In Re: Estate of Harold E. Rood

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2015 Pa. Super. 180
IN RE: ESTATE OF HAROLD E. ROOD, IN THE SUPERIOR COURT OF
DECEASED PENNSYLVANIA
APPEAL OF: THE ESTATE OF HAROLD
ROOD, BY AND THROUGH DAVID ROOD,
IN HIS CAPACITY AS EXECUTOR OF THE
ESTATE OF HAROLD ROOD AND IN HIS
CAPACITY AS BENEFICIARY, AND JANE
ELIZABETH LANTZ, BENEFICIARY
No. 1648 MDA 2014
Appeal from the Order Entered on September 4, 2014
In the Court of Common Pleas of Berks County
Orphans’ court at No.: 06-13-1705
BEFORE: OTT, J., WECHT, J., and JENKINS, J.
OPINION BY WECHT, J.: FILED AUGUST 28, 2015
The Estate of Harold Rood, David Rood, and Jane Elizabeth Lantz
(respectively, “the Estate,” “Rood,” and “Lantz”; collectively, “Appellants”)
appeal the orphans’ court’s September 4, 2014 order, which determined that
two “payable on death” Vanguard investment accounts (“the Accounts”)
opened by Harold Rood (“Decedent”), which named Rood and Lantz as
beneficiaries of the Accounts upon Decedent’s death, were subject to the
spousal election of Hope Rood, Decedent’s wife (“Wife”), pursuant to
20 Pa.C.S. § 2203. Appellants contend that the orphans’ court erred in
determining that Wife, who was bequeathed nothing in Decedent’s will, could
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claim one third of the Accounts’ proceeds under section 2203. Albeit for
different reasons than those set forth by the orphans’ court, we affirm.1
The orphans’ court provided the following concise factual background,
which is sufficient to contextualize this question of first impression:
Decedent died testate on December 8, 2013. At the time of his
death, Decedent had been married to Wife for almost 27 years.
He had two children from a previous marriage, Rood and Lantz.
Decedent’s Last Will and Testament (hereinafter the “Will”)
named Rood as executor and devised one half of the Estate to
Rood and the other half to Lantz. Although Decedent’s Will
acknowledged Wife . . ., she was left nothing from the Estate.
Letters Testamentary were granted to Rood in his capacity as
Executor on December 18, 2013[,] and notice was served upon
Lantz and Wife. On December 27, 2013, Wife timely filed to
claim her elective share of the Estate. The orphans’ court is not
aware of the existence of any prenuptial or postnuptial
agreements [that] would preclude Wife’s claim and her ability to
claim against the Estate is not in dispute.
The dispute between Wife and the Estate centers on the
Accounts[, which were] owned by Decedent[,] naming Rood and
Lantz as beneficiaries. A hearing was held before the orphans’
court on September 3rd with memorandums of law filed by both
parties. On September 4th the orphans’ court issued an order
finding that the Accounts are subject to spousal election. [A]
notice of appeal was filed by Appellants on September 25th and a
[concise] [s]tatement of [m]atters [c]omplained of [on appeal
pursuant to Pa.R.A.P. 1925(b)] was received on October 17th.[2]
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1
We may uphold a court of common pleas’ decision if there is “any
proper basis for the result reached,” even if different than the basis relied
upon by the common pleas court. In re Adoption of R.J.S., 889 A.2d 92,
98 (Pa. Super. 2005).
2
The orphans’ court had directed Appellants to file a concise statement
pursuant to Rule 1925(b) by order entered on September 30, 2014.
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Orphans’ court Opinion (“O.C.O.”), 11/5/2014, at 1-2 (nomenclature
modified for clarity).
Appellants raise the following three issues:
1. Whether the orphans’ court erred as a matter of law in
determining that Wife is entitled to exercise her spousal election
against Decedent’s Accounts[,] under which Rood and Lantz are
the named beneficiaries upon Decedent’s death.
2. Whether the orphans’ court erred as a matter of law in
determining that an inter vivos interest was conveyed by
Decedent in the Accounts given that Decedent designated Rood
and Lantz as beneficiaries to receive the Accounts upon his
death.
3. Whether the orphans’ court erred as a matter of law in
determining that a testamentary interest was conveyed by
Decedent in the Accounts given that Decedent designated Rood
and Lantz as beneficiaries to receive the Accounts upon his
death.
