. The court decided that appellant is also precluded from disclaiming because he accepted the benefits of the interest he seeks to disclaim. Because we disagree with these conclusions, we reverse and remand.

The facts of the present case are undisputed. Between 1950 and 1955 Leo and Evelyn Lamoureux, husband and wife, acquired three parcels of real estate in joint tenancy with a right of survivorship. Evelyn died July 14, 1981, survived by Leo. On August 10 of that year Leo attempted to disclaim a remainder interest in an undivided one-half interest in the property that he and his wife had held as joint tenants. This disclaimer was designed to preserve a life estate in the property for Leo while leaving the remainder to their children.

The Iowa Department of Revenue (department) refused to recognize the disclaimer and imposed an inheritance tax upon this remainder interest. It claims that the disclaimer is barred because it was not made within nine months of the original creation of the joint tenancy in the 1950s and because Leo accepted the interest he seeks to disclaim. Evelyn's estate paid the tax and filed a claim for refund which was denied. The validity of this denial is now before us.

I. Time for disclaimer. The initial issue concerning time for disclaimer requires interpretation of the terms found in the present section 633.704. Thus, we examine the history and purpose of this section to help discern the legislature's intent.

The obvious purpose of the original disclaimer statute was to equalize the treatment of transferees in testate and intestate estates. Prior to its enactment, property passing by will could be renounced while property passing by intestacy could not. Seeley v. Seeley, 242 Iowa 220, 223-25, 45 N.W.2d 881, 883-84 (1951). Thus, will beneficiaries could elect to avoid transfer taxes and thwart creditors by disclaimer, while heirs at law did not possess this power. In 1972 the legislature remedied this inequity by enacting 1972 Iowa Acts chapter 1128, section 11, which allowed both persons taking by will and those taking by intestacy to disclaim on an equal basis. This original provision made no specific reference to property held in joint tenancy.

In 1981 the legislature replaced the old disclaimer statute with a new one. 1981 Iowa Acts ch. 197 (codified at Iowa Code § 633.704 (1987)). The present section, in defining the right of disclaimer, states in relevant part:

A person ... is not required to take ... as a transferee including a transferee in joint tenancy.... If the requirements of this section are met, a person may disclaim, in whole or in part, the transfer of a power, or the transfer, receipt of, or entitlement or succession to, any property, real or personal, or any interest in property....

Iowa Code § 633.704(1). The statute provides such transferees a nine month time limit for disclaimer, commencing upon "the transfer of the property, interest, or right...." § 633.704(2)(a). ² When reading subsections (1) and (2) together it is apparent that the transfer which makes one a "transferee in joint tenancy" is the same "transfer" which triggers the nine month disclaimer period. The issue is whether this "transfer" is the original creation of the joint tenancy or the passing of the survivorship interest at one joint tenant's death. This dispute centers on differing notions of the nature of a joint tenant's interest. Consequently, we briefly review legal principles concerning ownership of property in joint tenancy.

Iowa has recognized common law rules allowing ownership of property in joint tenancy. The essential elements of this type of ownership are that the property be held by two or more parties jointly, with equal rights to share in the enjoyment of the whole property during their lives, and a right of survivorship which allows the surviving party to enjoy the entire estate. See In re Winkler's Estate, 232 Iowa 930, 932, 5 N.W.2d 153, 155 (Iowa 1942). Because each joint tenant owns the whole, death of a joint tenant does not enlarge the survivor's interest, it merely extinguishes an interest to which the survivor's interest was subject. Perez v. Pogge, 303 N.W.2d 145, 147 (Iowa 1981); Wood v. Logue, 167 Iowa 436, 441-42, 149 N.W. 613, 615 (1914). The survivor does not take or receive anything from the deceased tenant because title to the whole derives directly from the grantor by the deed which created the joint tenancy. Wood, 167 Iowa at 442, 149 N.W. at 615.

Relying on these principles, the department urges that no transfer occurred at Evelyn's death in 1981. Rather, the transfer that triggered the nine month disclaimer period was the original conveyance creating the joint tenancy.

While the department's position fits neatly into the traditional concepts of common law joint tenancy, we do not believe these precepts bind us in our interpretation of the language of the statute. When the legislature amended the statute to allow a "transferee in joint tenancy" to disclaim a "transfer" of property, it was referring to the accrual of additional rights and interest to the surviving joint tenant which occurs upon the death of the other joint tenant.

A surviving joint tenant clearly acquires greater rights in the property when the other tenant dies. For example, a joint tenant can only convey a fractional interest while the survivor, as sole owner, may sell the whole. See Frederick v. Shorman, 259 Iowa 1050, 1059-60, 147 N.W.2d 478, 484 (1966). The sole surviving joint tenant may retain title to all of the real property whereas prior to the death of the other joint tenant there is only power to retain title to a fractional interest, as the property is subject to partition. See Hockett v. Larson, 742 F.2d 1123, 1126 (8th Cir.1984). Likewise, a sole surviving joint tenant may keep all rents and profits and need not account for rents and profits exceeding a proportional interest. See 20 Am.Jur.2d Co-tenancy and Joint Ownership § 80 (1965). A sole surviving joint tenant is also free to use the property in a wasteful manner, is entitled to lease all of the property, retain possession of the whole and may encumber the whole.

This additional interest which accrues at the death of a joint tenant may be referred to as the "accretive interest" while the undivided interest in the whole held by each joint tenant before the death of one of them may be referred to as the "proportional interest." Uchtmann & Zigterman, Disclaimers of Joint Tenancy Interests Revisited, 18 Creighton L.Rev. 333, 342 (1985). We adopt these terms for the balance of our opinion.

We have previously recognized that the passing of these accretive rights to a surviving joint tenant is an event separate from the original creation of the joint tenancy. In Horner v. Iowa State Tax Commission, 234 Iowa 624, 12 N.W.2d 166 (1943), we stated:

However, there were two successions, each of which resulted in tax liability under the statute. The first was the transfer to appellant and William Horner, which created the joint tenancy....

Upon the death of William Horner there was a subsequent accrual to appellant of rights in the property not previously possessed by her.... the interest thus received by appellant "accrued by reason of the event of death of the cotenant, and not by reason of the transfer theretofore made which created the joint tenancy."

Id. at 626-27, 12 N.W.2d at 167 (quoting Gwinn v. Commissioner, 54 F.2d 728, 730 (9th Cir.), aff'd, 287 U.S. 224, 53 S.Ct. 157, 77 L.Ed. 270 (1932)). The United States Supreme Court has agreed that when a joint tenant dies there is "a distinct shifting of economic interest, a decided change for the survivor's benefit." United States v. Jacobs, 306 U.S. 363, 371, 59 S.Ct. 551, 555, 83 L.Ed. 763, 769 (1939). Both Horner and Jacobs held that the accrual of rights which occurs at the death of joint tenant is a sufficient event to impose an inheritance tax.

While the passing of the accretive interest is recognized for inheritance tax purposes, the present issue is whether the legislature intended to refer to this passing when it created a limitation period commencing on the date of "transfer." § 633.704(2)(a). A comparable issue was addressed by the Seventh Circuit in Kennedy v. Commissioner, 804 F.2d 1332 (7th Cir.1986), where the court held that under 26 U.S.C. section 2518 (1976) the disclaimer period for a joint tenant's accretive interest commences on the date of the other joint tenant's death. Section 2518 allows a person to disclaim an interest in property within nine months after "the day on which the transfer creating the interest is made." 26 U.S.C. § 2518(b)(2)(A). The court reasoned that a "transfer" occurred at the joint tenant's death...