Sunday, March 22, 2020

COVID-19 and Suspension of Physical Presence for the Execution of Legal Documents

Each day gets crazier and crazier on COVID-19's impact on our society, including in the estate planning world.  Under Iowa long-standing law (Iowa Code sec. 633.279), when an individual signs their will, it is required that they sign in the presence of two individuals.  This has been pretty strictly adhered to by Iowa courts in requiring the physical presence of the witnesses.

Today, Iowa Governor Kim Reynolds issued a proclamation suspending the requirement of physical presence of individuals witnessing the signing of wills and medical power of attorney documents provided that the signing takes place where the witnesses and individual can see and hear one another through electronic means, such as video conferencing.

The other portion of the proclamation deals with the remote notarization of documents.   Technically, Iowa's remote notary law wasn't scheduled to take effect until July 1, 2020 so the Governor's proclamation essentially "fast tracked" the implementation date.  This one is a little trickier as we don't have rules from the Iowa Secretary of State's office yet.  However, we are looking to get some additional guidance this week from their office.

Special thanks to Governor Reynolds and the Iowa Academy of Trust and Estate Counsel in getting this done expeditiously.

For all of those individuals that were "dying" to sign their Last Will and Testament, but didn't want to be in my physical presence, act now.  We can "Zoom" to you and get those signed.

Sunday, February 09, 2020

Retirement Accounts and Conduit Trusts and SECURE Act. What Do I Need to Do???

The recent passage of the “Setting Every Community Up for Retirement Enhancement” Act (SECURE Act) in December 2019 created some significant changes to retirement accounts.  One big change of SECURE resulted in changes to allowing what is commonly referred to as “stretch” IRA’s. Previously, beneficiaries such as children and grandchildren, were able to have funds withdrawn from an inherited retirement account over the rest of their expected life. That allowed younger beneficiaries to extend (or stretch) the IRA distributions over several years, or potentially decades for very young beneficiaries. The result was that the taxable income was spread over a long period of time that allowed the account to continue to grow (hopefully). With a few exceptions, the stretch IRA is no longer an option and funds from a traditional IRA/401k must be withdrawn within ten (10) years of your passing.

Many clients incorporated provisions in your estate plan that used the “conduit” trust as a way for your trustee to control those IRA/401k distributions for certain beneficiaries.  For example, if you had a young beneficiary or a beneficiary that had some concerns over financial management or financial maturity, you may have listed your trust (whether a revocable living trust or trust established under your Will) as the beneficiary of your IRA/401k with the intention of stretching those distributions out over many years.  To accomplish that goal, trust provisions provided the required “conduit trust” language.

Now, with the SECURE Act provisions (starting January 1, 2020), those same conduit trust provisions may result in some undesired results where instead of stretching distributions out, the most we can do is a ten year window.  

So what does this mean for you? My favorite answer: “it depends”. More specifically, it depends on your beneficiary designation on that retirement account and it depends on the personal situation with your beneficiaries.

If you have a trust named as a beneficiary of your IRA/401k, you should review your trust to determine if the “conduit trust” language is present in your trust and whether that is appropriate.  If you would like to set up a meeting to review your situation and your trust language, please feel free to contact our office to arrange a meeting.

Conversely, if your IRA/401k does NOT list a trust as a beneficiary, then it is not necessary to modify your trust. (Although it might be a good idea to review your estate plan regardless.) 

If you have minor beneficiaries, the conduit trust provisions can remain and we can still stretch those distributions out until they reach age eighteen, and then the new ten year withdrawal period starts once they reach age 18.

The first step is to check your beneficiary designation. You should have that information with your files, otherwise your financial planner or HR representative should be able to help you out. Then, if a trust is the beneficiary, the second step is to examine your estate plan documents (will or trust) to confirm the conduit trust language is present. If it is, the next step is to examine your beneficiary’s situation to determine if you are comfortable with that beneficiary getting access to all of those funds in that ten year window after your death.  

If you want to limit your beneficiary’s access for a longer period of time (e.g., beneficiary with creditor problems, marital concerns, addiction issues, etc.) we can still utilize a different structure to control those funds beyond a ten year window. However, changes to your plan will be necessary.