Brief for Appellants at 5 (nomenclature modified). However, because the
latter two issues are encompassed by the first, our discussion is addressed
solely to the first issue and touches upon the others only to the extent
necessary to complete our analysis.
The pertinent facts are undisputed. The matter at hand involves a
pure question of law requiring us to interpret provisions of the Probate,
Estates, and Fiduciaries Code (the “PEF Code” or the “Code”),3 and in
particular the section governing spousal elections, 20 Pa.C.S. § 2203. Thus,
we review the orphans’ court’s legal conclusions de novo and the scope of
____________________________________________
3
20 Pa.C.S. §§ 101, et seq.
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our review is plenary. Bowling v. Office of Open Records, 75 A.3d 453,
466 (Pa. 2013); In re D.L.H., 2 A.3d 505, 513 (Pa. 2010).
At issue in this case is whether the scope of Wife’s right of election
with regard to the Estate encompasses the Accounts, a matter governed by
the Code. This case calls upon us to interpret a statute, which we do
pursuant to the following time-honored rules and principles:
As with all questions of statutory interpretation, our object is to
ascertain and effectuate the intention of the General Assembly,
giving effect, if possible, to all provisions of the statute under
review. 1 Pa.C.S. § 1921(a). Generally, the best indication of
legislative intent is the statute’s plain language. Malt
Beverages Distributors Ass’n v. Penna. Liquor Control Bd.,
974 A.2d 1144, 1149 (Pa. 2009). Further, the plain language of
each section of a statute must be read in conjunction with one
another, construed with reference to the entire statute. E.D.B.
v. Clair, 987 A.2d 681, 684 (Pa. 2009) (internal citations
omitted). We presume that the General Assembly does not
intend a result that is absurd, impossible of execution, or
unreasonable, and that the General Assembly intends the entire
statute to be effective and certain. 1 Pa.C.S. §§ 922(1), (2).
When words of a statute are not explicit, but ambiguous, a
reviewing court looks to other principles of statutory
construction, among them: the occasion and necessity for the
statute; the circumstances under which the statute was enacted;
the mischief to be remedied; the object to be attained; the
consequences of a particular interpretation; and the legislative
and administrative interpretations of such statute. 1 Pa.C.S.
§ 1921(c).
Bowling, 75 A.3d at 466 (citations modified); see D.L.H., 2 A.3d at 513-
14. Furthermore, “[w]hile it is true that the views expressed by those who
draft or enact laws are not a safe guide when the courts are called upon to
determine the meaning of the words employed therein . . ., yet, in order to
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get at the old law, the mischief and the remedy, and properly to understand
and construe a statute embodying the latter, the history of the enactment in
question may always be considered.” In re Tarlo’s Estate, 172 A. 139,
140 (Pa. 1934), abrogated on other grounds by In re Estate of Klein’s,
378 A.2d 1182 (Pa. 1977); cf. In re Henderson’s Estate, 149 A.2d 892,
897 (Pa. 1959) (“[I]n ascertaining the legislative meaning, . . . the report of
a legislative commission or a Senate or House committee may, if obscurity
or ambiguity exists, be considered.”).
Specifically at issue, albeit as informed by other provisions, is
section 2203, which provides, in relevant part:
§ 2203. Right of election; resident decedent
(a) Property subject to election.—Except as provided in
subsection (c), when a married person domiciled in this
Commonwealth dies, his surviving spouse has a right to an
elective share of one-third of the following property:
****
(3) Property conveyed by the decedent during his
lifetime to the extent that the decedent at the time of his
death had a power to revoke the conveyance or to
consume, invade or dispose of the principal for his benefit.
****
In construing this subsection, a power in the decedent to
withdraw income or principal, or a power in any person whose
interest is not adverse to the decedent to distribute to or use for
the benefit of the decedent any income or principal, shall be
deemed to be a power in the decedent to withdraw so much of
the income or principal as is subject to such power, even though
such income or principal may be distributed only for support or
other particular purpose or only in limited periodic amounts.
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(b) Property not subject to election.—The provisions of
subsection (a) shall not be construed to include any of the
following except to the extent that they pass as part of the
decedent’s estate to his personal representative, heirs, legatees
or devisees:
(1) Any conveyance made with the express consent
or joinder of the surviving spouse.
(2) The proceeds of insurance, including accidental
death benefits, on the life of the decedent.
