Thursday, April 10, 2014

Governor Branstad Signs New Uniform Power of Attorney Bill in Iowa

Well, it was a long time coming, but following unanimous passage in the Iowa House and Iowa Senate, today Governor Branstad signed the Uniform Power of Attorney bill into law.  The Uniform POA is a substantial and long-overdue replacement to the current power of attorney statute (Iowa Code chapter 633B). The statute is applicable to ALL power of attorney documents, whether signed before or after the effective date of July 1, 2014.

Some key points from the Uniform act: (1) provides for improved remedies in event of abuse/misuse of authority; (2) clear guidance for agents; (3) addresses powers involving co-agents; (4) specific and general authority of agents; and (5) statutory form to use for individuals without attorney access.


Sunday, March 16, 2014

How to Own Land in Iowa...Let Me Count the Ways

Well, in the past week, I had 3 different calls involving issues of how land was owned and resulting problems when one of the owners passed away.  It is not unusual, apparently, for individuals to prepare their own deeds or to not have deeds provided to them not reviewed by experts (and no, realtors and bankers don't necessarily qualify as experts in this area).  Sometimes, even attorneys have problems with these issues.  (Probably those attorneys that graduated from the University of Iowa.)  (Sidenote to realtors, bankers and Iowa law grads - please enjoy the good-natured humor.  For the Iowa law grads, ask a Drake law grad to read these big words to you.)

Listed below are the more common options on ownership of real property in Iowa that could be placed on a deed with joint ownership.  Note two things I just indicated:  these comments apply to real property (you know, land, dirt, back 40...not your car) and land located in Iowa.  These same rules may not apply in Louisiana, or any other state.  Also, I have a previously blogged about some possible concerns with joint ownership.


  • "John Smith and Mary Smith" or "John Smith and Mary Smith as joint tenants" or "John Smith and Mary Smith as tenants-in-common" - The result of this type of ownership (sometimes kind joint tenants or tenants-in-common) provides that upon the death of one of the joint owners, the other joint owner continues to own a 1/2 undivided interest, and the estate of the deceased owner will handle the other 1/2 interest.  Thus, if John dies first, his will (if he has one) or the intestate statutes (if he doesn't have a will) will dictate the ownership of his half interest.  Mary may be surprised/upset/concerned with who she is owning the property at that time after John dies.  Or, it is possible that Mary may be the only beneficiary and becomes the sole owner of all of the property.  HOWEVER, just because Mary is the surviving spouse of John does not guarantee that she will receive John's 1/2 share at his death.  Also, using "and" or "or" doesn't make a difference. 
  • John Smith and Mary Smith, as joint tenants with full rights of survivorship and not as tenants-in-common - This type of ownership provides that upon the death of one of the owners, the other owner automatically becomes owner of the entire property.  This applies regardless of what the will provides and regardless of whether John or Mary really wanted it that way.  However, this specific language must be used in the deed in order to have the property owned with such a result.  This may not always be desired, as maybe you want to control what happens to that property at your death.  For example, if you and a friend own property together, do you want that property to go to your friend or to your family?
  • John Smith, life estate, with remainder to Mary Smith - This form of ownership basically gives John the ownership of the property for his life, with full ownership passing to Mary at John's death.  John and Mary basically share rights during their lives.  I won't dig into the buried neurons from law school in my little brain to explain the potential variations and issues associated with this form of ownership.  (e.g., what if Mary isn't living at the time of John's death?)  Suffice it to say this is just another method to title real property.
  • NOT - Transfer on death or "Lady Bird Deeds" - "But my cousin's brother-in-law from (insert state other than Iowa) said that his barber's neighbor titled his property as "transfer on death" to his brother.  Can I do that in Iowa?"  No.  The life estate is close to that type of ownership, but Iowa does not recognize these types of deeds.  These are presented as ways to avoid probate in other states, but for several good reasons, Iowa does not recognize them.
The way that this property is owned can have an extremely important impact on the complete estate plan for individuals/couples.  Setting up the ownership is critical to be aware of and not taken lightly as part of the overall estate plan process.  This is one of those things that those DIY will plans may not provide full insight that an experienced estate planning attorney can provide guidance.

Sunday, February 23, 2014

Even the Rich and Famous Fail to Plan Properly

Philip Seymour Hoffman obviously had several demons involved in his life before its tragic premature ending, and maybe updating his estate plan wasn't at the top of his list.  However, the legacy he left his family and friends is probably not one that he would have wanted.  It does, however, give this trusts and estates lawyer an opportunity to demonstrate how each of us can learn from PSH's errors (besides not doing drugs).

As reported in Forbes, PSH's will was signed after his first-born, but was not updated when his next two children were born.  Now, like in NY, the laws will typically provide some protection for "after born heirs" (those kids born after a will) but with some missing language in PSH's, plus some other problems, the issue will not be clearly determined until the court's get involved.

In Iowa, a child born after the execution of a will and which they are not provided for under the provisions of the will, will receive the amount they would have received if their parent had died without a will (intestate) pursuant to the provisions under Iowa Code § 633.267.  However, what if you have specific requirements, conditions and provisions for the children.  If they are receiving their inheritance under § 633.267, then those same provisions may not apply and the kids will be subject to different provisions.

What lessons can we learn?
(1)  Periodically review your will and other estate plan documents - adding a child, grandchild or other family member is a logical change justifying a review and update.
(2) Include specific language in your estate planning documents to reference subsequently born children.
(3)  Don't do drugs.

Matthew Gardner

Sunday, December 29, 2013

Too Embarrassed to Ask "What is Probate"?: Fear No More: Probate in Iowa

"Probate" is a term that is often mentioned (well, maybe not often) but many people don't understand what it really involves. Probate is the legal process where, through a court-supervised system: (1) a deceased individual's assets are transferred to their rightful heirs/beneficiaries; (2) taxes are paid; and (3) debts/claims are handled. The probate process also includes the validation of a will.  (How else can you prove it is the last will of the decedent.)  Probate also determines the rightful heirs and beneficiaries.  Quite the tool that probate.

It is not necessary to have the attorney who drafted the will handle the process. The "administrator" or "executor" can select whatever attorney they choose.  The "administrator" or "executor" is the individual appointed by the court to handle the various steps in probating an estate.  If there is a will, they are called the executor.  If there is no will, they are called the administrator.  (Impress your friends with that information.  Your welcome.)

In Iowa, the probate process primarily consists of 5 stages.
  1. The filing of the initial set of documents to open the estate.
  2. Publication of notice in a newspaper for filing of claims and giving notice to heirs and creditors.
  3. Waiting the time period for the filing of any claims or contests to the will.
  4. Filing of the report and inventory and payment of taxes.
  5. Distribution to beneficiaries/heirs and discharge of the executor/administrator.

Every state is different in how the probate process is administered and you should contact a knowledgeable attorney to handle the probate process. Feel free to contact me if you have any questions about the probate process in Iowa.

Friday, December 20, 2013

Iowa Supreme Court "Clearly" Provided Some Guidance on Undue Influence for Will Contests

In a ruling issued today by the Iowa Supreme Court, the Court provided some clarity on undue influence cases in Iowa. Family patriarch, Louis Burkhalter, had at least two sons, William and Steven.  Louis' revocable trust initially provided that son William, then his wife and son, would be the beneficiaries of the trust. After the death of William, his wife and his son, the trust would be distributed to Louis' heirs.  As Louis, who was now 98 years young, become to decline in health, his other son, Steven, traveled back from California and talked to dad about his trust.  Following their conversation, the trust officer and attorney jumped into play and a new trust was signed dividing the trust assets equally between William and Steven.  Good thing for Steven as dear ole dad then died 6 days later.

Half wasn't enough for William, so the attorney-gloves came out and the challenges for undue influence and interference with an inheritance were made by William.  The four elements for undue influence in Iowa are: (1)  the person making the will/trust was susceptible to undue influence; (2) the defendant had the opportunity to exercise influence; (3) the defendant was inclined to influence to gain improper favor; and (4) the result was clearly the result of the undue influence.