If you aren’t sure what if anything you need to do, or just want an excuse to come see me, we would be glad to visit with you about your current estate plan and any necessary changes for this issue or any other changes.

Sunday, December 15, 2019

Iowa Guardians and Conservators: Substantial Changes in Store for 2020

If you are (a) currently acting as the guardian and/or conservator for an Iowa resident or (b) plan to be appointed as guardian and/or conservator for an Iowa resident, bigly changes are in place for 2020 for annual reports or initial reports starting January 1, 2020.

I'll leave the procedural details out for now.  (Nobody except for attorneys really read those anyway). Maybe another post for another day.  But for the annual reports for guardians and/or conservators, the forms are going from the very basic two pages (or so), to 16 and 19 pages long, respectively.  Granted, some of the information that goes on the forms is fairly simple to fill out, but it is a substantial change to what was previously required under the old statute and rules and will take more time and effort.  But hey, all of the guardians and conservators that I work with have plenty of time to learn the new forms, fill them out and either file or have an attorney file them, right?

Another question is "why"?  Well, we've known for some time that the system needed to be improved.  However, you have to be careful when you start tinkering and before long you end up with a full blown change, much like we have here.    (Kind of like when I start with the intent of just trimming one little branch off a tree, and before long 3/4 of the tree has been "trimmed" and is laying on the ground all around me and there is just one straight stick standing out of the ground.)  I won't get into the back story and other issues that came about, but I will say that a substantial majority of the Iowa probate attorneys (and judges) are not pleased with the end result.

Unfortunately, the first set of forms that the Iowa Judicial branch has prepared were not approved by the legislative committee, but a new set of forms were recently proposed, so we are awaiting those to be approved.  If you want to get a taste of the new guardianship annual report form, here is a link to the new proposed form.  Some legislators think that these forms will only take 30 minutes or so to fill out.  Ha.  Remember, these are the same legislators that . . . never mind, I better not go down that road.

Sunday, May 12, 2019

Some Gifts Are Not Forever: Iowa's Rule on Confidential Relationship and Refunding of Lifetime Gifts

A recent ruling from the Iowa Court of Appeals addressed gifts from a parent (now deceased) to a trusted child.  Applying the standard involving "confidential relationships" and gifts during life, the Iowa Court of Appeals affirmed that the recipient of the gifts was required to return the gifts received during mom's life back to her estate.
Photo by Rene B√∂hmer on Unsplash

Quick facts:  Mom and dad had four kids.  Dad passed away a few years ago and one of the sons started assisting mom with her financial affairs.  This son was also a Florida-licensed attorney (cue the evil character background music).  Unfortunately, sibling love was not bountiful even when mom was alive, which continued after mom passed away.  Following mom's death, it was eventually revealed that numerous accounts and funds had been transferred ("gifted") to the son that was helping mom out, but that the gifts were "at his mother's direction" and his siblings were just jealous that he received more than they did.  ("Mom loved me the most" defense)  Following a trial, the court ruled that the son was helping out a little too much and determined that he had a "confidential relationship" with his mother during her life and he was unable to show the gifts to him were done with mom's free, intelligent and voluntary assent but instead were the result of the undue influence from the son.

The key lesson today, kids, deals with the term "confidential relationship".  Essentially, a relationship that a person by kind and considerate treatment establishes a dominant influence over the other.  Or, put another way, where one has gained the confidence of another and that person comes to rely on and trust them in their important affairs.  A confidential relationship can exist regardless of a person's mental capacity.  But when a person places their trust and ability in someone to act on their behalf, a confidential relationship can be established.  Here, mom trusted her son, who was an attorney, to assist her in financial matters and relied upon his advice.

Once that confidential relationship is established, then the issue of the gifts to the son take on a new meaning.  At that time, son (as the recipient of the gifts) has to show that he was acting in mom's best interest and her knowing assent when the gifts were made out to him.  His testimony alone was not sufficient and a refund of the gifts was required as a result of his undue influence arising from his confidential relationship.

