PUBLISHED OPINION
Case No.: 95-0580
Complete Title
of Case:
IN THE MATTER OF THE
GUARDIANSHIP OF STANLEY B.:
MICHAEL S. B., GUARDIAN OF
THE ESTATE OF STANLEY B.,
Appellant,
v.
FREDERIC J. BERNS,
GUARDIAN AD LITEM,
Respondent.
Submitted on Briefs: August 7, 1995
COURT COURT
OF APPEALS OF WISCONSIN
Opinion Released: September 19, 1995
Opinion Filed: September
19, 1995
Source of APPEAL Appeal from orders
Full Name JUDGE COURT: Circuit
Lower Court. COUNTY: Trempealeau
(If "Special", JUDGE: Alan S. Robertson
so indicate)
JUDGES: Cane, P.J., LaRocque and Myse, JJ.
Concurred:
Dissented:
Appellant
ATTORNEYSOn
behalf of the appellant, the cause was submitted on the briefs of Joseph J.
Skemp, Jr. of Moen, Sheehan, Meyer, Ltd. of La Crosse.
Respondent
ATTORNEYSOn
behalf of the respondent, the cause was submitted on the brief of Frederick
J. Berns of Frederick J. Berns, S.C. of Whitehall.
COURT OF APPEALS DECISION DATED AND RELEASED SEPTEMBER 19, 1995 |
NOTICE |
A party may file with the
Supreme Court a petition to review an adverse decision by the Court of
Appeals. See § 808.10 and
Rule 809.62, Stats. |
This opinion is subject to
further editing. If published, the
official version will appear in the bound volume of the Official Reports. |
No. 95-0580
STATE
OF WISCONSIN IN COURT OF
APPEALS
IN THE MATTER OF THE
GUARDIANSHIP OF
STANLEY B.:
MICHAEL S. B.,
GUARDIAN OF
THE ESTATE OF STANLEY
B.,
Appellant,
v.
FREDERIC J. BERNS,
GUARDIAN AD LITEM,
Respondent.
APPEAL from orders of
the circuit court for Trempealeau County:
ALAN S. ROBERTSON, Judge. Affirmed.
Before Cane, P.J.,
LaRocque and Myse, JJ.
CANE, P.J. Michael B., guardian of the estate of
Stanley B., appeals an order denying his request for court authorization
permitting him to make gifts from Stanley's guardianship estate in $10,000
increments. Michael also appeals an
order denying his motion to reconsider the same issue. Because we agree with the circuit court that
no statutory authority gives Michael the power to make gifts from the
guardianship estate for the purpose of avoiding estate taxes and because we
refuse to invoke the common law doctrine of substituted judgment to give
Michael such authority, we affirm the circuit court's orders.
The facts are
undisputed. On May 3, 1994, the circuit
court found that Stanley was in need of a permanent guardian and protective
placement because Stanley, a seventy-nine-year-old widower, was suffering from
infirmities of aging and was unable to care for himself. Michael, Stanley's son, was appointed
guardian of Stanley's person and guardianship estate.
On October 28, 1994,
Michael filed a guardianship inventory of his father's guardianship estate
estimating the net value of Stanley's property to be $817,254.91. On November 10, 1994, Michael filed a motion
asking for authorization to gift funds from Stanley's guardianship estate in
$10,000 increments for the purpose of distributing wealth before death, thereby
avoiding estate taxes upon Stanley's death.[1] The circuit court heard testimony on the
motion and held that § 880.19, Stats.,
does not authorize the guardian to make gifts from the ward's estate for the
purpose of minimizing estate taxes. The
circuit court also rejected Michael's argument that the court should adopt the
doctrine of substituted judgment, a doctrine other state courts have invoked to
authorize guardians to make gifts designed to effectuate prudent estate
planning. Because the circuit court
found there was no statutory or common law authority that would allow it to
authorize the gifts, it denied Michael's motion without specifically finding
whether the gifts would be in Stanley's best interest.[2]
Michael moved for
reconsideration of the circuit court's order.