Following an extensive summary of the undue influence history in Iowa, as well as the rest of the country, the Court was wrangling with the standard required to be successful on this type of a will contest.  Back in the day, it used to require a "clear and convincing" standard.  That made it really hard to show undue influence as those types of cases are challenging enough.  So the Iowa Supreme Court eventually changed it to "preponderance of evidence" in a 1998 ruling in Estate of Todd, 585 N.W.2d 273 (Iowa 1998).  Basically, that means you have to show more than half of the evidence in your favor and not such high level of "clear and convincing".  The highest level of proof is saved for criminal cases and his the old famous "beyond a reasonable doubt".  As a result, the range starts at beyond a reasonable doubt, then clear and convincing, then preponderance of evidence, then you lose.  (Forgive me any legal-purists and professors.)

Well, now with today's ruling that standard has been "fudged" a bit.  The Court focused on the term "clearly" in the last element of the claim.  It essentially moves the standard of proof from a preponderance of evidence to a little higher to require a showing that the influence "clearly" was the result of the person's actions.  They didn't go on to say they are moving back to the "clear and convincing" standard, but they moved the hurdle a little bit higher with what they are calling a hybrid approach.  As a result, what can be a tough case just got a little bit tougher.

Sunday, August 25, 2013

Since There is a Will, Is Probate Even Necessary?

This question has been raised before in meeting with me after a death: "Since dad had a will when he died, why is it necessary that we go through probate?"  Answer: basically, because the law requires it.  

Even though someone has a will when they die, the probate process is necessary for several reasons and just having a will isn't sufficient by itself to deal the process.  For example:
  • Probate establishes that it is a valid will of the deceased.  If there are questions about whether the individual had sufficient mental capacity, or was unduly influenced, or if they followed the legal requirements of executing a will.  (witnesses, etc.)  Probate establishes the will as legally valid.
  • Probate establishes and identifies the assets of the decedent.  If you are a beneficiary of an estate, how do you know what you are entitled to receive (I.e, 40% of the estate) if you don't know about all of the assets. Probate requires an inventory to be filed that lists all of the assets and the values of the assets.
  • Probate identifies beneficiaries and makes sure the proper procedures are followed.  How else can you confirm that a beneficiary is notified about their inheritance? The legal system ensures that they are located and given proper notice and a mechanism process to make sure their rights and interests are protected.
  • Probate identifies any proper creditors of the decedent.  There may be some unknown creditors lurking out there that the decedent owed money or potentially owed money.  Probate pulls those creditors "out of the weeds" and requires them to file a claim or forever be banished.  Or something like that.
  • Probate confirms all of the tax requirements are satisfied.  Some people may not be aware about the tax requirements or full awareness of past history.  Probate allows access and a process to finalize any tax requirements.
Most importantly, don't shoot the messenger.  I don't make the rules, I just help walk you through the minefield.  These are the rules that we live by and these rules have been in place a long, long time.  Besides, it gives me something to do.  

Tuesday, July 09, 2013

Using Jointly Owned Property to Avoid Probate: Good Idea?

A common question that frequently comes up, in an effort to avoid the "evil" world of probate, is the use of joint ownership to transfer property.  I'm sure you all know that jointly owned property will automatically pass to the surviving joint owner after one dies.  For example, mom and daughter are joint owner on bank account, mom dies, daughter automatically becomes new owner of account immediately.  Simple and easy. Right?

Sometimes it works.  But, let's play some "what if" scenarios:

  • What if the daughter has creditor problems - her creditors can go after and garnish the joint account and take the money away from mom.
  • What if the daughter has tax liens and garnishment?
  • What if there are other intended beneficiaries and the daughter decides she doesn't want to share with the others.  She has no legal obligation to divide the money out.
  • What if there are bills for mom that need to be paid after her death?
  • What if the daughter decides to "help herself" or "borrow" some of mom's money while mom is still alive and using the money?  There is nothing stopping her from taking the money out.
Depending on the situation, it can be a disastrous plan to rely on this as the estate plan.  However, it is possible that everything can work out correctly, assets pass without the need of probate, lawyers get nothing,  and everyone is happy.  Kind of a roll of the dice if you ask me.  Do you want to roll the dice with your life savings?

Sunday, June 09, 2013

I'm Only [insert age] Years Old, So I don't Need a Will.


A common question that I get is "when do I need a will?"  Not everyone needs a will, but there are a few situations where a will becomes pretty important in allowing your friends and family to handle your final affairs.  Some examples of key situations:

Young children - Your will can indicate your preference as to who will be raising your kids.  This issue can be ripe with conflict if there are multiple individuals that love your children and want the job.  That love can lead to competition.  A Will can calm that storm, or at least help. 

Real estate - If you own real estate, your will provides directions on how it is handled and distributed, but it also allows your personal representative to handle its disposition easier and without court involvement.  

Second marriage with children from prior marriage- you love your current spouse, and you love your children from a prior relationship, but that doesn't mean your spouse and kids will always love each other. Your spouse may not be as generous at dealing with your kids if you predecessor him or her. A will can provide assurances that both your spouse and children are taken care of "fairly".

Wednesday, May 22, 2013

Top Ten Questions About Iowa Probate

The masses have demanded it, so finally, the top ten questions about the probate process in Iowa (hold your applause until the end):


  1. Can an out-of-state person be an executor? Yes, despite what many attorneys tell their clients.  However, there is an Iowa statute that provides an Iowa resident should be appointed with a non-Iowa resident who is serving as a personal representative.  However, I have routinely had judges approve a non-Iowa resident to serve alone, under certain conditions.  (Property of the decedent stays in Iowa; use Iowa bank for the account; etc.)
  2. Do we have to go through full probate?  Ready for the classical legal answer?  Maybe.  (7 years of college for that answer.)  The first step is an analysis of how assets are owned and whether there were any named beneficiaries.  If everything is owned jointly or has a beneficiary, it may not be necessary to go through the probate process.  If there are other assets, as long as they aren't greater than $25,000 in value and not involving real estate, you may be able to use an affidavit to distribute those assets.  If that doesn't work, but the assets are less than $100,000, you may be able to use the small estate process (which doesn't really do a whole lot from a regular estate, but can save some costs.)  Otherwise, if you don't fit in any of the prior categories, you may be required to go through the probate process.  You can see that this isn't an easy "yes or no" response, but requires an inspection and review of the decedent's assets.
  3. Are attorney fees really 2% of the estate?  This is the subject of a prior post, but the Iowa Code generally limits attorney fees to no more than 2% of the size of the estate.  As the Iowa Supreme Court has noted, this is a ceiling on fees, not a mandatory amount for fees.  Having said that, it is fairly routine, historically, that attorney fees be set at 2% of the estate.  But just because it has been that way previously, doesn't mean that it will always be that way.
  4. Are retirement plans/annuities/insurance included in the estate? If these assets had named beneficiaries, they will be paid to those beneficiaries, regardless of what the estate plan (will or intestate) otherwise provides.  However, even though they pass outside of the probate management process, they are still subject to being reported on the Report and Inventory for the estate.  Also, with the exception of the life insurance to named beneficiaries  those accounts are included in the calculation of attorney fees and court costs.  (Everyone loves that fact.)
  5. Are there death taxes in Iowa?  Sort of.  There is an Iowa inheritance tax that certain beneficiaries will owe a tax on if they inherit property.  However, if you are a spouse, charity, or lineal descendant or ascendant of the decedent, there is zero inheritance tax.  Thus, siblings, cousins, nephews, friends, etc. would owe a tax on an inheritance.  For estates less than $25,000.00 in size, there is an exemption.
  6. Do we have to wait until probate is completed before we can deal with the property?  No, you can proceed with handling/managing the assets immediately upon appointment, but there are limitations as to distributions to beneficiaries.  Also, depending on the provisions of the will, you may need to get court approval for certain actions over property of the decedent.  Otherwise, you as the personal representative have authority to properly manage the estate assets, whether that means collecting income or selling an asset.
  7. Do we have to use the same attorney that drafted the will for probate?  Only if I was the attorney that drafted the documents.  (I'm kidding, I'm kidding.)  There is no requirement that you use the attorney that drafted the will or the decedent's regular attorney.  The personal representative for the estate should retain an attorney that they want to work with for the process.
  8. What if we can't find the original will?  That can be a problem.  Normally, you NEED the original will.  It can be possible to probate a copy of a signed will, but it can be very challenging to get it admitted into court.  That is a more involved question.
  9. I am the "power of attorney" - we don't need to go through probate, do we?  The authority of an agent under a power of attorney document ceases at death.  (Technically, the title is the attorney-in-fact.) Thus, there is no longer any power to deal with the property of the decedent.
  10. Do we need to use an attorney? An Iowa attorney? A local attorney?  As long as that attorney is me, then yes.  (I'm joking, again.)  You don't have to use an attorney, but I can't imagine trying to go through the process.  And no, I'm not saying that just to get business.  Probate isn't rocket science, but there are just numerous items/issues that most people aren't familiar with handling.  Until I write the DIY Probate book, you really need to use an attorney.  And you need to use an attorney licensed to practice in Iowa. If they aren't licensed here, they can't practice law in Iowa.  And finally, you don't need to use the attorney in the same county.  Much of the court systems in Iowa are going electronic, so court filings can be completed while I sit in my pajamas at my computer listening to music.
Now that you are full with knowledge, fire away with any questions.

