On September 12, 2018, the Iowa Court of Appeals affirmed the Polk County District Court’s ruling that a mother had intentionally given title of her house to only one of her two daughters. In Andrews v. Carter, the mother chose to transfer title of her home to the daughter who had been her primary caregiver as she aged. The other daughter had argued that the mother intended for her sister to hold the house, in constructive trust, for the benefit of both daughters until the mother died. This case highlights the need for clear and precise language when leaving only one child out of several a substantial asset.
The mother owned her home in Des Moines, Iowa, along with her husband, who was not the father of her two daughters. The wife wrote a letter in 2002 stating that if the husband did not want to live in the house after she died, he should sell it and split the proceeds between her two adult daughters. The wife wrote a second letter in 2005 with similar instructions that if the husband did not want the house, it should be sold and the proceeds split between the two daughters. Two years later in February 2007, the wife wrote a final letter stating that the husband should have two-thirds of the house if she predeceased him.
The next month, the husband and wife transferred the house to her daughter, Alice, by quit claim deed for no consideration. In August, Alice put her mother back on the deed in order to allow the mother to receive FEMA assistance after severe flooding affected the home. Alice was the primary caretaker to her mother for many years before the deed conveyance because of the severity of her illnesses. The mother continued to live in the house until her husband died in 2010. The mother died in 2011. In 2013, Alice sold the house for $12,500.
The second daughter, Betty, filed a lawsuit against Alice and the buyers of the home, claiming that the mother intended for Alice to hold the property in a constructive trust for the joint benefit of both daughters. She claimed their mother frequently put one of the daughters’ names on various accounts for convenience but remained the true owner of these accounts. The Polk County District found that placing other assets in the name of either daughter did not show the mother’s intent in executing the 2007 deed to Alice. The court also found that no constructive trust had been created and that title in the property should be quieted to Alice.
Betty claimed on appeal that the mother did not have the intent to transfer title of the property to Alice because the mother remained living in the house and acted as homeowner when she took out a mortgage, signed a property lien, and signed documents as the homeowner of the property for a disaster relief grant.
The Iowa Court of Appeals found that because the mother asked for her name to be put back on the deed in August of 2007, the mother did not believe she had control over the property after the initial transfer to Alice. She did not perform those actions when Alice was the sole owner of the home. Therefore, the court found that the mother intended for Alice to have control over the property when she gave Alice the quit claim deed.
Betty claimed that their mother intended for Alice to hold the property in a constructive trust for their benefit after their mother died. To establish that a constructive trust has been created, the proponent must show that there was either actual fraud, constructive fraud, or unjust enrichment. The appellate court found no constructive trust. While the letters showed that the mother previously intended the house to be sold and the proceeds divided if the husband did not want to live in the house, the mother likely chose to give the house to Alice alone in consideration for her work as caregiver. Therefore, Betty failed to prove fraud or unjust enrichment.
This case demonstrates that do-it-yourself estate planning often leads to trouble. Here, the time and money saved by failing to hire counsel to effectuate plans was more than lost in subsequent litigation. This is also true for many farm families. In many cases, one child will stay and farm the land with the parents while the other children leave to work off the farm. Parents may wish to leave the farm to the on-farm heir in consideration for their work. Pre-death planning, including clear communication of this plan to all involved, can lessen the likelihood of discord and litigation after death.
CALT does not provide legal advice. Any information provided on this website is not intended to be a substitute for legal services from a competent professional. CALT's work is supported by fee-based seminars and generous private gifts. Any opinions, findings, conclusions or recommendations expressed in the material contained on this website do not necessarily reflect the views of Iowa State University.