(3) Interests under any broad-based
nondiscriminatory pension, profit sharing, stock bonus,
deferred compensation, disability, death benefit or other
such plan established by an employer for the benefit of its
employees and their beneficiaries.
20 Pa.C.S. § 2203.
Insofar as it illuminates the General Assembly’s intent in enacting
section 2203 in its current form, the committee commentary also warrants
reproduction:
In one respect, the class of property subject to election is
narrower than in present Pennsylvania law. It is intended that
the spouse should have a right of election only with respect to
assets which the decedent retained the right or power to enjoy
during his lifetime. This should not include property which the
decedent has given away absolutely and cannot recapture for his
own benefit, even though he has retained a power of
appointment which cannot be exercised in his favor during his
life.
****
In other respects the property subject to the spouse’s election is
broadened by the proposed provisions, as follows:
****
(3) Revocable transfers. This conforms with present
Pennsylvania law.
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****
The final provision in the subsection, equating beneficial powers
to beneficial interests, is found neither in the Uniform Code nor
present Pennsylvania law. It will make certain transfer[s]
subject to the spouse’s election which under present law might
offer an easy escape from the rights of the surviving spouse,
e.g., discretionary trusts where a disinterested trustee has the
power to make payments to the decedent or where the decedent
had the right to withdraw a certain percentage of the principal
each year.
20 Pa.C.S. § 2203 Jt. St. Govt. Comm. Cmt.—1978
The orphans’ court determined that the Accounts were subject to
Wife’s section 2203 right of election because it found that they were in the
nature of a Totten or tentative trust:4
A tentative trust is created when a person makes a deposit in a
bank or other savings organization5 in his own name as trustee
for another person intending to reserve a power to withdraw the
whole or any part during his lifetime and is enforceable by the
beneficiary upon the death of the depositor. In re Estate of
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4
The name is drawn from In re Totten, 17 Bedell 112 (N.Y. 1904), the
New York Court of Appeals decision widely credited with first conceiving the
notion of a tentative trust. However, In In re Rodgers’ Estate,
80 Pa. D. & C. 531 (Phila. Cty. 1952), the orphans’ court found the
doctrine’s application in a number of English and Pennsylvania cases that
preceded Totten. Rodgers’ Estate, 80 Pa. D. & C. at 535.
5
Indeed, some cases suggest that it is strictly savings accounts of the
passbook variety that are designated in trust that may be treated as
tentative trusts. However, in In re Agostini’s Estate, 457 A.2d 861
(Pa. Super. 1983), we noted that two 1976 amendments to the Code
“enlarged the ‘trust account’ to include: ‘a checking account, savings
account, certificate of deposit, share account and other like arrangements.’”
Id. at 873 (quoting 20 Pa.C.S. § 6301). Self-evidently, if this expanded, or
recognized an expansion in, the range of accounts subject to the Totten
trust designation, it did so only incrementally.
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Inter, 664 A.2d 142, 146 (Pa. Super. 1995). These trusts are
frequently referred to as “Totten Trusts”[] and are essentially a
“poor man’s will[,”] a judicial creation that strictly speaking is
neither a will nor a trust but are “fairly obviously testamentary
transfers.” Kuestner Estate, 72 Pa. D. & C.2d 372 (Phila. Cty.
1976). Tentative trusts often have the effect of precluding a
surviving spouse’s right to inherit the deceased spouse’s estate.
Inter, supra. This goes against the spirit of the [PEF Code,]
which seeks to prevent a spouse from transferring money into an
account which they can enjoy during their lifetime but at death
disinherits the surviving spouse. It is settled law in the
Commonwealth that spouses can reach these tentative trusts
through their elective share. Kuestner, supra; see also Inter,
supra (to conclude a surviving spouse could not elect against a
tentative trust would contradict the legislature’s intent in
recodifying section 2203).
In this case, [Decedent] owned various Vanguard accounts which
by 20 Pa.C.S. § 6409(a)[6] are not testamentary[,] but the
decedent during his lifetime enjoyed full control over the
[A]ccount[s] with the balance designated for his children upon
his death. This fits squarely with 20 Pa.C.S. § 2203(a)(3)[,]
which allows “property conveyed by the decedent during his
lifetime to the extent that the decedent at the time of his death
had a power to revoke the conveyance or consume, invade or
dispose of the principal for his own benefit[,]” to be subject to
elective share. The conveyance can be an act which intends the
transfer to have either inter vivos or testamentary operation.