Tuesday, March 12, 2013

What is this "Probate Process" That You Speak of, Mr. Attorney?

A popular blog post that I had on a different site in my pre-solo days dealt with an overview of the probate process in Iowa.  As it has been a few years since that post, and I'd like to have this post under this blog "roof", I'm going to recycle it here.

The probate process in Iowa can be broken down into essentially 5 general steps:

  1. Initial opening of the estate - this is the filing of the initial paperwork to get a docket number and the formal appointment of a personal representative.
  2. Notification period - legal publication in the newspaper is arranged, heirs/beneficiaries are given notice, and creditors are given notice of probate.
  3. Report and Inventory - Within 90 days of opening the estate, the personal representative is required to file a document with the court listing the decedent's assets and their values, in addition to the information on the heirs/beneficiaries.
  4. Tax Filings - The other sure thing in life, besides death, is taxes and it doesn't change after death.  The personal representative is obligated to complete and file the necessary income tax filings with the revenue authorities (IRS and Iowa Department of Revenue and Finance)
  5. Close Estate - After the end of the notification period, filing of the Report and Inventory and completion of the tax filings (assuming there are no disputes or fights with the family or creditors) the Final Report, with the proper receipts from the beneficiaries, are presented to the Court for review and approval.  Court costs, attorney fees and final distributions are handled at this step.
There can be detours throughout this process and some items may be more involved, but it gives a general overview of the process and the general steps involved.

What else would be helpful?  Let me know if you have any general questions that I can expound on on this blog.

Thursday, February 28, 2013

Gardner Law Firm, P.C. - It's own webpage!

Gardner Law Firm, P.C. has its fully completed website up and operational at this point.  Want to know more about me?  Now you can find out.  Thanks to LawPromo for their good work!

Monday, February 25, 2013

Estate Planning - Regardless of Age


A local news story helps provide another sad example of why it is important to establish some basic estate planning, regardless of your age.  A young lady was involved in an automobile accident that has left her in a coma and unable to deal with her personal affairs.  As a result, her friends and family are struggling with the financial restrictions of getting access to her accounts to deal with various matters.

Two relatively simple documents-Financial Power of Attorney and Medical Power of Attorney-would have made this job much easier and cheaper.  The cost for getting these basic and essential documents in place is minuscule when compared to having to go to court to establish a guardianship and/or conservatorship for someone in this situation.  Commonly younger individuals don't realize the need or importance for such documents as they are young and immortal, or believed to be less likely to have a need for these provisions.  Unfortunately, that isn't always true.  (One minor correction to the news story: a Living Will is not the proper title for the document needed here, but rather the power of attorney documents noted.  A Living Will is the "pull the plug" declaration for end-of-life decisions.)

Thoughts and prayers to her friends and family as they seek to help her out.  Please consider helping this young lady out.

Friday, February 22, 2013

How to Dispose of a Dead Body in Iowa

Cemetery of Chettle parish church (Johan Doe) / CC BY-SA 3.0

The Iowa Supreme Court issued an interesting ruling today on the disposition of one's bodily remains.  Short summary: Wife dies.  Husband and wife were "on a long break" after 43 years of marriage, but had never formally divorced or filed for a legal separation.  Wife had given instructions in her Last Will as to where she wanted to be buried, verbally told her family members (10 kids!!) and wrote a letter to her son, that was shared with her sister, the executor and the kids about her final wishes.  Husband didn't want wife to be buried in Montana, as she desired and expressed to everyone, so he went ahead and buried her here in Heaven a/k/a Iowa.  Royal rumble in the courts ensued.

Think you have the right to determine what happens to your body after you have "departed planet Earth"?  Unless you take your body with you, guess again.  In the Court's ruling, you have no rights whatsoever as to what happens to your bodily remains.  Iowa Code § 144C.5 which was amended a few years ago, is titled "Final Disposition of Remains - Right to Control" sets out the chain of authority over the individuals that can make that decision.  The deceased person is not on the list.

Thus you, as the dead person, have the right to determine who makes the decision but not actually the decision yourself.  (I.e., buried, cremated, shot into space, sprinkled around the farm, etc.).  Also, don't put those instructions in your will.  I never recommend that in the first place as your will may not surface until it is too late, plus the Court clearly stated that placement in the will isn't compliant with the Iowa Code.  (Justice Cady, whom I believe is one of the premier judicial minds in our courts, issued a strong and rationale dissent that is worth the read.)  And if you don't designate anyone, the Code provides that your spouse is the sole decision-maker (just like in my house), followed by your adult children, and so forth.

I often get a chuckle from clients when I bring up this topic in the estate planning meeting, but this ruling reinforces the value of making plans to cover all of your matters: financial, family and remains.  Moral of the story: Pick the person that you trust to make decisions about your remains, and follow the requirements with including that choice with your durable power of attorney document.

Sunday, February 10, 2013

Inheritance Rights of Unborn Iowans


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With today's medical bio-technology, it is not unusual for a couple to "store an embryo", or other "genetic material" for future use.  Perhaps they had multiple embryo's created, or they are going through a medical treatment which may affect their reproductive capabilities, or heading to war.  Regardless of the reason, the legal issues that can be raised with such foundations of life are interesting. For example, if a baby is eventually born as a result of the "stored genetic material" and the parent dies before they are born, what rights as a child/heir do they have?

The Iowa Code was modified in 2011 to provide a window of opportunity for an unborn to have rights of inheritance following the death of the parent.  Essentially, if a child is born within two (2) years after the death of a parent, they can inherit from that parent just as if they had been born prior to the parent's death.  If a deceased has left any genetic material, the personal representative of the estate must report that fact to the court and also leave sufficient assets for that potential person to receive their inheritance.

While it is possible that an embryo, or other material, can be frozen much longer than two years, the two year window was used merely to provide some reasonable period time and not to keep it indefinitely   Medical advances certainly create some interesting legal scenarios.

Monday, January 21, 2013

Gardner Law Firm, PC - Open for Biz

"Faith is taking the first step even when you don't see the whole staircase."  Martin Luther King, Jr.

Well, it was 15 years in the making but the time has come...Gardner Law Firm, PC, located in Urbandale, Iowa, is created, established and the doors open (except I close for lunch and occasional golf).  While the struggles that I will likely have as a solo attorney pale in comparison to those of Martin Luther King, Jr., I find his quote inspirational as I open the door on the day we celebrate his birthday. 