The circuit court again denied Michael's motion. Michael now appeals, contending that §
880.19, Stats., is broad enough
to encompass the authorization he seeks.
Michael also argues that this court should adopt the common law doctrine
of substituted judgment and thereby allow the court to substitute its judgment
for that of Stanley. We reject these
arguments and affirm the circuit court's orders denying Michael's motion for
authorization to distribute gifts from the guardianship estate for the purpose
of avoiding estate taxes.
STATUTORY AUTHORITY UNDER §
880.19, Stats.
Section
880.19, Stats., defines the
duties and powers with which guardians manage their wards' estates. Michael argues that subsections (1), (4) and
(5)[3]
suggest a guardian has the authority to distribute gifts from the ward's
estate. For example, the statute
authorizes the guardian to protect, preserve, retain, sell and invest the
guardianship estate. Section 880.19(1),
Stats. Michael argues that this broad language "contemplates that
there are situations for which no provision is made in the statutory scheme to
which the court may exercise its discretion and permit such other actions by
the guardian which purpose is in the best interests of the ward (and his
estate)."
Whether Michael's
assertions are correct depends on this court's interpretation of § 880.19, Stats.
Statutory interpretation presents a question of law that we review
de novo. State ex rel.
Frederick v. McCaughtry, 173 Wis.2d 222, 225, 496 N.W.2d 177, 179 (Ct.
App. 1992). The purpose of statutory
construction is to ascertain and give effect to the legislative intent. State v. Martin, 162 Wis.2d
883, 893, 470 N.W.2d 900, 904 (1991).
In determining legislative intent, first resort must be given to the
statutory language itself. Id.
at 893-94, 470 N.W.2d at 904. If the
statute's meaning is clear and unambiguous on its face, resort to extrinsic
aids for the purpose of statutory construction is improper. Id. A statute is ambiguous when it is capable of being understood by
reasonably well-informed persons in two or more different senses. Id. at 894, 470 N.W.2d at 904.
We begin with our
examination of the statute's language.
While § 880.19, Stats.,
uses broad language to describe each guardian's powers and duties, this
language grants the guardian power to realize a single objective: to preserve the guardianship estate so that
upon termination of the guardianship, the guardian can deliver the ward's
assets to the persons entitled to it.
Section 880.19(1), Stats. To accomplish this objective, the guardian
may invest the proceeds of any sale of guardianship assets and any other moneys
in such real or personal property as the court determines to be in the best
interests of the guardianship estate.
Section 880.19(4)(b), Stats. Additionally, the guardian may sell or
exchange any property of the guardianship estate "for the purpose of
paying the ward's debts, providing for the ward's care, maintenance and
education and the care, maintenance and education of the ward's dependents,
investing the proceeds or for any other purpose which is in the best interest
of the ward." Section
880.19(5)(b), Stats.
Our examination of §§
880.19(1) and (4), Stats.,
reveals no language indicating that the guardian may distribute assets from the
guardianship estate for the purpose of avoiding estate taxes. While a guardian may sell, invest and
reinvest proceeds, the assets in their various forms remain with the guardianship
estate. We conclude that §§ 880.19(1)
and (4) are unambiguous and therefore, this court must give the language its
ordinary meaning. Frederick,
173 Wis.2d at 225-26, 496 N.W.2d at 179.
Michael asserts that the
ordinary meaning of the word "preserve" in § 880.19(1), Stats., includes distributing
guardianship estate assets to avoid estate taxes that will be imposed on
Stanley's estate at death. We
disagree. The word "preserve"
is inherently inconsistent with the permanent reduction of guardianship estate
assets through distribution. Our
supreme court reached the same conclusion when it examined an earlier version
of § 880.19 in In re Evans' Estate, 28 Wis.2d 97, 135 N.W.2d 832
(1965).[4] In Evans' Estate, the court
examined whether the law governing guardianships also controlled
conservatorships. Evans' Estate,
28 Wis.2d at 99, 135 N.W.2d at 833. In
doing so, the court stated:
Sec.
