In re Estate of Karnen

• Decision Date: 01 March 2000
• Docket Number: No. 20910.,20910.
• Citation: 2000 SD 32,607 N.W.2d 32
• Parties: ESTATE OF Rose Evelyn KARNEN, a.k.a. Rose Karnen, deceased.
• Court: South Dakota Supreme Court

607 N.W.2d 32

2000 SD 32

ESTATE OF Rose Evelyn KARNEN, a.k.a. Rose Karnen, deceased.

No. 20910.

Supreme Court of South Dakota.

Considered on Briefs January 10, 2000.

Decided March 1, 2000.

Wesley W. Buckmaster of Buckmaster and Macy, Belle Fourche, for appellee Estate.

Dale R. Hansen of Hansen, Hubbard & Swanson, Sturgis, for appellant Andrew J. Karnen.

MILLER, Chief Justice.

[¶ 1.] This case presents our first opportunity to interpret certain provisions of our Unified Probate Code (UPC) elective share provisions effective as of July 1, 1995. Andrew Karnen appeals the denial of his petition for elective share from his wife's estate, disputing the determination and value of assets used to satisfy his elective share entitlement. We affirm.

FACTS

[¶ 2.] The essential facts in this case are not in dispute. Rose Karnen and Andrew Karnen married in July 1947, when Rose was approximately forty years old. There were no children born to this marriage. She owned a ranch at the time of her marriage to Andrew. When Rose died on August 8, 1997, she and Andrew had been married for over fifty years. Her estate was valued at over two million dollars, and virtually all assets were titled in her name only.

[¶ 3.] Due to her failing health, in January 1996 Norwest Bank, SD, N.A., (Norwest) was appointed the conservator of Rose's estate. Prior to Norwest's appointment, Rose had a simple will, which bequeathed all her property to Andrew. After Norwest became conservator, Rose's new will was drafted. It was designed to take advantage of her federal estate tax exemption while still making her assets available to Andrew until his death. The new will also created two testamentary trusts: a unified credit trust (Family trust) and a Q-TIP trust. Upon Rose's death, all of her assets were placed into one or the other of these trusts.

[¶ 4.] The Family trust was funded up to the amount of Rose's federal estate tax credit, approximately $640,000. The remainder of her assets, approximately $1,370,000, were placed in the Q-TIP trust. Andrew was named the sole income and principal beneficiary of both trusts. After Andrew's death, the corpus of both trusts was to be distributed to the remaindermen, Rose's heirs. Her will provided that the income and principal of the Q-TIP trust was to be used prior to accessing any income or principal from the Family trust. Article VI(A) of Rose's will directed that the Family trust be administered as follows:

If my spouse survives me, then commencing as of the date of my death and during the life of my spouse, the trustee shall distribute to my spouse from time to time living [sic] as much of the net income and principal of the Family Trust, even to the extent of exhausting principal, as the trustee from time to time believes desirable (i) for the health, support in reasonable comfort, education, best interests, and welfare of my spouse considering all of the circumstances and factors deemed pertinent by the trustee provided, however, that:

1. Any undistributed net income shall be accumulated and added to the principal of the Family Trust, as from time to time determined by the trustee;

2. My primary concern during the life of my spouse is for the health and support in reasonable comfort of my spouse, and the trustee need not consider the interest of the ultimate beneficiaries in making distributions to my spouse under this paragraph;

3. Insofar as the trustee deems it advisable, no principal of the Family Trust shall be distributed to my spouse as long as any principal remains in the trust named for my spouse [the Q-TIP trust].

[¶ 5.] Further, Article VII(B) of Rose's will provided:

Among the circumstances and factors to be considered by the trustee in determining whether to make discretionary distributions of net income or principal to a beneficiary are the other income and assets known to the trustee to be available to that beneficiary and the advisability of supplementing such income or assets.

[¶ 6.] After Rose died, Andrew filed a petition for elective share to take against the will rather than under its provisions. The circuit court certified that the petition had been timely filed and, based upon the length of the marriage, Andrew's elective share was 50% of the augmented estate. A hearing was held on July 16, 1998, to determine the amount of the elective share to which Andrew was entitled. After reviewing the evidence and hearing testimony, the trial court determined that Andrew's petition for elective share was overfunded, because the amount made available to him via the will was more than he would receive under the elective share. The court therefore denied the petition for elective share. Andrew subsequently filed a motion for reconsideration, which was also denied. He now appeals,¹ generally raising the following issues:

1. Whether the Family trust has any ascertainable value for purposes of satisfying Andrew's elective share entitlement.

2. If the Family trust does have an ascertainable value, what are the correct annuity valuation and mortality tables to be used for determining its present value.

