ESTATE OF BRUCE
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NO. 94-017 IN THE SUPREME COURT OF THE STATE OF MONTANA 1994 IN THE MATTER OF THE ESTATE OF GLENDON CECIL BRUCE, Deceased: ALISON T. BRUCE, JONATHAN S. BRUCE and ISABEL S. NOBLE, interested parties, DONNA BRUCE, surviving spouse, and NORWEST CAPITAL MANAGEMENT & TRUST co., MONTANA, personal representative, Respondents and Respondents. APPEAL FROM: District Court of the Eleventh Judicial District, In and for the County of Flathead, The Honorable Michael H. Keedy, Judge presiding. COUNSEL OF RECORD: For Petitioners and Appellants: Kent P. Saxby, Warden, Christiansen, Johnson and Berg, Kalispell, Montana For Respondents and Respondents: Kirby S. Christian, Christian & Samson, P.C., Missoula, Montana (Donna Bruce) Walter S. Murfitt and Dale E. Reagor, Luxan and Murfitt, Helena, Montana (Nor-west) Jeffrey Bruce and Christian Bruce, California (Pro Se) Submitted on Briefs: Decided: Filed: San Diego, June 2, 1994 June 30, 1994 Chief Justice 3. A. Turnage delivered the Opinion of the Court. This is an appeal from an order certified pursuant to Rule 54(b), M.R.Civ.P. In that order, the District Court for the Eleventh Judicial District, Flathead County, determined that a PaineWebber individual retirement account (IRA) is part of the estate of Glendon Cecil Bruce. We reverse. The issue is whether the court erred in ruling that the designated contingent beneficiaries of the PaineWebber IRA, Alison Bruce and Jonathan Bruce, are not entitled to the proceeds of the IRA. In 1986, account. the Glendon Cecil Bruce established a PaineWebber IRA He named his wife, Isabel, as the primary beneficiary of account, and their children, Jonathan Bruce, as contingent appellants Alison Bruce and beneficiaries. The Custodial Agreement for the IRA account provided, at paragraph 5.5: The term "Beneficiary" means the person or persons designated as such . . . on a form acceptable to the Custodian . . . . The form may name persons or estates to take upon the contingency of survival. However, if no such designation on such a form effectively disposes of the IRA as of the time such distribution is to commence, the term "Beneficiary" shall mean the designating person's estate. In 1988, the marriage of Glendon and Isabel was dissolved. They entered a property settlement agreement which provided: Husband has two Individual Retirement Accounts (IRAs) with Paine Webber [sic] (in the approximate amount of $360,000.00) and with Fidelity Funds (in the approximate amount of $15,000.00), which IRA-s shall remain the sole and separate property of Husband. The agreement also contained a comprehensive mutual release of claims, which provided in part as follows: 2 [E]ach party hereto releases and forever discharges the other party, his or her personal representatives and assigns from any and all rights, claims, demands and obligations except as herein specifically provided. Each party is forever barred from having or asserting any such right, claim, demand or obligation at any time hereafter for any purpose . .~ . . Glendon later married respondent Donna Bruce and was married to her at the time of his death in February 1992. Despite the dissolution of his marriage to Isabel and his remarriage to Donna, he had never changed the named beneficiaries of his PaineWebber IRA. After Glendon died, Isabel filed with the District Court a renunciation and disclaimer pursuant to § 72-2-101, MCA (1991), renouncing her interest in the PaineWebber IRA as the named primary beneficiary. Both the contingent beneficiaries (Glendon's children Alison and Jonathan) and the personal representative of Glendon's estate, Norwest Capital Management & Trust Co., have asserted claims to the proceeds of the PaineWebber IRA. The District Court ruled that the 1988 property settlement agreement constituted an affirmative act evidencing intent that Isabel not receive the IRA. Glendon's It ruled that Isabel lost the ability to renounce her interest in the account when she entered the property settlement agreement, pursuant to MCA (1991). § 72-2-101, It then concluded that neither Isabel nor the contingent beneficiaries are entitled to the account. 3 Did the court err in ruling that the designated contingent beneficiaries of the PaineWebber IRA, Alison Bruce and Jonathan Bruce, are not entitled to the proceeds of the IRA? Section 72-2-101, MCA (1991), provides: (1) A person . . . who is [a] . . . beneficiary under a . . . nontestamentary instrument . . . may renounce, in whole or in part, the right of succession to any property or interest therein . . . by filing a written renunciation under this section. . . . . . . . (4) Unless the transferor of the interest has otherwise provided, the property or interest renounced devolves as though the person renouncing had predeceased the decedent . . . . The right to renounce property or an interest (5) (a) therein is barred by: (i) an assignment, conveyance, encumbrance, pledge, or transfer of property or interest . . . . In the opinion of the District Court, the 1988 property settlement