319.19, Stats., which lists the powers and duties of a guardian, contains no
express provision which permits a guardian to make a gift, either outright or
in joint tenancy, on behalf of the ward ....
The primary function of the guardian is to preserve the ward's estate
and assets are to be expended or disposed of only to meet the fundamental needs
of the ward or his dependents ....
[T]he trial court was correct in concluding that a guardian, even with
court approval, could not create a joint tenancy in certain assets of the ward
when such transfer was not for the care, maintenance, or education of the ward.
Id. at
99-100, 135 N.W.2d at 833-34. Our
supreme court did not interpret the guardian's duty to preserve the
guardianship estate to include distribution of guardianship estate assets;
instead, the court expressly denied that § 319.19, Stats., (now § 880.19) permitted a guardian to make gifts
outright. We conclude that the
guardian's duty in § 880.19 to "preserve" estate assets does not
include distributing guardianship estate assets to reduce estate taxes. Additionally, we conclude that the plain
meaning of § 880.19(4), Stats.,
does not give Michael this power.
We conclude, however,
that § 880.19(5)(b), Stats., is
ambiguous, because it is capable of being understood by reasonably
well-informed persons in two or more different senses. Martin, 162 Wis.2d at 894, 470
N.W.2d at 904. One reasonable
interpretation of § 880.19(5)(b) is that a guardian could gift assets to
effectuate prudent estate planning, a purpose which may be in the best
interests of the ward. Another reasonable
interpretation is that the section contemplates only those expenditures made
for the ward's and his or her dependents' benefit during the ward's
lifetime. Because we conclude §
880.19(5)(b) is ambiguous, we look to the statute's scope, history, context,
subject matter and object to determine the legislature's intent. Zimmerman v. DHSS, 169 Wis.2d
498, 504-05, 485 N.W.2d 290, 292 (Ct. App. 1992).
Section 880.19(5)(b), Stats., states that the court may
authorize the guardian to sell, mortgage, pledge, lease or exchange any
property of the guardianship estate for several purposes. These include: (1) paying the ward's debts; (2) providing for the ward's care,
maintenance and education; (3) providing for the care, maintenance and
education of the ward's dependents; (4) investing the proceeds; and (5) any
other purpose which is in the best interest of the ward. Ejusdem generis, a rule of statutory
construction, provides that where a general term is preceded by a series of
specific terms, the general term is construed as being limited to an item of
the same type or nature as those specifically enumerated. Pluskota v. Roadrunner Freight Systems,
188 Wis.2d 288, 295, 524 N.W.2d 904, 907 (Ct. App. 1994).
In this case, the
statute provides four specific purposes and one general purpose: "any other purpose which is in the best
interest of the ward." Section
880.19(5)(b), Stats. Applying the rule of ejusdem generis,
this general purpose must be construed as being limited to an item of the same
nature as the specific purposes listed.
The four specific purposes have in common the goal of providing for the
immediate financial needs of the ward and his or her dependents. This may include paying bills or investing
sale proceeds to preserve funds for the continued financial support of the ward
and his or her dependents. However,
construction of the general purpose to include gifting guardianship estate
assets to benefit potential heirs and avoid estate taxes is not a purpose of
the same type or nature as the other purposes specifically enumerated. This conclusion is consistent with our
supreme court's holding in Evans' Estate, where the court
analyzed § 319.19, Stats.,
(now § 880.19, Stats.) and noted
that assets are to be expended or disposed of only to meet the fundamental
needs of the ward or his dependents. Evans'
Estate, 28 Wis.2d at 99-100, 135 N.W.2d at 833.
