Larry died intestate, survived by his third wife and sons from a previous marriage. So begins a recent opinion from the Iowa Court of Appeals.
The word intestate often signals difficulty, but it can mean special difficulty when it's found in the same sentence as third wife and sons from a previous marriage. Life can get complicated. A recent Iowa Court of Appeals decision illustrates why estate planning in these complicated situations is especially important.
The facts in this case were complex. Larry was also survived by his mother, who had been widowed 13 years earlier when Larry’s father passed away. Larry and his father had farmed together for years. When Larry’s father died, his mother disclaimed her interest in all of the farm machinery that Larry and his father had used on the farm. She also disclaimed a one-half interest in the family farmland. Larry’s mother continued to live on the home property, and it is unclear whether the disclaimer included one-half of the homestead and the outbuildings or only one-half of the crop ground. The farm machinery was stored in the buildings on the home place. Larry was the sole beneficiary of the property disclaimed by his mother.
Bad blood may not properly characterize what appears to have existed between Larry’s mother and son and Larry’s third wife. After the wife was appointed to be the administrator of the intestate estate, she began collecting property and arranging for an auction. She scheduled the sale to be held in February of 2015 on the farmstead. Larry’s mother and son, however, disputed the estate’s ownership of the property listed for sale. They argued it belonged to Larry’s mother. His mother placed a chain across the driveway, along with a “no trespassing” sign. She also sent notices stating that she was denying entrance to the farmstead.Consequently, the sale was canceled, and the items had to be eventually transported to a different site for another sale. The wife filed a replevin action against Larry’s mother and son. The action sought recovery of 230 items from the farmstead. The parties reached an agreement on all but around 100 items.
The case went to trial, and the mother and son were ordered to return all but three of the disputed items to the wife. The trial court also awarded the wife damages in the amount of $748 in lost advertising expenses, $2,000 in expenses to transport the items off the farmstead, and $22,824 in reduced proceeds caused by a fall in market price between the time of the scheduled sale and the actual sale. The judge also awarded such “further expenses and losses” as would be suffered by the estate in selling the remaining assets that could have been sold in February of 2015.
The mother and son appealed, arguing that the mother’s disclaimer was not all-inclusive. They also asserted that the district court incorrectly labeled some of the property to be “trade fixtures,” properly removable by Larry’s estate and that the estate was not entitled to hold the auction on the farmstead. As such, the defendants alleged that the damages awarded for removing the property were improper.
The Court of Appeals agreed with the district court. It ruled that the mother’s disclaimer had been all-inclusive. After his father’s death, Larry, not his mother, included the disputed equipment on his depreciation schedules. He also sold and traded items at will. In fact, the court found that for 14 years, neither defendant had disputed Larry’s right to possess, use, control, or even sell any of the farm equipment his father had owned. The court also ruled in favor of the wife as to the trade fixtures. She was able to show that Larry had purchased these fixtures, which included a parts washer, a tire machine, and a grain dryer. It was shown that Larry had used this property for his business. Thus, the district court did not err in finding that he intended them to be attached to the realty only so long as they were used in his business.
Finally, the court considered the right of the estate to enter the property to hold a sale in February of 2015. The clearest right to entry, the court found, likely came from the fact that the estate was still a proper tenant under Larry’s cash rent lease with his mother. Because Larry died in September of 2014, no termination notice was sent before September 1, and the estate was still entitled to enter the property the following February pursuant to the lease. Even if the outbuildings were not part of the property included in the farm lease, however, the court found that Larry’s estate was at least a tenant at will with respect to those buildings. Until his death, Larry had always used the buildings for his farming operation. Because the mother did not send a notice of termination 30 days before the February sale, the estate was still entitled to occupy the property pursuant to that arrangement as well.
The largest lesson from this case is that a properly drafted will or estate plan for the mother and her husband, as well as for Larry, could likely have prevented the conflict. Although it may have done little to repair rocky personal relationships, it might have averted this difficult and costly litigation.
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