20 Pa.C.S. § 2201[7]. During his lifetime, [Decedent] clearly
had the ability to consume, invade or dispose of the contents of
his Vanguard accounts[,] and his opening of the [Accounts] and
designation of [Rood and Lantz] as beneficiaries acted as a
conveyance for the purpose of creating an interest as they would
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6
Section 6409(a) provides that “[a] transfer on death resulting from a
registration in beneficiary form is effective by reason of the contract
regarding the registration between the owner and the registering entity and
this chapter and is not testamentary.” 20 Pa.C.S. § 6409(a).
7
Section 2201 defines a “conveyance” as “an act by which it is intended
to create an interest in real or personal property whether the act is intended
to have inter vivos or testamentary operation.” 20 Pa.C.S. § 2201.
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receive the money only after his death. Therefore, [the
Accounts] are reachable by his spouse’s elective share under
20 Pa.C.S. § 2203(a)(3).
O.C.O. at 3-4 (citations modified). In effect, the orphans’ court, in
analogizing the Accounts with a Totten trust, reduced the application of
subsection 2203(a)(3) to a question of whether the assets in question were
unrestrainedly revocable by the decedent up to the moment his life ended.
Thus, although investment vehicles such as the Accounts here at issue are
not expressly mentioned by the Code as being subject to (or excluded from)
election, the orphans’ court concluded that their practical characteristics
render them so by implication.
Our opinion in Inter provides insight into the history of the interaction
between the tentative trust doctrine and Pennsylvania’s doctrine of spousal
election, the nature of which has not changed significantly through at least
three incarnations of the PEF Code’s provisions governing same. Ultimately,
we disagree with the orphans’ court that recognizing the existence of a
Totten trust in this case is either appropriate or necessary. However, Inter
provides the most thorough account of the history and evolution of
Pennsylvania’s statutory spousal election of any discussion in Pennsylvania
case law. Although in Inter we considered a Totten trust, we review that
case at length for what it has to say about spousal election generally:
The theory of tentative trusts was “enunciated in an effort to
retain for the depositor complete control of the fund during his
life and yet secure to the beneficiary any balance . . . at the
death of the depositor.” Scanlon’s Estate, 169 A. 106, 108
(Pa. 1933). A tentative trust is revocable by the (depositor)
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prior to his death by “any clear manifestation of an intention to
do so.” In re Estate of Stevenson, 648 A.2d 559, 561
(Pa. Super. 1994) (quoting Estate of Vittorio, 434 A.2d 777,
779 (Pa. Super. 1981)). Tentative trusts do not constitute part
of a decedent’s estate; rather, the funds pass directly to the
named beneficiary. In re McFetridge’s Estate, 372 A.2d 823
(Pa. 1977).
A tentative trust often had the effect of precluding a surviving
spouse’s right to inherit the deceased spouse’s estate. The
depositor of the tentative trust retained control of the assets
during his lifetime and subsequently was able to leave the
money to a third party. In re Schwartz’ Estate, 295 A.2d 600
(Pa. 1972). The obvious philosophy of Section 11 of the Estates
Act of 1947 is to prevent a husband from indirectly disinheriting
his wife through an inter vivos transfer while retaining control
over the use and enjoyment of the property during his lifetime.
Montague Estate, 170 A.2d 103 (Pa. 1961). Accordingly,
20 P.S. § 301.11 and its successor 20 Pa.C.S. § 6111 were
enacted to ensure that the surviving spouse would not be
disinherited through a tentative trust. Section 6111 reads as
follows:
(a) In general—A conveyance of assets by a person
who retains a power of appointment by will, or a power of
revocation or consumption over the principal thereof, shall,
at the election of his surviving spouse, be treated as a
testamentary disposition so far as the surviving spouse is
concerned to the extent to which the power has been
reserved, but the right of the surviving spouse shall be
subject to the rights of any income beneficiary whose
interest in income becomes vested in enjoyment prior to
the death of the conveyor. . . .
****
Because 20 P.S. § 301.11 and its recodification as 20 Pa.C.S.
§ 6111 were enacted to prevent a spouse from defrauding the
surviving spouse of his or her marital rights and to confirm a
long existing public policy of Pennsylvania to protect a surviving
spouse’s rights, . . . a surviving spouse had the right to elect
against a tentative trust. Kuestner, 72 Pa. D. & C.2d 372.