I will be doing the same work that I did previously at my previous firm: estate planning (wills/trusts), probate administration (handling final matters for deceased people), real estate, and business planning (setting up business entities, helping individuals buy or sell businesses, succession planning, etc.) 

Check out www.gardnerlawpc.com for more information (when the site is completed).  

Wednesday, January 02, 2013

FINALLY...Estate Tax Rules Updated for 2013

Almost exactly 2 years ago, I blogged on the updated federal estate taxes for 2011 and 2012 and noted that the rules put in place then were just punted down the road.  That "punt" finally landed when the "Fiscal Cliff" doomsday of 1-1-13 approached.

Finally, today we received some updated rules on the federal estate tax system for 2013 and beyond.  (Can I say "permanent"?).  I'll update more on the details of the statute after it is digested, but essentially most of the rules from 2012 will remain in place.  (Slightly more than $5 million exemption per person and continued portability options for spouses.) The Iowa Academy of Trust and Estate Counsel have a quick summary of the tax bill here.

I expected this to happen, but I'm often wrong when it comes to predicting what Congress will do.  At least we have a better set of rules to work with and estate planners will know what to tell clients for the future.

Friday, November 02, 2012

Iowa Spousal Elective Share - It is Official Now

In a ruling issued today by the Iowa Supreme Court, the Court ruled that a spouse can be cut out of an elective share by utilizing a non-probate transfer.  In the Myers case, the decedent had placed beneficiary designations on a checking account, CD and an annuity to her children and not her husband.  The trial court initially had ruled that those assets, despite the beneficiary designation, were still subject to the spousal elective share based on earlier court rulings.

However, on appeal, the Iowa Supreme Court determined that the statutory language of the spousal elective share provisions (Iowa Code § 633.238) specifically limits the elective share to ONLY the probate property.  Thus, payable on death (POD), transferable on death (TOD), or any other account that has beneficiaries listed upon death could be passed on to other beneficiaries and exclude the spouse.  In other words, if you want to disinherit your spouse, this is how you accomplish that result.

This ruling at least clears the issue in Iowa, for now, as there have been conflicting cases, including one I wrote about a few years ago.

An interesting fact that may have played a role in this case--or maybe not--was that the surviving spouse had assigned his elective share rights to a judgment creditor and it was the judgment creditor that was seeking to enforce the elective share rights.  If this was a destitute surviving spouse living on cat food and government support programs, would the court have made the same decision?  Probably will never know.  Sometimes bad facts create bad law.

Friday, September 07, 2012

Surviving Spouse Rights in Iowa Still Evolving

The rights of a surviving spouse (male or female) in Iowa are not exactly "clear cut".  When you have numerous methods on how property can pass at death (named beneficiary, joint ownership, will, trust, intestate) and sprinkle in second marriage situations with kids from an earlier relationship, you can create a minefield of problems.  I have written previously on a court's allowance of the disinheritance of a spouse in a December 2009 district court case.  In a different district court, another court has taken a different approach.

Betty Rich was the surviving spouse of William Rich.  William Rich had three daughters from a prior marriage and none from his marriage with Betty.  Mr. Rich's will & trust combo created the standard AB trust with the QTIP provisions.  (Another future blog post.)  Betty wasn't thrilled with what she was receiving under her husband's estate plan (or from the insurance policies) so she proceeded to opt for her elective share.  She sought to obtain her spousal share from IRAs, securities, annuities and the trust assets.  Mr. Rich's children responded by claiming that Betty had agreed to keep their assets separate.  However, the court responded that separate assets doesn't necessarily mean a waiver of their spousal rights.

What becomes interesting in the ruling is the assets that were given to Betty.  Mr. Rich owned some IRA's in which Betty was not the named beneficiary.  The court held that the IRA's were exempt property and as exempt property, the spousal elective share provides that ALL of the exempt property goes to the spouse.  As to the other personal property (checking account, CD, annuities and investment account) Betty was entitled to 1/3 of those assets.

There was also some life insurance where Mr. Rich's children were the named beneficiaries.  The court found, based upon some old Iowa law, that life insurance is excluded from the elective share.  (I do have some questions on that piece of the ruling based on recent Iowa cases.)

I take no position as to whether this was the right or wrong outcome.  However, it does reinforce the potential value of a prenuptial agreement and the benefit of allowing for postnuptial agreements.  Without either, some Iowa courts may be willing to provide broad application for spousal rights that may not result in the understanding of the parties.  But that's why we have lawyers, right?

Thursday, September 06, 2012

Iowa Will Contest Rejected by Iowa Court of Appeals

The Iowa Court of Appeals issued a ruling today affirming a ruling of an appeal in a will contest case.  The contestants to the will were basing their argument that the testator (decedent) lacked sufficient capacity to execute her will as she suffered from certain delusions as to certain family members/beneficiaries.  According to the ruling, certain medical evidence was properly excluded as the proposed evidence related to medical information after the execution of the will, and not during the time period the will was executed.  In other words, any evidence concerning the testator AFTER the signing of the will may not be relevant in determining capacity at the time of signing the will.  In this case, the testator was diagnosed with cancer after signing the will and was under medication for that treatment.  The contestants also objected to the jury instructions used in referring to the delusions.  The Court rejected the appeal and affirmed the findings of the jury.

The will contestants also made the claim that the testator was unduly influenced, but the jury didn't agree.  Not a lot of facts provided in this ruling as to the evidence that was presented.

Monday, July 02, 2012

Old Trust, New Trust? Iowa Trust Code Applies to All Trusts

Okay, let's assume person D had a will executed in 1980, then dies in 1987.  Will says 'all my assets in trust to my wife for her life, then to our 2 kids when she dies.'  Child #1 dies in 2002 and then wife dies in 2008.  Child #2 is alive, child #1 has a surviving widow and a surviving daughter.  Who receives the remaining assets at the death of the wife?  Is it: (a) daughter of child #1 (b) widow of child #1 (c) child #2 or (d) the attorney.

If you guessed (d), I like the way you think, but unfortunately you are wrong.  If you guessed (a), you are correct!!  Congratulations on your first star to being a junior lawyer.  The Iowa Court of Appeals affirmed this position in an opinion issued June 13, 2012.  (See the opinion here.)  One of the issues in this case involved the issue of whether the Iowa Trust Code, which became effective in 2000, applied to trusts that were in existence prior to that time.  (For example, a trust established in 1987.)  The Iowa Trust Code is pretty clear that it does, and it is a little more clearer now.

If you guessed (b), don't be too hard on yourself as that very well could have been the position prior to the Iowa Trust Code.

(In case you were wondering, I am related to the attorney that represented the successful party in this appellate ruling...it is me.  So yes, I'm sort of tooting my horn.)

Sunday, February 26, 2012

Minors Inheriting Property in Iowa

My daughter Maggie
I recently have had a couple of situations where minor children are heirs of a parent that passed away.  As a result, the minor children are beneficiaries of their parent's estate.  However, in Iowa, it can be a challenge when a minor is inheriting money/assets.

Iowa law provides that if the amount of the inheritance is above $25,000, it is necessary that a conservatorship be opened for the minor.  A conservatorship, while beneficial in handling the assets for a minor that can't handle those assets, can be a challenge and potentially frustrating experience.  Some issues associated with a conservatorship:

  • Annual reporting requirements - each year (or occasionally other periods) a report is filed and review by the court for all income and expenses of the conservatorship.
  • Annual expenses - there are annual court costs and potentially attorney fees to handle those reports.
  • Bonding requirements - a conservator has to post an insurance bond before they can be appointed.  This can be difficult to get for many people.
  • Limitations - Want to change the investments? Need a special disbursement?  You'll have to go to court first.
  • "Handcuffs" off at 18 - When the child turns 18, all of the money is immediately theirs.  Buy a new car with 412 hp? (I love that car.) Purchase a ton of new clothes?  All are options as the child can do anything they want.  Not sure how many 18 year olds could handle that responsibly.
There are ways to avoid a conservatorship when a minor is a beneficiary, but it takes action and planning ahead of time...not from the grave.  
Get a will - and set up a trust for your kids.  

