- 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.
Sunday, August 25, 2013
Tuesday, July 09, 2013
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.
Wednesday, May 22, 2013
- 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.)
- 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.
- 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.
- 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.)
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
Tuesday, March 12, 2013
The probate process in Iowa can be broken down into essentially 5 general steps:
- 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.
- Notification period - legal publication in the newspaper is arranged, heirs/beneficiaries are given notice, and creditors are given notice of probate.
- 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.
- 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)
- 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.
Thursday, February 28, 2013
Monday, February 25, 2013
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
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
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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
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, 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
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
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
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
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
|My daughter Maggie|
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.
Monday, February 13, 2012
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
Tuesday, December 20, 2011
So, some options and things to think about for storing a will:
- 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.)
- 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.
- 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.
- 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.
Saturday, July 16, 2011
Wednesday, May 25, 2011
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
Monday, January 10, 2011
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.
Monday, December 13, 2010
Sunday, September 19, 2010
Monday, September 06, 2010
Monday, July 26, 2010
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:
- 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.
- 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.
- 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.
- 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
Friday, April 16, 2010
Thursday, April 15, 2010
Tuesday, March 02, 2010
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
Tuesday, January 12, 2010
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
For more information on using the valuable estate planning tool of gifts, contact an estate planning attorney.
Thursday, December 03, 2009
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
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
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
Monday, June 22, 2009
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
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.
Thursday, May 07, 2009
Sunday, April 05, 2009
Monday, March 23, 2009
Sunday, March 01, 2009
Monday, February 02, 2009
Wednesday, January 28, 2009
Sunday, December 28, 2008
- 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.
Monday, December 08, 2008
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
Wednesday, October 15, 2008
For example, assume this scenario: H & W have a child together, C. Shortly thereafter, W dies and H remarries W2 while C is still a young child. Together, H & W2 raise C and treat C as their own child, even though W2 never formally adopts C as her own child. Later in life, H dies and all of his assets pass to W2 as joint assets. C continues to care for and treat W2 as their mother. W2 then passes away without having executed a will. Who inherits W2's estate? Or, more importantly, who should inherit?
Under the intestacy laws, C would not inherit from W2 as there is no legal status of a parent-child relationship as required to inherit under the intestacy laws. However, over the past 80-some years, the Iowa courts, as well as 26 other states, have considered and adopted a theory called "equitable adoption", sometimes called "adoption by estoppel" or "virtual adoption" or "constructive adoption". Basically, a good summary of the theory stated by the Missouri Court of Appeals in Gardner v. Hancock:
An adoption by estoppel is an equitable remedy to protect the interests of a person who was supposed to have been adopted as a child but whose adoptive parents failed to undertake the legal steps necessary to formally accomplish the adoption; the doctrine is applied in an intestate estate to give effect to the intent of the decedent to adopt and provide for the child.In other words, the law won't punish a child for the mistake of the "parent" in failing to formally adopt the child through the legal system.
As the number of second marriages increase, in addition to "informal adoptions" and extended families as a result of cultural differences, as noted by Professor Higdon, and economic limitations, the argument of equitable adoption can be expected to increase in the court system.
Sunday, October 05, 2008
Any compensation received by a personal representative is taxable income to that individual. Thus, if a personal representative is a beneficiary, they may want to consider whether to waive their fee and thus increase their inheritance, which may be free of tax, or to take their compensation and pay income tax on that amount.
Thursday, September 11, 2008
Monday, September 01, 2008
A common question that I get asked is about "breaking a trust". By breaking a trust, someone typically means doing away with a trust for some reason or changing its terms. Is it hard to do? Can it be done? Yes, it certainly can be done. The difficulty of doing so depends on the circumstances.
Terminating or Modifying a Trust in Iowa
The general background is that a trust will run its course until its objectives are reached. However, there are situations which may be applicable that affect the trust. Under the Iowa Trust Code, which is still relatively new and untested in Iowa, there are several statutory options that are available for consideration.