In 1978, however, 20 Pa.C.S. § 6111 was repealed and
20 Pa.C.S. § 2203 was enacted. Chapter 22 pertains to the
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elective rights of a surviving spouse and reads in pertinent part
as follows:
(a) Property subject to election.—When a married
person domiciled in this Commonwealth dies, his surviving
spouse has a right to an elective share of one-third of the
following property:
[* * * *]
(3) Property conveyed by the decedent during his
lifetime to the extent that the decedent at the time
of his death had a power to revoke the conveyance
or to consume, invade or dispose of the principal for
his own benefit.
20 Pa.C.S. § 2203 (emphasis added).
****
The official comment . . . indicates that the changes
implemented by Chapter 22 were primarily intended to broaden
the property subject to a surviving spouse’s election. Therefore,
although the legislature repealed 20 Pa.C.S. § 6111, the law
pertaining to tentative trusts and spousal election was not
altered in any significant way . . . . This is supported by the
official comment to 20 Pa.C.S. § 2203[,] which states that
[subsection 2203(a)(3)] pertains to revocable transfers and was
intended to conform with current Pennsylvania law. Thus, to
conclude that a surviving spouse could not elect against a
tentative trust would contradict the legislature’s intent.
Inter, 664 A.2d at 145-48 (citations modified).
The orphans’ court summarily equated the instant Accounts to a
Totten trust, and, as such, deemed them subject to spousal election under
subsection 2203(a)(3), in conformity with Inter: The Accounts were “so
similar in character to and operation of [sic] a tentative trust that existing
jurisprudence already provides clear guidance that the [Accounts] are
subject to spousal election.” O.C.O. at 3. Wife seeks to reinforce this
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policy-driven reasoning by speculating as to the evolution of personal
financial planning that animated the General Assembly’s decision to broaden
the definition of property subject to election under section 2203:
Historically, during time periods when interest rates offered on
bank accounts were favorable, individuals would create “in trust
for” accounts as an efficient way to establish a “payable on
death” account which could accumulate steady growth. In
today’s market, where the interest rates offered on bank
accounts are minimal at best, individuals now use other avenues
to create “payable on death” accounts which have the potential
for growth. The most common and closest option to the “in trust
for” account is a mutual fund investment account like . . . the
Accounts. The Accounts are the modern version of the
traditional “in trust for” account at a bank, and individuals are
able to achieve many of the same objectives that they were able
to achieve in creating “in trust for” accounts at a bank. The only
real difference is that the Accounts lack the words “in trust for.”
In all other respects, the accounts are almost identical in
character and operation. These similarities just further illustrate
why the Accounts are properly categorized as . . . tentative
trusts.
Brief for Wife at 12-13.
Notably, neither the orphans’ court nor Wife cites a case that has
expanded the Totten trust doctrine beyond savings accounts or their close
equivalents, or one that has recognized a Totten trust in the absence of “in
trust for” language, see supra n.8, a step we are loath to take given that
neither our Supreme Court nor our General Assembly has seen fit to do so
during a century of preserving the limited scope of such trusts. However,
we find that the plain language of the statute encompasses the Accounts
without the imposition of a Totten trust.
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We begin our analysis with the text of subsection 2203(a)(3). That
subsection identifies “property conveyed by the decedent during his lifetime”
as subject to spousal election. No party suggests that the assets placed in
the Accounts were not “property.” Accordingly, it is the meaning of
“conveyed” that we must interpret in determining whether
subsection 2203(a)(3) encompasses the Accounts.
Section 2201 defines a “conveyance” as “an act by which it is intended
to create an interest in real or personal property whether the act is intended
to have inter vivos or testamentary operation.” 20 Pa.C.S. § 2201. It is
beyond dispute that no inter vivos transfer to Rood and Lantz was
effectuated by way of the Accounts, because being named in a revocable,
payable on death registration creates only an expectancy under the
instrument, not a vested interest. Cf. McFetridge’s, 372 A.2d at 825
(“Prior to decedent’s death, appellee had a mere expectancy in the savings
accounts since decedent could revoke the [Totten] trusts at will during his
lifetime.”). Thus, we must assess the meaning of “testamentary operation.”
Appellants would have us narrowly construe “testamentary operation” based
upon subsection 6409(a) of the Code, which provides that “[a] transfer on
death resulting from a registration in beneficiary form is effective by reason
of the contract regarding the registration between the owner and the
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registering entity and this chapter and is not testamentary.” 20 Pa.C.S.