Moral of the story: if you are going to help someone out with handling their financial affairs, that is great.  The world needs more selfless people with good intentions.  However, if there are some gifts back to you from the person you are helping out, you need to be careful about how those are handled to make sure those are handled properly.

Sunday, November 25, 2018

Effect of Divorce in Iowa Estate Planning: Do I Need to Change My Will to Keep My Ex Away?

First and foremost, I don't handle divorces and won't go further with any divorce questions because my knowledge ends with that.  In 20+ years of practice, handling a divorce 20 years ago was good enough to put away those materials.

But for those that have gone through a divorce, there is typically the question about how a divorce impacts your estate plan documents.  The Iowa legislators realize that many people don't go through the process to update their estate plans after a divorce, so they have implemented a series of code sections throughout the Iowa Code that essentially provide that if you get a divorce, any provisions that provide for your beloved "ex" are ignored.  Those various code sections are consolidated here to help you sleep a little easier at night:

  • Iowa Code section 598.20A provides that if you list your ex-spouse (or relatives of your ex-spouse) as your beneficiary of life insurance, that designation is ignored.
  • Iowa Code section 598.20B provides that if you list any of the same individuals as beneficiaries of your IRA, annuity, stock option plan, POD (Payable on Death) account, or TOD (Transfer on Death) registration, your beneficiary will be ignored.  
  • Iowa Code section 633.271 provides that any provisions in your will, whether as a beneficiary or appointment to a fiduciary position (executor or trustee for example) are negated.  
  • Iowa Code section 633B.10 provides that if you name your spouse as your agent under your financial power of attorney, their power terminates when the petition for dissolution is filed.  
  • Iowa Code section 144B.12 provides that after a divorce, if your medical power of attorney lists your spouse, that authority is revoked.  (No mention of relatives of ex-spouse).
"SO...with all of these helpful statutes, that means that I don't have to visit my friendly estate planning attorney, right?"  Not so fast my friend.  Updating your plan is still important for several reasons.  

(1) There may be a series of steps and documentation to prove that those provisions shouldn't apply and it may cause some delays in handling those matters.  (e.g., What if your family members have trouble tracking down the divorce decree?) 
(2) Just because your ex and family is out, you should re-examine who you want to handle your affairs or receive assets.  I've seen numerous documents that did not list an alternate/contingent individual.  That leaves all plans up to the court's determination which may not be the result you would like and can cause some legal fees to get that determination.
(3) You may want your ex-spouse to be involved.  **GASP**  Sometimes former spouses maintain a good relationship and still trust them to handle certain aspects.  Maybe not the norm, but it happens.
(4) Your federal laws are not so friendly for those procrastinating individuals.  Your 401k-type plan funds, which are not subject to the Iowa laws, do not have your ex-spouse revoked as a beneficiary.   I suspect that will be enough of a reason to start the process to update your beneficiary ASAP.

Sunday, April 08, 2018

Avoiding Probate Just Got a Little Easier...For Certain Estates

Currently in Iowa, if a decedent owns personal property that totals $25,000 or less, and that property would normally pass under a Will or the intestate statute, you can skip probate with just an affidavit.  The governor recently signed a bill that increased that figure up to $50,000 (for deaths after July 1, 2018), along with a few extra new additions to the affidavit.

So...what does that mean lawyer boy?  This:

  • If the dead person owned real estate, the affidavit doesn't work.
  • If the dead person owned other types of property that all together total more than $50,000, the affidavit doesn't work.
  • You still have to pay inheritance taxes, if any are due.
  • You still have to pay the creditors, if any.
  • You still have to pay the state back for any Medicaid debts due.
  • Otherwise, you use the affidavit to transfer those small estates.

