Senate Bill No. 186
(By Senators Bowman, Dittmar, Kessler,
Snyder, White, Deem and Kimble)
____________
[Introduced January 21, 1998;
referred to the Committee on the Judiciary.]
____________
A BILL to amend and reenact section two, article three, chapter
forty-two of the code of West Virginia, one thousand nine
hundred thirty-one, as amended, relating to the rights of
surviving spouses in estates; including certain powers of
appointment and the proceeds of accident and life insurance,
pension, profit sharing, retirement and other benefit plans
within the augmented estate; and excepting the proceeds of
certain life insurance policies from inclusion in the
augmented estate.
Be it enacted by the Legislature of West Virginia:
That section two, article three, chapter forty-two of the code
of West Virginia, one thousand nine hundred thirty-one, as amended,
be amended and reenacted to read as follows:
ARTICLE 3. PROVISIONS RELATING TO HUSBAND OR WIFE OF DECEDENT.
§42-3-2. Augmented estate.
(a) Definitions.
(1) In this section:
(i) "Bona fide purchaser" means a purchaser for value in good
faith and without notice of an adverse claim. The notation of a
state documentary fee on a recorded instrument is prima facie
evidence that the transfer described therein was made to a bona
fide purchaser.
(ii) "Nonadverse party" means a person who does not have a
substantial beneficial interest in the trust or other property
arrangement that would be adversely affected by the exercise or
nonexercise of the power that he or she possesses respecting the
trust or other property arrangement. A person having a general
power of appointment over property is deemed to have a beneficial
interest in the property.
(iii) "Presently exercisable general power of appointment"
means a power of appointment under which, at the time in question,
the decedent by an exercise of the power could have created an
interest, present or future, in himself or herself or his or her
creditors.
(iv) "Probate estate" means property, whether real or
personal, movable or immovable, wherever situated, that would pass
by intestate succession if the decedent died without a valid will.
(v) "Right to income" includes a right to payments under an
annuity or similar contractual arrangement.
(vi) "Value of property owned by the surviving spouse at the
decedent's death" and "value of property to which the surviving
spouse succeeds by reason of the decedent's death" include the
commuted value of any present or future interest then held by the
surviving spouse and the commuted value of amounts payable to the
surviving spouse after the decedent's death under any trust, life
insurance settlement option, annuity contract, public or private
pension, disability compensation, death benefit or retirement plan,
or any similar arrangement, exclusive of the federal social
security system.
(b) The augmented estate consists of the sum of:
(1) The value of the decedent's probate estate, reduced by
funeral and administration expenses, homestead exemption, property
exemption and enforceable claims;
(2) The value of the decedent's reclaimable estate. The
decedent's reclaimable estate is composed of all property, whether
real or personal, movable or immovable, wherever situated, not
included in the decedent's probate estate, of any of the following
types:
(i) Property to the extent the passing of the principal
thereof to or for the benefit of any person, other than the
decedent's surviving spouse, was subject to a presently exercisable
general power of appointment created by the decedent during the
marriage and held by the decedent alone if the decedent held that power immediately before his or her death;
(ii) Property, to the extent of the decedent's contribution to
it during the marriage, as a percentage of the whole, by which the
property is held by the decedent and any other person, except the
decedent's surviving spouse, with right of survivorship, acquired
during the marriage of the decedent and the surviving spouse, if
the decedent held that interest immediately before his or her
death;
(iii) Property transferred by the decedent to any person other
than a bona fide purchaser at any time during the decedent's
marriage to the surviving spouse, to or for the benefit of any
person, other than the decedent's surviving spouse, if the transfer
is of any of the following types:
(A) Any transfer to the extent that the decedent retained at
the time of his or her death the possession or enjoyment of, or
right to income from the property;
(B) Any transfer to the extent that, at the time of the
decedent's death, the income or principal was subject to a power,
exercisable by the decedent alone or in conjunction with any other
person or exercisable by a nonadverse party, for the benefit of the
decedent or the decedent's estate; or
(C) Any transfer made to a donee within two years before the
decedent's death to the extent that the aggregate transfers to any
one donee in either of the years exceed ten thousand dollars;
(3) The value of property to which the surviving spouse
succeeds by reason of the decedent's death, other than by homestead
exemption, exempt property, testate succession or intestate
succession, including the proceeds of insurance, including
accidental death benefits, on the life of the decedent and benefits
payable under a retirement plan in which the decedent was a
participant, exclusive of the federal social security system; and
(4) The value of property owned by the surviving spouse at the
decedent's death, reduced by enforceable claims against that
property or that spouse, plus the value of amounts that would have
been includible in the surviving spouse's reclaimable estate had
the spouse predeceased the decedent.