Terminating a Small Trust in Iowa
If the amount of the trust is relatively low and incurring costs in its administration, it is possible to terminate the trust and distribute the assets to the beneficiaries, even if the trust terms provide for the trust to continue into the future. A court would need to approve such a termination after either the trustee or a beneficiary request the court to terminate the trust. Iowa Code sec. 633A.2205 (2007). Whatever "low" value means depends on the costs involved, the argument presented to the court and the court's opinion as to what is "low enough".
Modifying a Trust in Iowa
it is possible to change an irrevocable trust. If the settlor (the person who created the trust) is still alive, so long as they consent and all the beneficiaries consent, a trust could be modified or even terminated. Court involvement is not necessary. Iowa Code 633A.2202. If the settlor is dead, there is a different procedure involved. If ALL the beneficiaries are in agreement and it isn't necessary for the trust to carry on with the same terms, a court can permit the trust to be modified or even terminated. The difficult component is getting the consent of each beneficiary. The Iowa Trust Code does provide some relief when dealing with minor beneficiaries. Iowa Code 633A.2203.
Replacing the Trustee of an Iowa Trust
This provision has some unresolved questions that may need to be clarified in the future through some legislative changes. Historically, it was difficult to remove a trustee from a trust. However, the relatively new (& untested) Iowa Trust code does provide some "gray area" that may be used to change the trustee. There is also the possibility that a trust could be amended by insertion of a provision in a trust permitting a procedure to remove a trustee. At least one court in Iowa has permitted this change.
Thursday, July 31, 2008
While it is not necessary to have an attorney, a qualified attorney can be helpful in providing direction and necessary forms for the administration.
Thursday, June 05, 2008
A guardian is appointed by the court, after someone requests to be appointed, to oversee the health and well-being of an individual. On an annual basis, they will report to the court as to the status of the ward. Before a guardian can take certain steps, it is necessary for certain decisions to be approved by the court. The guardian does not handle any finances or assets for the ward.
A conservator is also appointed by the court upon request. A conservator is responsible for managing the finances of the ward, paying bills, investing and paying taxes. The conservator also has to provide on an annual basis an accounting of all income, expenses and changes in the investments of the ward.
The conservator and guardian may, but need not be, the same person. In some situations, more than one person may seek to be appointed, which may create tension and conflict in a family situation.
Establishing a conservatorship or guardianship can be time-consuming and expensive. To avoid these procedures, it is ideal to execute a power-of-attorney prior to losing your competency, which in most situations negates the need to have a guardian or conservator appointed.
Tuesday, May 13, 2008
Now, what is "reasonable under the circumstances"? Under the definitions section, consideration should be given to the deceased's financial situation, religious beliefs and cutural or family customs.
Also, if the designee doesn't promptly step forward and assume their responsibility, they forfeit their rights. In fact, the designee has either 24 hours after notification or 40 hours after death to exercise their authority. Iowa Code section 144C.8 After, that, the power is gone and moves to the next person on the priority list.
This new law also covers situations beyond immediate funeral arrangements. For example, disinterment or decisions about an autopsy.
I imagine most attorneys will begin placing appropriate designations on their medical power of attorney forms. Here is the suggested language to use for the declaration:
I hereby designate ................ as my designee. My designee shall have the soleThis new chapter is a needed step by the Iowa legislature. Unfortunately, for the Stark family, it is too late. However, like many aspects of an estate plan, the usefulness of this chapter is only beneficial if the plans are communicated to those key individuals. Knowing where the document is, who the designee is and what one's wishes are can be critical to putting your final affairs in order.
responsibility for making decisions concerning the final disposition of my remains
and the ceremonies to be performed after my death.
This declaration hereby revokes all prior declarations. This designation becomes
effective upon my death. My designee shall act in a manner that is reasonable under
I may revoke or amend this declaration at any time. I agree that a third party
(such as a funeral or cremation establishment, funeral director, or cemetery) who
receives a copy of this declaration may act in reliance on it. Revocation of this
declaration is not effective as to a third party until the third party receives
notice of the revocation. My estate shall indemnify my designee and any third party
for costs incurred by them or claims arising against them as a result of their good
faith reliance on this declaration.
I execute this declaration as my free and voluntary act.