3. Should the value of the remainder interest in the homestead be included in the value of the Q-TIP trust, for purposes of satisfying Andrew's elective share entitlement.

STANDARD OF REVIEW

[¶ 7.] In interpreting another provision of the South Dakota Uniform Probate Code, we stated:

This Court interprets statutes under a de novo standard of review without deference to the decision of the trial court. City of Brookings v. Winker, 1996 SD 129, ¶ 4, 554 N.W.2d 827, 828; In re Estate of Steed, 521 N.W.2d 675, 680 (S.D.1994).

[¶ 8.] In addition, this Court has previously noted:

"Statutes are to be construed to give effect to each statute and so as to have them exist in harmony. State v. Woods, 361 N.W.2d 620, 622 (S.D.1985); Matter of Exploration Permit Renewal, 323 N.W.2d 858, 860 (S.D.1982). It is a fundamental rule of statutory construction that the intention of the law is to be primarily ascertained from the language expressed in the statute. Petition of Famous Brands, Inc., 347 N.W.2d 882, 884 (S.D.1984). In addition, we are statutorily mandated to interpret uniform laws such as the [UPC] `to effectuate its general purpose to make uniform the law of those states which enact it.' SDCL 2-14-13."

Matter of Estate of Jetter, 1997 SD 125, ¶¶ 10-11, 570 N.W.2d 26, 28 (quoting Rushmore State Bank v. Kurylas, Inc., 424 N.W.2d 649, 653 (S.D.1988)).

[¶ 9.] We have stated in prior elective share proceedings:

Recent decisions of this court have made it clear that the equitable determination in an elective share proceeding is within the discretion of the trial court and will not be overturned absent an abuse of that discretion. Matter of Estate of Pejsa, 459 N.W.2d 243 (S.D.1990); Matter of Estate of Clyde, 423 N.W.2d 513 (S.D. 1988); In Re Estate of Smith, 401 N.W.2d 736 (S.D.1987); see also 1 S. Childress & M. Davis, Standards of Review, § 4.21, p. 287 et seq. An abuse of discretion will be measured by an objective reasonableness standard. As stated in Davis v. Kressly, 78 S.D. 637, 107 N.W.2d 5, 8 (S.D.1961):

We are not to determine whether the judges of this court would have made an original like ruling, but rather whether we think a judicial mind, in view of the law and the circumstances of the particular case, could reasonably have reached such a conclusion.

Stated another way, a trial court's findings of fact and the subsequent application of discretion shall not be disturbed unless there is clearly no basis in reason or evidence to support that finding. Pejsa, 459 N.W.2d at 245.

Matter of Estate of Donahue, 464 N.W.2d 393, 394-95 (S.D.1990).

DECISION

[¶ 10.] 1. Whether the Family trust has any ascertainable value for purposes of satisfying Andrew's elective share entitlement.

[¶ 11.] In finding that Andrew's elective share was overfunded, the trial court determined, pursuant to SDCL ch 29A-2, that the value of the augmented estate was $2,602,189. Andrew's elective share was 50% of that amount, or $1,301,095. Sources used to fund the elective share included the commuted value of a life interest in the Family trust ($233,474), the commuted value of a life interest in the Q-TIP trust ($504,193), Andrew's assets ($381,080), one-half of jointly owned property ($205,150), and personal property willed to him ($48,559). Applying these sources to the elective share amount, the court determined that the elective share was overfunded by $71,361, and the petition was denied.

[¶ 12.] As his first issue in this appeal, Andrew claims that his life interest in the Family trust has no ascertainable value and should therefore be excluded as a source used to fund his elective share under SDCL 29A-2-209. He makes this claim because distribution to him from the Family trust is discretionary rather than mandatory and, because in light of his other sources of income,² it is "simply inconceivable that [he] should need any income, or should be paid any income, from the Family trust." The effect of Andrew's proposed exclusion is that his elective share would be underfunded by $162,113, and this shortfall would have to be funded from other assets in Rose's estate.

[¶ 13.] The underlying purpose of Andrew choosing to take against the will, rather than under it, is apparently to attain a fee interest in a portion of the estate assets, rather than merely the life interest granted in the will. By taking title to assets in fee, Andrew thus will be able to pass something on to his heirs. His appellate brief states:

The remaindermen of both the Family Trust and the Q-TIP trust are the heirs of [Rose Karnen]. Andrew and [Rose] had no children. Therefore, upon Andrew's death, whatever balance of principal in the Q-TIP trust, and principal and accumulated income in the Family Trust remain, will be distributed to the heirs of [Rose], and Andrew's heirs will receive nothing from either of these two Trusts upon

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