For these reasons, we
reject Michael's argument that § 880.19(5)(b), Stats., gives the circuit court the power to authorize the
guardian to distribute the assets of Stanley's guardianship estate. This conclusion disposes of Michael's
argument that reducing Stanley's taxable estate is "in [Stanley's] best
interest the same way that it would be in the best interest if [an attorney]
had a client with an estate this size to engage in competent, thorough estate
planning." The best interests
contemplated by § 880.19(5)(b) do not include gifting guardianship estate
assets to avoid estate taxes.
Our conclusion that §
880.19, Stats., does not provide
the guardian authority to gift guardianship estate assets to avoid estate taxes
is consistent with our examination of § 880.173, Stats. Section
880.173 states:
(1) A guardian of the estate appointed under this chapter for a married
person may exercise with the approval of the court, except as limited under s.
880.37, any management and control right over the marital property or property
other than marital property and any right in the business affairs which the
married person could exercise under ch. 766 if the person were not determined
under s. 880.12 to be a proper subject for guardianship. Under this section, a guardian may consent
to act together in or join in any transaction for which consent or joinder of both
spouses is required or may execute a marital property agreement with the other
spouse, but may not make, amend or revoke a will.
(2) The powers under sub. (1) are in
addition to powers otherwise provided for a guardian of the estate.
Section § 880.173, Stats., created in 1985, gives the
guardian of an estate for a married person additional rights not provided in
other subsections. According to the
Legislative Council Notes to 1985 Wis. Act 37, Wis. Stat. Ann. § 880.173 (West 1991), the authority under §
880.173 includes the power to "minimize current or prospective taxes or
expenses of administration of the guardianship estate or of the estate upon the
married person's death." This is
the power Michael seeks, but § 880.173 is unavailable to him because he is not
representing a married person. The
Wisconsin Supreme Court discussed the powers traditionally held by guardians in
In re F.E.H., 154 Wis.2d 576, 453 N.W.2d 882 (1990). In F.E.H., the court stated:
Traditionally, the guardian of the estate
had limited powers with respect to the property of the ward. Upon approval of the court, the guardian
could sell, mortgage, pledge, lease, or exchange property of the estate for the
purpose of paying the ward's debts, providing for the care, maintenance, and
education of the ward or his or her dependents, investing the proceeds, or for
any other purpose in the best interests of the ward. See sec. 880.19(5)(b), Stats. The guardian had no authority, however, to
exercise any power over the ward's property which was not conferred by
statute. Thus, the guardian of the
estate could not make a gift of property of the estate on the ward's behalf or
exercise on the ward's behalf those property rights denominated as
"personal" to the ward, such as the right to change the beneficiary
on a life insurance contract, make an election on behalf of an incompetent
widow, or terminate the joint ownership of a bank account or government bonds.
Id. at
583-84, 453 N.W.2d at 885 (footnote omitted; emphasis supplied).[5] The court also recognized that the recently
created powers conferred by § 880.173 supplement and broaden those powers
otherwise provided for a guardian of an estate in ch. 880, Stats.
F.E.H., 154 Wis.2d at 585, 453 N.W.2d at 885.
The supreme court's
interpretation of §§ 880.19 and 880.173, Stats.,
indicates that only guardians of married wards are authorized under § 880.173
to make gifts from the guardianship estate.
See F.E.H., 154 Wis.2d at 585, 453 N.W.2d at
885. If § 880.19 authorized the type of
broad authority granted by § 880.173, there would have been no need to
enact § 880.173. When the legislature
enacts a statute, it is presumed to act with full knowledge and awareness of
existing including statutes. State
ex rel. McDonald v. Circuit Court, 100 Wis.2d 569, 578, 302 N.W.2d 462,
466 (1981). We must avoid any
construction of a statute that would make a portion of the statute
superfluous. Madison Landfills,
Inc. v. Libby Landfill Negotiating Comm., 188 Wis.2d 613, 629, 524
N.W.2d 883, 890 (1994) (citation omitted).