You avoid nearly all of the headaches with a conservatorship.  

Monday, February 13, 2012

Inheriting Iowa Farmland

With a recent ISU survey showing Iowa farmland values continuing to skyrocket, there is an increase in attention to dealing with the big values involved.

Some issues to keep in mind when your estate involves Iowa farmland:


  • "Death Taxes" - For 2012, the federal estate tax exemption amount is $5M, which excludes are large portion of the individuals dying in 2012.  However, for the larger estates, or estates with significant life insurance or retirement plans, there may be some issues.  Also, in less than a year, the exemption amount is scheduled to be reduced back to $1M.  With just a 150 acre farm, at average values, you potentially have estate tax exposure.
  • Disputes - Handling the farm if there is more than one child can be challenging.  What if there is one child that is involved in farming and one that isn't?  What if neither are involved?  What if the kids don't get along with each other? How will decisions be handled in the future when there are multiple owners?
  • Expenses - Probate fees and costs in handling your estate may be a substantial expense for some situations.  Plan for that contingency or consider alternatives.
  • Education - Discussion with family members about information in dealing with the farm can be critical.  Are there leases involved?  Where are the abstracts located? Why you formulated the estate plan that you did?

There are plenty of problems that are involved, and not always easy answers.  With careful planning with an experienced planner, you can hopefully alleviate many of the problems, or at least deal with them the best way possible.

Sunday, February 12, 2012

Time Period to Administer a Probate Estate in Iowa

Iowa law limits the time period in which to administer an estate of an Iowa decedent.  Iowa Code section 633.331.  If an estate is not opened up within 5 years after death of the decedent, it will not be able to opened up.  Iowa currently does not recognize any exception to this rule.

What does that mean? If there is a will and you wait more than 5 years after death before doing anything, you've waiting too long.  Good luck on the headaches of transferring any assets at that point.

This doesn't mean that you always have to probate an estate, but if there are any possible assets that may need to be distributed, don't wait.

Tuesday, December 20, 2011

Honey, I lost my will!!

Hopefully you've done the proper thing and put together an estate plan.  But what do you do with the original will?  The original will is an extremely important document.  In Iowa, as in many other states, if the original will cannot be located, there is a presumption under the law that the decedent intentionally destroyed the will.  Even if you can find a copy of a signed will, it may not be enough.  It is possible to argue to a court that it was not revoked, but the law requires you to show by clear and convincing evidence that they did not destroy (revoke) the will.

So, some options and things to think about for storing a will:

  1. Keep it with the attorney - normally the safest, so long as the family can find the attorney and the attorney/firm is still in business. (We don't charge for this service, but we are a pretty cool law firm.)
  2. Keep it in your freezer - never understood the use of a freezer as storage.  Could get tossed out, cooked, freezer burned, or destroyed by accident.
  3. Keep it in your bank deposit box - Not bad, but could be an issue getting it out of the box after death.  Unless there is another person authorized, the only person capable of getting into a bank box after death is the executor.  You need an original will in order to be appointed executor.  (See the problem? Catch 22.)  Some banks can help you set the box up for access after death, but make sure you ask the question and get it taken care of.
  4. Store in house in [insert location] - As long as it is in a location where family can find it if necessary.  (I've had estates where we never found one that we knew existed.)  Risk of house burning or misplaced.
Moral of the post - Will is an important document to keep: store it in a safe location.

Saturday, July 16, 2011

Will Contest Ruling from Iowa Court of Appeals

The Iowa Court of Appeals had a recent ruling on a will contest based on a claim of undue influence and lack of "brotherly love".

Mom left her substantial estate to one of her two sons, and disinherited the other son completely. The disinherited son challenged the will based on undue influence and lost, then filed an appeal.

The Court of Appeals goes through a thorough analysis of the undue influence elements in a challenge to a will. Those elements being: (1) susceptibility to undue influence; (2) opportunity; (3) disposition to unduly influence; (4) result which is the effect of undue influence.

Of interesting note is the fact that apparently there was a recording of her estate plan changes. While it is not clear whether these were video or audio taped, the court indicated the recording corroborated the attorneys' statements about her susceptibility.

The use of a recording, in my opinion, could cut both ways in supporting a will. For example, if a recording is made, it raises the question of "why" a recording was even made ("because we knew there was a concern about the individuals's capacity"). Also, the recording process may make the individual nervous and less at ease, which may translate to raising additional questions about the individual.

My recommendation has been to not do a recording, but the Court here may make me question that process. Of course, every case is different and has unique facts.

On the Iowa-Law Blog, I posted about another recent ruling involving an interference with an inheritance case.

Wednesday, May 25, 2011

Declining to Serve As Executor of a Will

While it may be hard to believe, people and relationships change over time. (Duh.) However, some people's Last Will and Testaments don't change in a similar fashion. A question that occasionally arises when it comes time to probate someone's will is 'what if this person doesn't want to serve as executor?'

Going back to 1864 and the 13th Amendment to the Constitution abolishing involuntary servitude, no one is legally required to serve as the executor of an estate, or a trustee of a trust, or guardian for a minor. If you are nominated to serve and don't want to get involved because: (a) it is going to get messy, (b) you don't have the time or (c) you don't like dealing with attorneys, you can simply decline to serve. Of course, you may have to battle any moral coercion to fulfill the decedent's wishes, but that is for each person to deal with.

Hopefully, the testator named an alternate name as a backup in the event the first choice either declines to serve or cannot for some reason, which I strongly recommend for my estate plans.

Sunday, February 20, 2011

Debts of the Decedent Not Inheritable

A common question that arises in some estate administration is "whether the beneficiaries of the decedent are responsible for any unpaid debts?" Short answer: generally, no. Barring any issues such as fraudulent activities by the beneficiaries, if the estate is a bankrupt estate and insufficient assets to pay the debts, that will be the end of the story on the debts. The court may determine which creditors are paid and how much of their claims are paid, but that unpaid amount of the debt will not pass to the beneficiaries. Thus, when a client signs their will and jokes that their kids won't get anything except their unpaid bills, that isn't entirely accurate.

Monday, January 10, 2011

Estate Tax Changes for 2011-2012 (& 2010)

Apparently Congress was following my posts and decided to wait until the last minute to make changes to the federal estate tax system. Three significant changes to be aware of from the TRA 2010:

Exemption Amount Change - While $1 million was scheduled for the exemption amount for 2011 the new act implements a $5 million exemption per person. Thus, a married couple could pass on $10 million without worrying about federal estate taxes. With these type of numbers, there will be very few estates that will have any federal estate liability. In addition, for those individuals that passed in 2010, their estate can choose either the old 2010 "no estate tax - carryover basis" rules or the new "$5 million exemption - stepped-up basis".
Portability - In somewhat of a surprise, one of the bigger changes was the addition of the idea of portability. The idea is essentially if your spouse doesn't "utilize" their exemption amount, the surviving spouse can take advantage at their death. Previously, unless the assets were properly titled, it was possible that the first-to-die spouse may not use their exemption and it is lost forever for no one to use. Portability concept avoids that situation. However, it creates different "issues" that arise out of second marriage situations.
Gift Tax Exemption - The lifetime gift exemption was matched to the federal exemption amount as well ($5 million). Thus lifetime and/or death transfers up to $5 million are permitted.

However, while Congress did make some changes, at the last minute, it is only temporary as the provisions will expire December 31, 2012. I suspect I'll have to re-post my comments from last month about the "what if" scenario, which include the scheduled return of a $1 million exemption. On the night of the BCS national football championship, it is appropriate to describe this move by Congress as a "punt".