agreement constituted an assignment under subsection (5) (a)(i) above, and Isabel was thereafter barred from exercising a right to renounce. The respondents argue that the contingent beneficiaries are not entitled to the IRA because Isabel did not predecease them. They argue that there exists no effective designation of a beneficiary of the IRA, and therefore, under the terms of the Custodial Agreement, the estate is the beneficiary. In Sowell v. Teachers' Retirement System (1984), 214 Mont. zoo, 693 P.2d 1222, this Court ruled that a marital property settlement agreement did not operate as a relinquishment of a right to be designated as the beneficiary of a retirement account. Court stated: 4 The [t]he property settlementagreementdoes not specifically refer to Carolyn's designation as beneficiary, but rather, relinquishes Carolyn's rights of "dower, support, maintenance, succession, homestead, inheritance, or heirship" and her right to "all property, both real and personal which the other party now has or may hereafter acquire." This language does not specifically cover Carolyn's inchoate right to acquire property upon the happening of a future event. Sowell, 693 P.2d at 1224. The respondents rely upon Soha v. West (1981), 196 Mont. 95, 637 P.2d 1185. In that case, this Court held that a property settlement agreement created a question of fact as to decedent's intent concerning a previously-executed designation in a life insurance policy which named the ex-spouse as the beneficiary. That holding, however, was specifically overruled in Eschler v. Eschler (1993), 257 Mont. 360, 849 P.2d 196. In Eschler, we quoted the following language with approval: [W]hile a settlementagreementmay require the beneficiary wife to surrender or l'turn over" the policy to the insured, that fact alone does not destroy her right as beneficiary where the insured thereafter did not change her designation as beneficiary. Whether a property settlement agreement should be deemed to bar the divorced wife is a question of the construction of the agreement itself. Where there is no provision that the effecting of the settlement agreement should deprive her of her rights as named beneficiary and she in fact remains named as beneficiary, the settlement agreement will not be siven a broader scooe than its express terms specify and she will not be barred from her right as the named beneficiary. Eschler, 849 P.2d at 201; quoting Girard v. Pardun (S.D. 1982), 318 N.W.2d 137, 138-39 (emphasis in original). The respondents argue that neither Sowell nor Eschler applies here, because, unlike the retirement account and life insurance 5 policy involved in those cases, the PaineWebber IRA was specifically awarded to Glendon However, in the property settlement agreement. the property settlement agreement did not refer to Isabel's interest as a beneficiary of the PaineWebber IRA, but only referred to the account in general. Under the language and logic of Sowell and Eschler, when she entered the property settlement agreement, Isabel relinquished any immediate ownership interest in the IRA by virtue of her marital interest therein. She did not, however, relinquish her right as a named beneficiary of the IRA. After the dissolution of the marriage of Glendon and Isabel, and until the time of his death, Glendon retained complete control over who was named as the beneficiary of the IRA. representative The personal states that it is difficult to speculate on Glendon's intent as to who should be the beneficiary of the IRA. However, it is not necessary to speculate, because Glendon specifically named a beneficiary and two contingent beneficiaries. any time He, at before his demise, possessed the power to change any beneficiary named in the IRA; either intentionally or inadvertently, he did not change the beneficiaries. We hold that the property settlement agreement did not constitute a relinquishment of Isabel's inchoate interest in the PaineWebber IRA as a beneficiary. (1991) I Pursuant to § 72-2-101(4), MCA her renunciation of that right after Glendon's death operated as if she had predeceased him and brought into effect the provision of the Custodial Agreementthatthe contingent beneficiaries "take upon the contingency of survival." 6 The right to the Painewebber IRA then vested in Alison Bruce and Jonathan Bruce, the contingent beneficiaries. Reversed and remanded for further proceedings consistent with this Opinion. Chief We concur: 7 Justice June 30, 1994 CERTIFICATE OF SERVICE I hereby certify that the following certified order was sent by United States mail, prepaid, to the followhlg named: Kent P. Saxby WARDEN, CHRISTIANSEN, P. 0. Box 3038 Kalispell, MT 59903-3038 JOHNSON & BERG Kirby S. Christian CHRISTIAN & SAMSON, P.C. P. 0. Box 8479 Missoula, MT 59807 Walter S. Murfitt & Dale E. Reagor LUKAN & MURFITT P. 0. Box 1144 Helena, MT 59624 Jeffrey Bruce 7096 Park Mesa Way, #58 San Diego, CA 92111 Christian Bruce 262 Lausanna Drive San Diego, CA 92114 ED SMITH CLERK OF THE SUPREME COURT STATE OF MONTANA
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