Thus, we conclude that § 880.173 created the authority for guardians of
married persons to engage in estate planning and that this power is not granted
by § 880.19. Because we conclude §
880.19 does not provide Michael with the authority to gift assets from
Stanley's guardianship estate, we affirm the circuit court's orders.
DOCTRINE OF SUBSTITUTED JUDGMENT
Michael argues that this
court should adopt the common law doctrine of substituted judgment and thereby
allow the court to substitute its judgment for that of Stanley. Where it has been adopted, the doctrine of
substituted judgment empowers the court to authorize a guardian to gift
property of the guardianship estate, notwithstanding the absence of specific
statutory authority, when the gift would both benefit the ward and carry out
his or her probable actions if he or she were of full capacity. F.E.H., 154 Wis.2d at 588, 453
N.W.2d at 886-87 (citing In re Christiansen, 248 Cal. App. 2d
398, 56 Cal. Reptr. 505 (Dist. Ct. App. 1967)).
While our supreme court
has not ruled specifically on a case where the guardian sought to distribute
guardianship estate assets to effectuate estate planning, the court has refused
to adopt the doctrine of substituted judgment in other cases. In In re Pescinski, 67 Wis.2d
4, 226 N.W.2d 180 (1975), the court refused to adopt the doctrine of
substituted judgment to authorize an operation removing an incompetent's kidney
for the purpose of transferring it to the ward's sister. The court stated:
Historically, the substituted judgment
doctrine was used to allow gifts of the property of an incompetent. If applied literally, it would allow a trial
court, or this court, to change the designation on a life insurance policy or
make an election for an incompetent widow, without the requirement of a statute
authorizing these acts and contrary to prior decisions of this court.
We conclude that the doctrine should not be
adopted in this state.
Id. at
8, 226 N.W.2d at 182 (footnote omitted); see also In re L.W.,
167 Wis.2d 53, 482 N.W.2d 60 (1992) (adopting a best interests standard rather
than a substituted judgment standard for determining whether to withdraw
life-sustaining medical treatment from a ward).
While our supreme court
has refused to adopt the common law doctrine of substituted judgment, the court
has recognized the doctrine where it is found in § 880.173, Stats.
This section, created in 1985, was based on Cal. Prob. Code § 2580
(West 1981) and Uniform Probate Code § 5-407 (1983), both of which codify the
common law equitable doctrine of substituted judgment. F.E.H., 154 Wis.2d at 588, 453
N.W.2d at 886-87.[6] In F.E.H., our supreme court
did not invoke the doctrine on its own but instead recognized that the
legislature had chosen to adopt the doctrine of substituted judgment. Id. at 588-89, 453 N.W.2d at
887. In similar fashion, this court
will invoke the doctrine of substituted judgment only where the legislature has
adopted the doctrine, as it did in § 880.173.
Thus, if Michael wishes to pursue authorization to perform estate
planning for Stanley's guardianship estate, he must look to the legislature
rather than this court.
For the foregoing
reasons, the circuit court's two orders denying Michael's request for
authorization to gift guardianship estate assets are affirmed.
By the Court.—Orders
affirmed.
[1] A tax is imposed on the transfer of the taxable estate of every decedent who is a United States citizen. I.R.C. § 2001(a). A credit of $192,800 is allowed to the estate of every decedent against the tax imposed by § 2001. Id. at § 2010. For an estate worth $600,000 or less, this credit covers the entire estate tax imposed by § 2001. Id. at § 2001(c). Thus, many prudent estate planners advise reducing the taxable estate before death to $600,000 or less. One way to do this without paying a gift tax is to give gifts of up to $10,000 to individual persons each year, because gifts up to $10,000 per person per year are not included as taxable gifts. Id. at § 2503(b). In this case, Michael is seeking authorization to give gifts to Stanley's seven living relatives (including Stanley's children's spouses) and thereby reduce the taxable estate by $70,000 each year. No family member has objected to this plan.