§ 6409(a) (emphasis added).8
Although no Pennsylvania case has analyzed the interplay of these
provisions at length, or addressed them in the context of
subsection 2203(a)(3), we find preliminary guidance in our decision in In re
Estate of Hart. At issue in Hart was a widow’s entitlement to take an
elective share of real property that was held by the decedent with his son as
joint tenants with rights of survivorship. 801 A.2d 599, 600
(Pa. Super. 2002). The orphans’ court found that the widow was entitled to
her statutory elective share of the property under subsections 2203(a)(3) or
(4).9 The appellant joint tenant disagreed, and argued that a literal reading
of section 2203 precluded the widow’s claim because, while that provision
refers only to property conveyed by the decedent, the property at issue in
that case was property conveyed by a third party to the decedent and his
son. The trial court, however, had found that “the ‘conveyance’ against
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8
It is undisputed that the Accounts’ posthumous disposition was
putatively governed by a registration of beneficiary form under the Act. See
generally 20 Pa.C.S. §§ 6401-13.
9
Subsection 2203(a)(4) identifies “[p]roperty conveyed by the decedent
during the marriage to himself and another or others with right of
survivorship” as subject to election “to the extent of any interest in the
property that the decedent had the power at the time of his death
unilaterally to convey absolutely or in fee.”
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which elections are effective was the transfer of full title of the hunting farm
by operation of law upon the death of the decedent.” 801 A.2d at 601.
This Court began by consulting section 2201’s definition of
“conveyance” and the official comment to section 2203 pertaining to joint
property, which noted that subsection 2203(a)(4) “conforms with present
Pennsylvania case law which allows the spouse to take against property held
jointly by decedent and another on the theory that the decedent had the
power to revoke the conveyance as to his one-half or other fractional share
by unilaterally changing it to a tenancy in common.” 801 A.2d at 601.
We then reviewed our Supreme Court’s earlier decision in Estate of
William Kotz, 406 A.2d 524 (Pa. 1979). In that case, which concerned real
estate held jointly with rights of survivorship by the decedent and his sister
that had been purchased before the decedent and the widow had married,
our Supreme Court interpreted section 2203’s predecessor, 20 Pa.C.S.
§ 6111. Section 6111 provided, in relevant part, that “[a] conveyance of
assets by a person who retains a power of . . . revocation or consumption
over the principal thereof, shall, at the election of his surviving spouse, be
treated as a testamentary disposition so far as the surviving spouse is
concerned.” Kotz, 406 A.2d at 529 (citing 20 Pa.C.S. § 6111 (repealed)).
The Kotz Court consulted the Code’s definitional section concerning the
definition of conveyance, then found at 20 Pa.C.S. § 6101, which provided
materially the same definition as is now provided by section 2101. The
Court concluded that “a joint tenancy with a right of survivorship was to be
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treated as a ‘conveyance.’” Hart, 801 A.2d at 601 (citing Kotz, 406 A.2d at
529). Furthermore, “[t]he [Kotz] Court stated that the purchase of the
property by the decedent and his sister was an ‘act which created an interest
in real property’ and that the decedent retained ‘. . . a power of revocation
or consumption over the principal.’” Id. at 601-02 (quoting Kotz, 406 A.2d
at 529).
We also observed that the Kotz Court further based its broad
construction of “conveyance” upon the legislative intent behind the statute,
finding that “the obvious philosophy of Section [6111] . . . is to prevent a
husband from indirectly disinheriting his wife through an inter vivos transfer
while retaining control over the use and enjoyment of the property during
his lifetime.” Hart, 801 A.2d at 602 (quoting Kotz, 406 A.2d at 530). The
Kotz Court ultimately ruled that the widow could not elect against the joint
property there at issue, because it had not been acquired (or “conveyed”)
during her marriage to the decedent, as expressly required by subsection
2203(a)(4). See 406 A.2d at 531.
Informed by Kotz, and noting that the property at issue in Hart had
been “conveyed” after the inception of the widow’s marriage to the
decedent, this Court in Hart reasoned as follows:
The purpose of [section] 2203 . . . is to protect spouses from
being denied a share of their deceased spouses’ estates. Section
2203 affords that protection by treating assets that the decedent
was able to dispose of or enjoy during marriage the same as
property that was titled under the decedent’s name alone.