Here's a common scenario where the affidavit could be used:
John Smith passes away.  When he died, he owned his truck, lived in an apartment, had a checking account with $5,000 in it, a savings account balance of $32,670, and the complete collection of all the Journey albums and CD's issued.  As his 3 children are carefully dividing dad's Journey album collection, the question comes around to who is going to handle the job of getting the bank account money and the truck.  Contrary to the belief of some, the bank won't just hand over money to the family "just because they are family".  However, if dad had a will that left his assets to his kids -or- dad did not have a will, but he did not have a spouse and his kids are all surviving, one of the kids could provide the affidavit with the super-secret language to the bank and the bank will issue a check for the bank account balances.  That child can then pay any bills dad left behind (rent, utilities, etc.) and then divide the rest out to their siblings.  No probate.  No public notice.  Lower attorney fees.

There are different examples where this affidavit could be used (some even include scenarios where the decedent has a multi-million dollar estate) to transfer assets that: (1) don't have a beneficiary listed or (2) don't have a joint owner, but (3) total less than the $50,000.  When you are talking about minimum probate fees in the $2,000 range and timeframe of 7 months to a year or more, this could be an opportunity to simplify the process, shorten the time, and save funds.  

Before you try to do this on your own (which you can...but you can do a lot of stuff on your own, like surgery, but that doesn't mean you should) visit with a Trusts and Estates Iowa attorney to walk you through the steps and save yourself some time and frustration.

Sunday, June 11, 2017

Intentional Interference With Inheritance - Estate of Boman (2017)

You gotta love email.  In seconds, I can transmit a message around the globe to one person or to hundreds of people, or I can share a photo of my dog, Georgia.  Or you can email your parents' attorney and tell the attorney what changes to make to your parents' estate plan to exclude one of your siblings.  Whoops.

In Estate of Boman, decided earlier this year, the on-going feud between two sisters and their brother, plus a little "spice" mixed in with the stepmother, resulted in jury trial supporting the claim of undue influence for a will and also intentional interference of inheritance by the sisters.  The court's ruling specifically identified the numerous email communications from the sisters to their dad's attorney as significant evidence supporting the brother's claim.  While the brother (will contestant) was not able to successfully support his claim of lack of capacity as his evidence failed to find lack of capacity for "the day the will was signed", his jury verdict was still upheld on appeal by the Iowa Court of Appeals.  In addition to lack of communication, serious allegations of behavior, the sister's callousness of not even telling their brother about their father's death and funeral further supported their actual malice and thus the nearly $200,000 in punitive damages against the sisters was also affirmed.

Ah, the joy of email.

Sunday, January 15, 2017

Take That Step

This past year, I had the opportunity to go skydiving. What a blast! I had wanted to skydive for a while so I was anxious to jump out. However,  when you are on the edge of the plane door, looking out at the ground several thousand feet below you, a slight pause is a natural feeling. Thinking about your possible demise can be unnerving. Similarly, sometimes doing your estate planning can have the same feeling.  Unfortunately death is a certainty for all of us and it doesn't necessarily get any easier later on.
As I stood on the edge of the plane, I didn't pause long as my tandem guide jumper basically pushed me out (with him and the parachute thankfully).  My job as your estate planning attorney is to do the same thing. Push you out of the plane!  Or, better yet, to get your affairs in order (just in case that parachute doesn't open).

Monday, December 26, 2016

Avoid Inheritance Taxes in Iowa? Adopt that Nephew!

Adoption can be a wonderful thing.  My niece, in this picture, is adopted and she is a wonderful addition to our family.  However, adoption can have some funky applications in the estate planning world.  A recent ruling from the Iowa Supreme Court was interesting on a couple of issues involving an adoption:
  1. To avoid paying inheritance taxes for a bequest to a non-lineal descendant, a nephew was adopted by his aunt.
  2. Even though he was adopted by his aunt, the son's biological mother was still able to include an inheritance for her son.
The first point is not all that unusual and I have advised clients of this very option.  Basically, whether you are adopted or biological, as a child in Iowa, you do not pay any inheritance tax when you inherit from your parents.  But, if you are a nephew, cousin, friend (basically a non-lineal descendant) there is an inheritance tax owed on an inheritance based on this table.  So, if reducing a tax bill is worth changing your heritage, you can be adopted by someone (even though you are an adult) and escape that pesky Iowa inheritance tax.  So, whether it is a friend, nephew/niece, cousin, attorney...stop by that friendly adoption attorney's office and do your tax planning as you enlarge your family.  Many clients find this tax plan "amusing" and don't take that step.  However, here is a clear example demonstrating its real-life application.