[2] The circuit court did imply that even if it had the authority to authorize Michael's request, it may have declined to do so because the record suggested Stanley seldom made large gifts to relatives during his lifetime, choosing instead to give approximately $100 on birthdays and at Christmas.
[3]
Section 880.19, Stats.,
provides:
(1) General Duties. The guardian of the
estate shall take possession of all of the ward's real and personal property,
and of rents, income, issues and benefits therefrom, whether accruing before or
after the guardian's appointment, and of the proceeds arising from the sale,
mortgage, lease or exchange thereof.
Subject to such possession the title of all such estate and to the
increment and proceeds thereof shall be in the ward and not in the
guardian. It is the duty of the guardian
of the estate to protect and preserve it, to retain, sell and invest it as hereinafter
provided, to account for it faithfully, to perform all other duties required of
the guardian by law and at the termination of the guardianship to deliver the
assets of the ward to the persons entitled thereto.
....
(4) Investments. (a) The guardian of the estate may, without
approval of the court, invest and reinvest the proceeds of sale of any
guardianship assets and any other moneys in the guardian's possession in
accordance with ch. 881.
(b) The guardian of the
estate may, with the approval of the court, after such notice as the court
directs, invest the proceeds of sale of any guardianship assets and any other
moneys in the guardian's possession in such real or personal property as the
court determines to be in the best interests of the guardianship estate,
without regard to ch. 881.
(c) No guardian shall lend
guardianship funds to himself or herself.
(5) Sales and other dispositions. (a) The
guardian of the estate may, without approval of the court, sell any property of
the guardianship estate acquired by the guardian pursuant to sub. (4).
(b) The court, on the
application of the guardian of the estate or of any other person interested in
the estate of any ward, after such notice if any, as the court directs, may
authorize or require the guardian to sell, mortgage, pledge, lease or exchange
any property of the guardianship estate upon such terms as the court may order,
for the purpose of paying the ward's debts, providing for the ward's care,
maintenance and education and the care, maintenance and education of the ward's
dependents, investing the proceeds or for any other purpose which is in the
best interest of the ward.
(c) No guardian shall
purchase property of the ward, unless sold at public sale with the approval of
the court, and then only if the guardian is a spouse, parent, child, brother or
sister of the ward or is a cotenant with the ward in the property.
(d) The provisions of this subsection insofar as they apply to real estate shall be subject to ch. 786.
[4] Section 319.19(1), (4) and (5), Stats. (1965), renumbered § 880.19, Stats., in 1971, is identical to § 880.19(1), (4) and (5), Stats., with two exceptions: the section was amended to be gender neutral and a reference to ch. 296, Stats., was changed when the chapter was renumbered ch. 786, Stats.
[5]
Our supreme court has also denied guardians authorization to cash
without necessity bonds held in joint tenancy, In re Barnes' Will,
4 Wis.2d 22, 26, 89 N.W.2d 807, 809 (1958), to designate a beneficiary in a
policy issued to the ward while the ward was competent, Kay v. Erickson,
209 Wis. 147, 150, 244 N.W. 625, 626 (1932), and to make an election for an
incompetent widow, Van Steenwyck v. Washburn, 59 Wis. 483,
503-04, 17 N.W. 289, 292-93 (1883). For
additional discussion of the limits on the guardian's power to act, see Boehmer
v. Boehmer, 264 Wis. 15, 58 N.W.2d 411 (1953), where our supreme
observed that in general,
a guardian of the estate of the
ward does not have legal title to the property of his ward, and has only
certain powers and duties to deal therewith for the benefit of the ward. Many courts have described the fiduciary
character of a guardian by stating that he is merely the conservator of the
ward's property and his powers are only such as are essential to the temporary
preservation of the estate.
Id. at 21, 58 N.W.2d at 414.