Therefore, both types of conveyances should be subject to the
elective right. As the Kotz Court stated, “[t]o effectuate that
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purpose, the legislature permits the surviving spouse to treat as
testamentary any property which the other spouse by act
‘intended to create in interest in real or other personal
property.’” Kotz, 406 A.2d at 531.
It is also clear from the official comment to [section] 2203 that
Kotz’s language considering a joint tenancy to be a conveyance
was to be incorporated, and followed, in the application of
[section] 2203. A joint tenancy between a deceased spouse and
a third party is therefore a “conveyance” for purposes of a
surviving spouse’s right to elect against that property. At the
time of his death, [the decedent] had the power to revoke,
consume, invade or dispose of the principal for his own benefit.
This power, therefore, subjected his interest in the hunting farm
to [the widow’s] election after his death.
Hart, 801 A.2d at 602 (citation modified).
While the instant case does not concern a joint tenancy, we find it
illuminating that this Court in Hart interpreted conveyance far more broadly
than the definition pressed upon us by Appellants in this case. Furthermore,
both Kotz and Hart underscored the General Assembly’s overarching intent
to protect spouses from inequitable disinheritance by their decedent
spouses’ estates. In so doing, those decisions depended in substantial part
upon section 2203’s focus upon the decedent’s freedom during his life to
revoke the property arrangement in question, or to use and enjoy the
principal, which is equally implicated in the matter sub judice.
Although these cases militate in favor of affirmance in the instant
matter, we find it prudent to further examine the language of the relevant
provisions of the Code, to ensure that, vis-à-vis subsection 2203(a)(3), a
ruling in harmony with Kotz and Hart would not contradict the statute’s
plain language, which we are obligated to honor to the extent possible.
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Appellants’ reliance upon subsection 6409(a)’s indication that payable on
death accounts are not “testamentary”10 must be construed in tandem with
section 2201’s indication that “conveyance” refers to “an act by which it is
intended to create an interest in real or personal property” if it is intended to
have “testamentary operation,” because it is not at all clear that the usages
are intended to be interchangeable. “Testamentary,” simpliciter, is defined
by one authority as “[o]f or relating to a will or testament,” and,
alternatively, “provided for,” “appointed by,” or “created by a will.” Black’s
Law Dictionary 1484 (Deluxe 7th ed. 1999). Because a section 2201
“conveyance” may refer to something outside the will of a given testator, an
inference justified by conveyance’s usage in subsection 2203, which governs
a decedent’s nonprobate property, then “testamentary operation” must
refer to something that behaves like a will but is not, itself, part or parcel of
a will. Consequently, if we are to give full effect to the language used by the
General Assembly, informed by the assumption that it did not intend to
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10
It is clear that subsection 6409(a) applies in the instant matter. The
Vanguard account is a “security account” as defined by 20 Pa.C.S. § 6401
(“Definitions”), which includes “a securities account with a financial
institution.” A “security” is “[a] share, participation or other interest in
property, in a business or in an obligation of an enterprise or other issuer.
The term also includes a certified security, an uncertified security, and a
security account.” Id. A “beneficiary form” is “[a] registration of a security
which indicates the present owner of the security and the intention of the
owner regarding the person who will become the owner of the security upon
the death of the owner.” Id. Neither party contests generally the
applicability of section 6409 in this case.
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employ an irregular definition of “testamentary,” then section 6409 only
means that, as a matter of law, a transfer intended by a registration in
beneficiary form does not, itself, constitute a will.
There also is an important caveat built into section 6409. Therein, the
legislature provided that “[t]his chapter,” i.e., Chapter 64 (“Transfer on
Death Security Registration”), “does not limit the rights of creditors or
security owners against beneficiaries and other transferees under other
laws of this Commonwealth.” 20 Pa.C.S. § 6409(b). This at least
suggests that section 6409 was not intended to interfere with spousal
elections. That suggestion is reinforced by section 6409’s commentary,
which explains that “[t]his section is comparable to Section 214.” 20 Pa.C.S.
§ 6409 Uniform Law Cmt. The reference is to Uniform Probate Code § 2-
214, which provides as follows:
§ 2-214. Protection of Payors and Other Third Parties
(a) Although under Section 2-205 a payment, item of
property, or other benefit is included in the decedent’s
nonprobate transfers to others, a payor or other third party is
not liable for having made a payment or transferred an item of
property or other benefit to a beneficiary designated in a
governing instrument, or for having taken any other action in
good faith reliance on the validity of a governing instrument,
upon request and satisfactory proof of the decedent’s death,
before the payor or other third party received written
notice from a surviving spouse or spouse’s representative
of an intention to file a petition for the elective share or
that a petition for the elective share has been filed. A
payor or other third party is liable for payments made or
other actions taken after the payor or other third party
received written notice of an intention to file a petition for
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the elective share or that a petition for the elective share
has been filed.