The second point is for a little more on the advanced side.  One of the trade-offs of getting adopted is that once you are adopted, you are normally cut-off from adopting from your biological side.  So, if your rich aunt adopts you, and then the next month your mother wins the lottery and dies from a heart attack, you don't get to share in the lottery winnings as you are no longer your mother's child.  (You are your aunt's child, essentially, and you can only have one set of parents.  Mom becomes your aunt and your aunt becomes your mom.)

However, the Iowa Supreme Court made the notation that the biological parent in this case specifically named the (adopted) child and thus that specific naming of the child was enough to counter the change in status from the adoption.  For example, if the biological parent had said "I leave my millions equally to my children", then the adopted son would not have received the inheritance from biological mom.  But, since biological parent said "I leave my estate to my wonderful son Matthew" the specific naming of that biological child was enough to "override" the disinheritance by the adoption.  The court didn't mention anything about it, but I would assume that the inheritance from the biological parent was subject to inheritance tax as technically her biological son was now her nephew.  You can't win 'em all, I guess.

Moral of the story: You can have your cake and eat it, too.

Sunday, August 21, 2016

POA Planning for College-Bound Students

It is hard to believe that my oldest daughter is heading off to college this week at Drake University.  I'm excited for her as she starts this next journey in her life.  In addition to getting all of the necessary supplies, such as towels, laundry bags, books, pepper spray, etc., it is also important that parents of college-bound kids have the kids sign power of attorney documents.  While we may still think of them as young kids, the fact is that under the law, they are legal adults and entitled to full and independent control of their financial information/assets as well as medical decisions and privacy protection.  This is regardless of the fact that you as the parent may be paying their tuition and treating them as a dependent for tax deduction purposes. 

However, it can be extremely beneficial to have your child sign a power of attorney document so that you are authorized to: obtain medical information and consent to medical procedures if necessary; access information about their accounts, or even access grades.  This isn't just continuing to be a "helicopter parent", but there is a legitimate reason for all adults, regardless of the age, to have these planning documents.  For now, it is just another item to add to that "back to school" list.   

Good luck Holly!

Monday, May 30, 2016

Second Marriages and Estate Planning

Not every marriage works out.  Duh.  Sometimes, after one ends, another marriage begins and several challenges begin.  You have the challenges of "mixing" families together, learning about snoring patterns, and discovering a new person.  You also frequently have the challenge of dealing with estate planning.  I'll skip the issues with snoring and focus on some of the estate planning points.

If you are smart...and brave...bring up the subject of a premarital agreement (or a "prenup" if you prefer).  Just don't wait until you are on the way to the ceremony.  Not exactly a romantic subject and many people will steer clear of it because of the delicateness of the topic.  ("You think we are going to get divorced!?!")  The premarital agreement can provide protection for each other, not only in the event of a divorce, but also upon the death of one of you.  Remember: you can't disinherit your spouse as part of your will or trust estate plan after you are married.

Frequently, second-marriage families don't do a premarital agreement.  Maybe they didn't have much in assets when they got married or maybe they just didn't think about it when love is in the air.  "Post marital" agreements are not valid in Iowa so you won't be able to visit this topic down the road once you are hitched.  So now what?

We now have another option under the Iowa Code:  The "Post Nuptial Trust". 

Let's say you (1) you have a second marriage situation; (2) you don't have a premarital agreement; and (3) you have some property that you want to make sure it goes to your children (e.g., you inherited the family farm).  With proper...and careful...planning by a knowledgeable trusts and estates attorney, we can legally draft documents to allow you to transfer that property to your children without the concern of the spousal share election "re-routing" where that property ends up after your demise.

Sunday, March 20, 2016

Gaining--Not Losing Power--With Immediate Power of Attorney Authority in Iowa

A financial advisor recently reached out to me regarding the impact of a Power of Attorney document concerning financial matters.  In particular, the question was whether the person signing the document (the "principal") loses any power or authority once they sign the POA document. 