(c) Any transfer or exercise or release of a power of
appointment is excluded from the decedent's reclaimable estate:
(i) To the extent the decedent received adequate and full
consideration in money or money's worth for the transfer, exercise
or release; or (ii) if irrevocably made with the written consent or
joinder of the surviving spouse. Life insurance, accident
insurance, pension, profit sharing, retirement and other benefit
plans payable to persons other than the decedent's surviving spouse
or the decedent's estate is also excluded. The proceeds of any life
insurance policy on the decedent purchased prior to the marriage of
the decedent and the surviving spouse is also excluded from the
decedent's reclaimable estate.
(d) Property is valued as of the decedent's death, but
property irrevocably transferred during the two-year period next
preceding the decedent's death which is included in the decedent's
reclaimable estate under paragraph (iii), subdivision (2),
subsection (b) of this section is valued as of the time of the
transfer. If the terms of more than one of the paragraphs or
subparagraphs of subdivision (2), subsection (b) of this section
apply, the property is included in the augmented estate under the
paragraph or subparagraph that yields the highest value.
(e) (1) Although under this section a payment, item of
property or other benefit is included in the decedent's reclaimable
estate, 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 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 the 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 only liable for actions taken two or more business
days after the payor or other third party has actual receipt of
such written notice of an intention to file a petition for the
elective share or that a petition for the elective share has been filed.
Any form of service of notice other than that described in
subdivision (2) of this subsection shall not be sufficient to
impose liability on a payor or other third party for actions taken
pursuant to the governing instrument.
(2) The written notice shall indicate the name of the
decedent, the date of the decedent's death, the name of the person
asserting an interest, the nature of the payment or item of
property or other benefit and a statement that the spouse intends
to file a petition for the elective share or that a petition for
the elective share has been filed.
(3) The written notice must be mailed to the payor's or other
third party's main office or home by registered or certified mail,
return receipt requested, or served upon the payor or other third
party in the same manner as a summons in a civil action. Notice to
a sales representative of the payor or other third party shall not
constitute notice to the payor or other third party. Upon receipt
of written notice of 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 may pay any amount owed or transfer or
deposit any item of property held by it to or with the court having
jurisdiction of the probate proceedings relating to the decedent's
estate, or if no proceedings have been commenced, to or with the
court having jurisdiction of probate proceedings relating to decedents' estates located in the county of the decedent's
residence. The availability of such actions under this section
shall not prevent the payor or other third party from taking any
other action authorized by law or the governing instrument. If no
probate proceedings have been commenced, the payor or other third
party shall file with the court a copy of the written notice
received by the payor or other third party, with the payment of
funds or transfer or deposit of property. The court shall not
charge a filing fee to the payor or other third party for any such
payment, transfer or deposit with the court, even if no probate
proceedings have been commenced before such payment, transfer or
deposit. The court shall hold the funds or item of property and,
upon its determination under subsection (d), section four of this
article, shall order disbursement in accordance with the
determination. If no petition is filed in the court within the
specified time under subsection (a) of said section or, if filed,
the demand for an elective share is withdrawn under subsection (c)
of said section, the court shall order disbursement to the
designated beneficiary. A filing fee, if any, may be charged upon
disbursement either to the recipient or against the funds or
property on deposit with the court, in the discretion of the court.
Payments, transfers or deposits made to or with the court discharge
the payor or other third party from all claims under the governing
instrument or applicable law for the value of amounts paid to or items of property transferred to or deposited with the court.
(4) Upon petition to the probate court by the beneficiary
designated in a governing instrument, the court may order that all
or part of the property be paid to the beneficiary in an amount and
subject to conditions consistent with this section.
(f) (1) A bona fide purchaser who purchases property from a
recipient, or who receives a payment or other item of property in
partial or full satisfaction of a legally enforceable obligation,
is neither obligated under this part to return the payment, item or
property or benefit nor is liable under this part for the amount of
the payment or the value of the item of property or benefit. But
a person who, not for value, receives a payment, item of property
or any other benefit included in the decedent's reclaimable estate
is obligated to return the payment, item of property or benefit, or
is personally liable for the amount of the payment or the value of
the item of property or benefit, as provided in section six of this
article.
(2) If any section or part of any section of this part is
preempted by federal law with respect to a payment, an item of
property or any other benefit included in the decedent's
reclaimable estate, a person who, not for value, receives the
payment, item of property, or any other benefit is obligated to
return that payment, item of property, or benefit, or is personally
liable for the amount of that payment or the value of that item of property or benefit, as provided in section six of this article to
the person who would have been entitled to it were that section or
part of that section not preempted.
NOTE: The purpose of this bill is to expand what property or
interest in property is included in the augmented estate for
purposes of determining elective shares under the Uniform Probate
Code by restoring language which was changed in legislation enacted
in 1995, except for the exclusion of life insurance purchased prior
to the marriage of the decedent and the surviving spouse. This
bill was recommended for introduction and passage by the Joint
Committee on the Judiciary.