Uniform Probate Code § 2-214 (emphasis added); see id. § 2-214(b) (“If no
petition is filed in the court within the specified time . . . or, if filed, the
demand for an elective share is withdrawn . . ., the court shall order
disbursement to the designated beneficiary.”).
Viewed in tandem with section 2-214, it becomes clear that PEF Code
section 6409’s principal concern, like Uniform Probate Code section 2-214, is
to protect third parties responsible at a decedent’s time of death for “non-
probate” assets, such as the Accounts in this case, from harm in the event of
a good-faith transfer of an asset that is subject to a spousal election of
which the third party is not aware. Thus, subsection 6409(b)’s caveat that it
“does not limit the rights of creditors of security owners against beneficiaries
and other transferees under other laws of this Commonwealth” might fairly
be construed to encompass spousal elections. Furthermore, additional
commentary notes approvingly another provision that “makes the decedent’s
nonprobate transferees liable for statutory allowances and allowed
claims against the decedent’s estate to the extent the decedent’s
probate estate is inadequate.” 20 Pa.C.S. § 6409 Uniform Law Cmt.
(emphasis added). In short, nothing suggests that section 6409’s use of “is
not testamentary” in reference to payable on death accounts was intended
to compromise the meaning of section 2201’s indication that a transfer
intended to have “testamentary operation” is a “conveyance” under the
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Code. To the contrary, the commentary to section 6409, and specifically its
reference to section 2-214 of the uniform code, indicates that the legislature
anticipated that at least some payable on death accounts would be subject
to spousal election.
Informed by the broader statutory context, we return to subsection
2203(a)(3), which provides that spousal election is available against
“[p]roperty conveyed by the decedent during his lifetime to the extent that
the decedent at the time of his death had a power to revoke the conveyance
or to consume, invade or dispose of the principal for his benefit.” As noted,
supra, the only sticking point on whether this encompassed the Accounts
was whether they comprised property that was “conveyed.”
We find that, in designating Rood and Lantz as payable on death
beneficiaries of the Accounts, Decedent “conveyed” the Accounts insofar as
he sought to create an interest in real or personal property that would have
“testamentary operation.” See 20 Pa.C.S. 2201. Furthermore, he retained
the “power to revoke the conveyance or to consume, invade or dispose of
the principle for his benefit” up to the moment of his death, as specified in
subsection 2203(a)(3). It would be difficult indeed to find that the definition
of “conveyance” could be broad enough to encompass the purchase of joint
tenancies in Kotz and Hart but insufficiently broad to include a transfer of
property into an investment account with a registration of beneficiary
designation that clearly was intended to have testamentary operation.
Nothing in our review of the Code compels a result so patently at odds with
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the harms the General Assembly has sought to prevent with its enduring
protection of the statutory spousal elective share. To read section 2203 so
narrowly would require conscious indifference to “the mischief to be
remedied,” “the object to be attained,” and the incompatibility of the
consequences of such an interpretation relative to the former two concerns,
1 Pa.C.S. § 1921(c), in derogation of our obligations under our canons of
construction.11
We agree with Wife that the orphans’ court’s resort to tentative or
Totten Trusts was unnecessary in this case. The Accounts at issue satisfy
subsection 2203(a)(3)’s criteria for materially the same reasons set forth in
Hart, which are supported by the Code. Subsection 2203(a)(3) embodies
Pennsylvania’s long-standing policy against the disinheritance of a spouse by
financial chicanery. That overarching legislative intent would be
categorically undermined if investments like the Accounts enabled decedents
to circumvent that public policy.
Order affirmed.
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11
Further reinforcing our analysis, the General Assembly declined to
define exhaustively every form of asset and revenue stream to be subject to
election. Rather, the legislature described a class of assets subject to
election that is delineated by its characteristics rather than its technical
form. Furthermore, in subsection 2203(b), which was enacted at a time
when financial instruments like the Accounts likely were familiar to
legislators, the legislature expressly excluded certain categories of assets
from spousal election, but did not include payable on death investment
accounts therein.
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Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 8/28/2015
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