Monday, December 13, 2010

Proposed Estate Tax for 2011- Maybe

With plenty of time left in 2010 (insert sarcasm tone), Congress is moving towards modifying the federal estate tax system. Here is a quick summary of where we are currently, where will be if they don't pass anything, and what the current bill ("Tax Relief, Unemployment Insurance Reauthorization, And Job Creation Act Of 2010") would provide. (Disclaimer: this is the quick and dirty summary for discussions at holiday parties and should not be relied upon as an extensive analysis.)
  • What we had in 2009 - $3.5 million exemption per person, 45% tax rate
  • What we had in 2010 - No federal estate tax. "Carryover basis" on inherited assets, with limits.
  • What we will have in 2011 with no change - Federal estate tax for estates greater than $1 million, with a rate of up to 55%.
  • Under the current proposed bill - $5 million exemption, 35% tax rate above that.
One of the more interesting items in the proposed bill includes a "portability" provision. Historically, in order for both spouses to maximize their total available exemption amount, assets had to be titled in a certain manner and different drafting provisions were necessary. ("Use it or lose it" was the message.) The portability provision would provide that if a spouse didn't use their exemption, their spouse could use it. Thus, it could be possible for a surviving spouse to actually have a $10 million exemption available at death and pass $10 million tax free to their beneficiaries.

This portability will be interesting as to how it gets applied. It will change the way attorneys plan for their clients. Assuming this bill passes, of course.

Sunday, September 19, 2010

Farm Estate Planning and Trust Protector

I recently attended the Farm Estate and Business Planning Seminar in Ames, Iowa, which is put on by the Iowa State University's Center for Agricultural Law and Taxation with Roger McEowen as the Director. Each year I'm impressed with the materials and speakers presented.

One of the speakers this year, Wayne Reames, discussed utilizing trust protectors. I have used trust protectors in the past for substantially-sized estates, but Mr. Reames further highlighted some of the benefits in even modest estates. A common problem is who is to serve as trustee. A trustee is responsible for investing and managing trust assets, which can be substantial, preparation and filing tax returns, preparing and providing accounting reports and dealing with distribution requests from beneficiaries. This can be a daunting task for many people.

Rather than having friends or family members serve as trustee, and potentially be in over their head, naming a bank as a trustee may be a better solution. Then, as a way to keep the family involved, name a trusted family member as a "trust protector" and give them the ability to remove and replace a trustee. They don't have to deal with requests for funds, tax returns, investment decisions, or accounting, but yet have plenty of authority to make sure the trust is managed properly with the ability to pull the "hook".

Again, just another planning tool for your estate plan.

Monday, September 06, 2010

Iowa Guardianship Proceedings in the News

Another guardianship proceeding in Iowa is getting some notoriety lately after another one recently was in the news. The Des Moines Register has been following a story involving a 16 year old mom's battle to get her 1 year old daughter back from the 16 year old's family members. Unfortunately, the story highlights some legitimate concerns over the guardianship process in general:

(1) Publicity - This is open record for the whole world to watch your life on stage. Like all court proceedings, they are open proceedings for the public or the media. The Des Moines Register brought in their legal counsel to prevent/"urge" Associate Probate Judge Klotz from closing the proceedings and requests to keep the reporter out of the courtroom.

(2) Delay - The time involved in getting the facts before the court and for the court to review the evidence can take months. The challenge is do you take the child away from the parent for safety concerns or do you return the child to the parent when there is allegedly some danger involved. Tough call.

Guardianship proceedings are continuing to grow in numbers and crowd the court docket. Guardianships can cover individuals from 1 day old infants to 109 year old individuals and everything in between.

Monday, July 26, 2010

Special Needs Trust in Iowa for Disabled Children

Parents, grandparents and others wanting to benefit family members with special needs should act carefully in providing for lifetime gifts or testamentary gifts.

The primary options when it comes to planning for gifts with special needs children in Iowa include:

  1. Gift to Disabled child. The problem with a gift is the impact it may have on eligibility for public assistance benefits. It may even disqualify the child from getting those benefits until the funds from the gift are completely exhausted, at which time the child will need to reapply for benefits.
  2. Disinherit the disabled child. To avoid the issue of disqualification from public assistance, a simple route is to disinherit the special needs child altogether. There is no legal requirement that one must provide for a child under their estate plan.
  3. Distribute to a Another Person for Disabled Child's Benefit. Another option is to distribute the funds to someone (a sibling for example) for that person to manage and distribute the funds for the benefit of the special needs child. However, this can be risky as it the assets are exposed to the creditors of that person, ex-spouses, bankruptcy, and possibly gift taxes.
  4. Special Needs Trust. Distribution of the funds to a properly drafted supplemental needs trust can avoid all of issues addressed while providing for a little extra benefit and resources for the special needs child. Extreme care is necessary in preparing such a trust.

No matter the plan, you should seek the advice of experienced counsel in making the arrangements for a special needs child.

Wednesday, July 14, 2010

Iowa Estate Plan Blog is Still Alive!

Despite a noticeable absence from this blog, Mr. "Life and Death Lawyer" is back at it. I have a posting on the Iowa Law Blog about a recent Iowa Court of Appeals case dealing with trustee removal and trustee fees.

Friday, April 16, 2010

5kfor5charities

Looking forward to beautiful weather tomorrow for a 5k run. A local 501(c)(3) charitable organization 5kfor5charities that I have had the pleasure of working with is sponsoring their inaugural 5k charity run at the Blank Park Zoo tomorrow, April 17th.

Thursday, April 15, 2010

Another Reminder on Updating Your Estate Plan in 2010 (and not on your own)

The North Carolina Estate Planning Blog has a good reminder post that summarizes the state of current affairs about (1) the importance of updating your estate plan, (2) the coming estate tax changes, and (3) the limitations of D-I-Y wills/trusts, as I have previously commented on.

Tuesday, March 02, 2010

Economy Affecting Estate Planning - Only 35% of Americans Have a Will

A new survey by the Harris Poll for Lawyers.com recently reported that even fewer Americans have estate plans in place. According to the poll, only 35% of Americans have a will in place. This is down from 45% only 2 years earlier.

Apparently, individuals are focusing on their short-term needs as the economy continues to lag and job security continues to be an issue. While keeping food on the table is critical, putting your estate plan matters in place is also important. With young children, second marriages, children from prior marriages and beneficiaries with creditor problems, the lack of an estate plan can create significant emotional and financial hardship on a family.

When looking for an attorney to handle your estate planning when cost is an issue, look at attorneys that offer flexible payments or those that allow you to pay by credit card (not that increasing your credit card balance is good, but it does offer some ability to pay over time.) Hint: contact me.

Tuesday, February 09, 2010

Looking to Disinherit Your Spouse? Now an Iowa Court Tells You How

I have a post about an interesting ruling by an Iowa district court on disinheriting your spouse on the Iowa Law Blog.

Iowa Legislature Working on Posthumously Conceived Children

As a result of the struggle a family endured in seeking Social Security benefits for a child conceived through in vitro fertilization two years after her biological father died of leukemia, the current Iowa legislature is looking at a bill to provide some legal rights for children conceived after a parent dies. The current bill is taking into consideration some of the issues raised by the Iowa State Bar Association, such as obtaining necessary consent from the contributing parent as well as a limited time period. Jason Clayworth of the Des Moines Register had a recent article as he continues to follow the story.

Tuesday, January 12, 2010

"Trust Mill" Fines of $6.4 million in Ohio

The Ohio Supreme Court fined two California-based companies multi-million dollar fines for the unauthorized practice of law. The operation apparently involved telemarketers and salespeople persuading elderly residents of purchasing a living trust in order to avoid exaggerated fees and costs at their death. Apparently, over 3,000 Ohio residents were convinced to purchase the products, which were from non-attorneys, although "approved" by an Ohio attorney, despite not speaking with the client. The Ohio Supreme Court was not thrilled with the performance of legal services by non-attorneys and handed down the hefty fines.

Living Trusts (or revocable trusts or inter vivos trusts - all the same) can be an effective estate planning tool. The determination of whether it is an appropriate plan for you should be carefully considered after consultation with an attorney (not a salesman or telemarketer) who is familiar with estate planning. After the trust is established, it is also important that it be funded, otherwise many of the key benefits are lost.