As a reminder, the default rule (and recommended direction in my opinion) is that the agent's power is immediate upon signing.  In other words, it is not necessary to wait until the principal is incapacitated before there is authority for the agent to be able to act on behalf of the principal.

So the question is: "Once the principal signs the POA for an immediate power, does that principal lose any power/authority?"  Quick answer: No.

The POA document in this scenario simply adds another individual as an authorized party to deal with accounts or other financial interests.  Thus, the principal can continue to operate as normal.  The principal also has the ability to remove the agent at any time and notify any third-parties that the agent's authority has been terminated.

Sunday, November 29, 2015

Estates in Iowa: Do I Really Need to Go Through Probate?

A common issue that pops up with family members after someone dies is "do we need to go through probate?"   To answer that question, there are series of follow-up questions to be answered first.  To start the process, you should have a list of the assets in front of you and go through a "filter" process of the following questions.

Question 1: Is there a named beneficiary for the assets?  Do any/all of the assets have a named beneficiary?  For example, life insurance and annuities typically have a beneficiary.  Is there a POD (Payable on Death) or TOD (Transfer on Death) beneficiary?  If the answer is "yes"  to all the assets, then you are done.  Go straight to the claims process and pass probate.  If the answer is yes to some, but not all, we move to the next question. (If the beneficiary is the "estate", then that doesn't count but doesn't necessarily mean you have to go through probate.)

Question 2: Is there a surviving joint owner?  Next question is whether there is a surviving joint owner on the remaining account(s).  While this can create some problems, if the rest of the accounts have a joint owner, you can skip probate.  If you still have assets that don't have a named beneficiary or a joint owner, then you move to the next question.

Question 3: Is there a funded revocable trust?  If the decedent established a living (revocable) trust and properly titled the remaining assets, then you can avoid probate and just have the trust administration to deal with those assets.  You can end the analysis here.

Question 4: Is the total value of remaining assets less than $25,000.00?  Other than the joint assets and those with named beneficiaries, and assuming no real estate (land), do those assets total less than $25,000.00?  If so, you can use an affidavit to transfer all of those assets. For example, if there a checking account of $1,500 and a savings account of $10,001 you would be able to take a completed affidavit of distribution to the bank and they will cut a check out to you.  You should contact a trust & estate (T&E) attorney (me) to help with preparation of the affidavit to provide to the financial institution.

Question 5: Is there real estate involved for the remaining assets?  If there is real estate involved, whether it is a small home or if it is a sprawling farmland, probate is your new best friend. Contact a T&E attorney and get the process going.  However, if it has been more than 5 years since the decedent passed, you have another option that I don't feel like getting into right now.

If you get to the end of the process and it appears that you need to go through the probate process, the world does not end.  There are some other issues (Medicaid estate recovery and small estate vs regular estate) that need to be determined.  Also, just because you don't have to go through probate doesn't mean that you may not have some other issues to deal with for the estate.  (taxes, such as income, inheritance or estate, plus Medicaid liens)  A good probate attorney ( should know who fits that category by now) will be able to walk you through the process. Also, if you had a power of attorney, it is now worthless.  Stop using it immediately.

Wednesday, October 21, 2015

Break Out the Balloons - It is National Estate Planning Awareness Week!

Every year I count the days down to this week.  Well, not really.  But it does serve as a regular reminder about the need to address the basics of estate planning.  Despite my best intentions, there continues to be a large portion of Americans that don't have estate plans.  Based on a 2014 survey, for those individuals age 51-64,  51% don't have wills.  For all ages above 18, it is 64% without wills.  Wow.

Many younger people feel invincible and don't believe it is necessary to  have a will in place.   I suppose you can wait until the day before you die to sign your will and all is fine.  But for most people, except for Marty McFly, we don't know when our number gets called.  It is one of the reasons we buy insurance - protection against the unknown.