Sunday, December 27, 2009

Gift Tax Exemption Amount for 2010

As David Goldman of the Florida Estate Planning Lawyer Blog recently noted, the IRS has announced that the annual gift tax exemption amount for 2010 will stay at $13,000.00. This represents the amount that each individual can give to another person without having to either pay any gift tax or file a gift tax return. If you decide to make a gift in excess of the exemption amount, then it is necessary to prepare and file a gift tax return with the IRS. Whether you will have to pay any gift tax on a gift depends on how much you gifted already during your life.

For more information on using the valuable estate planning tool of gifts, contact an estate planning attorney.

Thursday, December 03, 2009

Social Security Benefits for Posthumously Conceived Child Upheld

In a follow-up to a recent post I had on the Iowa Law Blog, Jason Clayworth of the Des Moines Register recently updated the situation concerning a young girl's application for social security benefits as a result of her father's death. A federal judge has overturned the rejection of benefits and thus permits her to receive benefits. The article continues to point out that legislators are examining long overdue updates to the Iowa statute to address these types of situations. The Social Security Administration has until January 11, 2010 to appeal.

The complexities that are involved in cases like this are challenging. A recent Probate Section meeting of the Iowa State Bar began to examine some of the issues and an approach to take with this issue. The discussion revealed that there is a split in the probate section as a result of numerous questions and possible approaches. Beyond the basic philosophical question of is this "right", there other other related matters beyond social security benefits. Can the father's wishes restrict future usage of his genetic material? Does he need to sign a written consent to authorize the use after his death? Should that consent be notarized? How far in the future will this material be permitted to be utilized? How will this impact settlement of estates and determination of heirs? How does this issue impact review of real property titles in abstract examinations?

I look forward to how the Iowa legislature approaches this issue in the spring and hopefully they consider all of the interrelated issues.

Monday, October 19, 2009

Heemstra Trial Update - No Asset Protection Here

A little bit slow on my part in updating my prior post on the Heemstra case, but the Judge in a harshly worded ruling of September 18, 2009 ordered Heemstra to pay $750,000 in punitive damages, another $204,000 in other damages and ordered the sale of land owned by Heemstra and his wife. The judge found that the Heemstras engaged in a "complex shell game" to try and hide and move their assets to prevent Lyon's widow from recovering on her $5.68 million judgment. William Petroski of the Des Moines Register also covered the ruling in an article on the Des Moines Register.

The judge found that the family fraudulently transferred their assets (even I called this one) to various family members and entities to produce the perception of a "penniless" defendant in order to avoid payment of the wrongful death judgment. The judgment goes beyond just Rodney Heemstra, and also included certain damages against Heemstra's son, an irrevocable trust, his sister, a limited liability partnership and his mother.

Fraudulent transfer statutes can, obviously, produce some harsh sanctions and may even include those involved in the transaction, even if they don't personally benefit. Asset protection is not the same thing as fraudulent transfer. Properly completed, asset protection may protect one's assets from judgment.

Friday, October 09, 2009

Disposition of Partnership Property that Isn't in the Name of the Partnership

A recent case from the Iowa Court of Appeals helps illustrate the importance of putting business matters in writing. In the Matter of the Estate of John Liike, John and his brother had inherited some land from their parent and had operated the land as part of a partnership for several years. The land was never actually placed in the name of the partnership, but kept in their individual names as tenants-in-common. Eventually, they entered into a written partnership agreement which provided that when one of them died, the other partner would have the option of purchasing the partnership property. No changes were made to the title of the land.

After John died, John's widow and John's brother did not see eye-to-eye, with each wanting John's one-half interest in the farmland. The trial court found, and the Iowa Court of Appeals affirmed, that even though the land was not titled in the name of the partnership, the facts and circumstances clearly found that the land was meant to be partnership property and permitted John to purchase the land from the estate.

What does this mean? As a result, John's brother will be able to keep the farm that he inherited and he is not forced to split the farm with his sister-in-law or forced into some business relationship with her. Message to others? Formalize your business arrangements by putting your affairs in writing and establishing what happens in the event of your death. The Liike brothers did some written planning, but a little more thorough planning may have avoided this costly lawsuit.

Aren't families grand?

Monday, July 13, 2009

Heemstra Trial and Asset Protection In Iowa

The local Rodney Heemstra trial has brought asset protection into the local news lately. Mr. Heemstra shot and killed his neighbor during a dispute. After the incident, Mr. Heemstra made several restructuring changes to his finances and assets which involved the use of irrevocable trusts and other entities.

Revocable trusts are a common estate planning tool, but they do not provide any asset protection for the person who creates the trust. With revocable trusts, the person has the power to revoke, or cancel the trust. That power to yank the assets back removes the option to protect those assets from your creditors as your creditors can access them as well.

The question of when is it "too late" is a key issue in the asset protection plan is important. If transfers are made after an event that gives a basis for someone to bring a claim to collect, the state's fraudulent transfer statute under Iowa Code chapter 684 can apply to revoke those transfers as if they didn't happen. In the Heemstra trial, I would think that Iowa's fraudulent transfer would be applicable.

Proper asset protection planning takes place prior to any potential threat of a lawsuit or a claim. Once there is a basis for a claim, it is usually too late.

Monday, June 22, 2009

When is an Heir an Heir?

An Iowan is struggling with the definition of heir under the Iowa Probate Code. In order to qualify as an "heir" under Iowa law, you must have been conceived prior to the death of the biological parent. This has been the definition of an "heir" for 150 years. However, with advances in medical science, it is now possible that a child can be conceived after death through fertilization from frozen sperm. Still a child right? Wrong, under Iowa intestate law and for social security benefits.

Despite the same result, social security administration has ruled that being conceived after death is not the same as being conceived before death of the biological parent. As a result, the child, who has her father's DNA and is in fact the biological daughter of her father, will not be able to reap the benefits of her father's social security benefits, as other children would, that he contributed to during his life.

Due to a split in the circuit courts, expect to see either this case or a similar case before the US Supreme Court in the future. Until then, the legislature should examine the definitions in light of changes in medical science.

Friday, June 19, 2009

Planning Your Estate in Iowa for Future Changes

A power of appointment is special planning tool that not many people are aware of. What if you didn't know exactly how you wanted your assets distributed in the future at your death, but you did trust someone else, such as your spouse or child, to make those decisions for you? A power of appointment is a special authority that you can pass to someone to make distribution decisions for your assets in the future. For example, Husband's Will keeps his assets in trust for the life of Wife, and then it gives Wife the authority, at her death, to distribute the assets out as she chooses. Thus, if Son is in a bad financial situation or marital situation and it is not wise to give the money to Son now, the surviving spouse (Wife) could say that Son's share will stay in trust and not be given out to him. Or conversely, rather than keeping it in trust, it could be paid immediately to Son if his affairs are in order. If flexibility for future decisions is sought, this can be an answer.

This decision deferral, called a "Power of Appointment", is an effective estate planning tool. You can also limit how much discretion the appointee (person with the power) has so that they can't distribute it to someone that you have no intention of providing funds.

Matt Gardner - Published Author

I've always wanted to say that. Now I can. I recently had a chapter published by Aspatore Books in the book titled "Estate Planning Client Strategies: Leading Lawyers on Understanding the Client's Goals Using Trusts Effectively, and Planning in a Changing Economic Climate (Inside the Minds)." (Say that in one breath.) If you are interested in purchasing, go here (none of the proceeds go to me).

Thursday, May 07, 2009

Death of a Beneficiary - Iowa's Antilapse Statute

Quiz time - You leave a bequest in your will for a gift to an individual, but that individual dies before you do, leaving their own children.  Do those kids inherit their parent's share or do the other beneficiaries named in your will receive an increased amount?  If you guessed that the children of the beneficiary inherit, you are correct (but with an asterisk).

Iowa's antilapse statute (Iowa Code sec. 633.273) provides that if a devisee dies before the testator, leaving issue who survive the testator, the devisee's issue inherit the property devised unless the terms of the will indicate to the contrary.  Huh?

What this means, if you want person A to receive property, but only if they survive you, then you need to specifically require that they must survive you in order to receive their inheritance.  Otherwise, if you don't, their children will inherit what you intended to go to their parent.

A recent case of In re: Delmege Estate, the Iowa Court of Appeals addressed the application of the Iowa antilapse statute.  In that case, five siblings were named as devisees under a will, but one of the siblings predeceased the testator leaving two daughters.  The Court found that if the decedent didn't want his nieces to inherit, he could have easily crafted his will for that purpose by including a survivorship clause.  There is a presumption that the testator knew about the antilapse statute.  (I wonder if the DIY wills fully address this issue.)

Sunday, April 05, 2009

Power of Attorney Dangers - License to Steal

A local couple (a pastor and his wife nonetheless) were recently charged with theft and dependent adult abuse.  There were charged with taking money from both of their elderly parents, under authority of a power of attorney to pay for vacations, airfare, motels and eating out frequently.  

Local authorities and national organizations are reporting an increase in elder abuse in the past year, likely attributable to challenging economic times.  The typical power of attorney grants the attorney-in-fact broad power to act in their stead.  This power is typically granted without any oversight, which can be too tempting for some people.

If you suspect that someone is misusing the power granted to them, report the information immediately to the local police who will be able to properly investigate the case.

 

Monday, March 23, 2009

Iowa Courts Fail to Honor Postnuptial Agreement Terms

A recent ruling from the Iowa Court of Appeals continued to reinforce the surviving spouse's right in the case of In the Matter of the Estate of Herbert C. Shaffer, issued March 11, 2009.  Husband and wife had executed a postnuptial agreement (presumably in another state as postnuptial agreements - agreements entered into after a marriage - are not recognized in Iowa but are recognized in other states).  The postnuptial agreement basically provided that each would be responsible for their own expenses and would not look to the other party for reimbursement.  Subsequently, husband executed a will in which he left all of his property to his children from his earlier marriage.

After husband died, wife had a change of heart and decided to exercise certain rights of a surviving spouse.  Specifically, she sought to elect to (1) take against the will and (2) request spousal support.  

First, a little background on these rights.  Basically, you can't disinherit your spouse unless he or she agrees to it.  If a spouse is excluded, they have the right to declare the disinheriting provision of the will as invalid and receive a share of the estate, despite the will.  This is the right to elect against the will.  A second right of a surviving spouse is the right to request a spousal allowance.  After taking into consideration certain factors, a court can award an allowance from an estate for twelve months of support to a surviving spouse, whether they need an allowance or not.

Despite the provisions of the postnuptial agreement, the Iowa Court of Appeals determined that a postnuptial agreement could NOT waive the right to elect against the will.  Thus, while while a premarital agreement could permit a spouse to waive the right to elect against the will, a postnuptial agreement, even though presumably valid where executed, will not be enforced in Iowa to force a waiver of that right.  Interesting result leads to some interest scenarios.  

Additionally, the Court of Appeals further authorized the spousal allowance the surviving spouse sought.  Under Iowa Code 633.374 and prior cases, the spousal allowance provisions cannot be waived by agreement.  

The Court of Appeals has basically called out the Iowa legislature to amend the Iowa Code to approve postnuptial agreements by statute, as the court will not accept the limiting provisions otherwise.  Thus, if you have a postnuptial agreement, be wary of moving to Iowa or other states that have not adopted postnuptial agreements.

Sunday, March 01, 2009

Will Contests in Iowa

Not happy with the distribution provisions of a will?  Like any good American you have the right to go to court.  On the Iowa Law Blog I have a post about what is required to be shown in a will contest.

Example #517 of Poor Estate Planning

At the Ohio Estate Planning, Trust & Probate Law blog, there is another great example of why will preparation should not be handled by yourself, especially if you have any unique situations in your family.  Imagine after trying to kill your parents, you inherit $500,000 from them after they, understandably, attempted to disinherit you.  Just another example of seemingly easy estate planning gone wrong.

Monday, February 02, 2009

Preserving Your Assets and Possessions

I recently had the opportunity to sit down and visit with Gabriel Glynn of Iowa's Asset Protection Specialists, LLC (APS) about his business.  After learning about the services they offer, I believe that his company offers an excellent supplement and expansion to the "standard" estate planning.  Basically, APS will come to your house and inventory all of your belongings by video and photographic means.  They will also scan any important receipts, which can document prices paid for certain items and they will also scan other important documents.  After their inventorying job is complete, APS will provide you with a complete copy of the inventory as well as maintain two separate back-ups.

Imagine trying to replace all of the items in your house following a flood, fire or burglary.  Not easy, eh?  With the APS system, imagine how much easier it would be to complete an insurance claim when you have a verifiable record of those assets lost.  Or, what about trying to determine the assets that your parents have and how they should be divided? There are multiple uses for the asset inventory.

Most people will continue to accumulate assets over their life - some of which may be valuable.  Even for those non-valuable assets, they are not easily replaced.  Family heirlooms, antiques and collectibles can hold special value and history that could be lost if not preserved properly.

I would encourage you to contact Gabriel Glynn at APS and learn more about what they can do for you.

Wednesday, January 28, 2009

Estate Planning Basics Course for Urbandale

For anyone interested in attending a no-pressure-educational class on estate planning basics for Iowa residents, feel free to check and sign up for the Estate Planning Basics class I'll be teaching through the Urbandale Parks and Recreation Community Education Program.

Sunday, December 28, 2008

Legal Issues for Family Members with Alzheimer's

Alzheimer's is a horrendous disease with someone developing Alzheimer's every 71 seconds. Watching a loved one's condition continue to deteriorate to the point of not recognizing family members or their life is truly depressing. However, there are certain legal steps to consider when a family member is involved.
  • Guardianship and conservatorship If decisions need to be made for an incapacitated individual, whether medical care or financial matters, it may be necessary to have a guardian/conservator appointed by a court.
  • Trust - If a self-settled trust has already been established by the incapacitated individual, it may be necessary to examine having the successor trustee step in to handle trust management matters.
  • Power of Attorney - If the individual has already signed a power of attorney (health and financial), steps should be taken to determine whether the disability provisions are applicable and granting authority.
  • Beneficiary Designation review - Information should be reviewed to determine if the proper beneficiaries are named on applicable accounts and whether any changes need to be made.
Working with an elder law attorney or an experienced estate planning attorney will help guide a family through a difficult time.

Monday, December 08, 2008

Iowa Inheritance Taxes

The "Death tax" is alive and well in Iowa. Iowa currently has an inheritance tax system in place. What this means is that the person who inherits the property will determine if tax is owed or not. Compared to an estate tax system, where the size of the estate determines where tax is owed or not. (Although if the total estate is less than $25,000, there is no Iowa Inheritance tax imposed.)

Iowa has an unlimited exemption from inheritance taxes for surviving spouses, charities and lineal descendants/ascendants. If the recipient fits into any of those categories, there is no Iowa inheritance tax.

If the recipient is outside those categories, the tax will vary based upon the amount of the inheritance and the relationship to the decedent. The Iowa Department of Revenue's table illustrates how the tax is computed and the different tax rates applicable.

If any tax is owed, it is due on the 30th day of the ninth month following the date of decedent's death.

Sunday, November 23, 2008

Medicare and Medicaid in Iowa. What's the difference?

It is not unusual to hear people use the wrong term when referring to obtaining government assistance for health care expenses. Medicare and Medicaid are two separate and distinct programs administered and financed by the government for covering health care expenses. Eligibility for "Medicare" is based simply on age or disability. "Medicaid", on the other hand, has eligibility based upon financial requirements. In other words, a millionaire could qualify for a Medicare, but not Medicaid. Hyman Darling has another good post explaining the difference between the programs.