For the cynical people out there you are probably saying "whatever lawyer boy, you are just trying to get some business." Yep.  Lawyers need to eat, too.  But it is frustrating to see situations where lack of proper planning disrupts the family relationships and they fall apart.  Some basic planning steps would allow an easier transition without additional cost, delay and problems.  Plus, those attorney fees in those situations are normally higher anyway.  Putting an estate plan together is not as hard or expensive as you might think.

Estate Planning Awareness Week 2015 - schedule an appointment with a qualified attorney...or you can roll the dice.

Monday, July 27, 2015

Changes to the 2015 Iowa Probate Code - Authority of Representative to Get Financial Details

One of the convenient & powerful changes to the Iowa Probate Code from the 2015 legislative session involved the authority of a court-appointed representative to get information or access to financial information or assets.  Iowa Code section 633.78 was revised to give both the representative and the financial institution the necessary authority and protection in dealing with assets.

Okay, that was enough of a legal mouthful.  If you want a bigger mouthful, you can read the bill that was signed by Governor Branstad.  This was a bill that was drafted and sponsored by the Probate Section of the Iowa State Bar Association.  Another great job by the Section.

To give you an example of how this is useful, let's assume that you are the executor of an estate, or you represent the executor.  And assume that you believe that decedent owned an account at a financial institution, or that you know for a fact that they owned an account at the institution.  The  executor has certain duties to (1) identify and account for assets and (2) distribute the property to the proper parties.  But what if the financial institution isn't exactly cooperative with providing information or access about the decedent's accounts?  After all, we are in the age of scams and paranoia over identity theft.  Well, section 633.78 comes to the rescue in that you now have very clear authority in dealing with that account.  Should the financial institution continue to be resistant, they can be held responsible for damages and attorney fees.  Additionally, the financial institution is also protected in providing that information or account to you. Everybody wins!

You might wonder just how after something like this is useful.  Well, in the past 26 days that the law has been in effect, I've used it one time and I'm getting ready to use it in another matter if we continue to have difficulties in getting cooperation.  I would say that is a pretty quick and useful history already.

Sunday, April 05, 2015

Probate Patience: How Long Should it Take to Complete Probate?

A common question that comes up in client meetings is 'how long does it take to get through probate?'  There a lot of variables that go into that determination.  However, it is fair to recommend some patience for the process to get completed.

Notice Publication - This is one of the primary delays.  One requirement is that the executor/attorney needs to publish notice in a local newspaper to run for 2 consecutive weeks.  Then, after the 2nd publication, there is a 4 month period in which anybody can file a claim in the estate or contest the will.  There is also a requirement that notice be given to all interested parties.  The claims process/will challenge ends than later of (1) four months after the second notice publication notice or (2) 30 days after mailing notice.

Inventory - An inventory needs to be completed and filed with the court.  That includes getting date of death values and listing of all assets.  Depending on the organization of the records and information, that may take some time to get assembled.  This inventory should be filed with the court within 90 days after the appointment of the executor.

Tax Filings - In addition to filing the decedent's final individual income tax return, there are also fiduciary returns to be filed.  In Iowa, the Iowa Department of Revenue has to approve and issue a proper clearance before you can close the estate.  That review process can take up to 90 days after filing.  Other tax filings potentially include the Iowa Inheritance Tax return and the federal estate tax return (for larger estates).  Both of those returns also have to be approved and a proper clearance issued.

Creditors & Challengers - You also have the potential issue of claims filed in the estate and resolution of those claims. Then, if you have a will challenge, you are really getting the probate case extended out for several months or possibly years.

On average, I estimate a year to complete the probate process.  Sometimes they can close sooner, but sometimes later.  Every case is different with different facts and different persons.

Sunday, March 01, 2015

The Trusted Trustee: Who Gets to Have All the Fun?

When you are putting together your estate plan (and shame on you if you haven't done so yet) one of the decisions you may face is 'who should be the trustee?'

This question assumes that you are using a trust.  Whether it is due to young beneficiaries, special needs, or other circumstances that call for managed control of assets, a trustee is the title assigned to person/entity.  So what are the requirements?

  1. Capable - A trustee needs to handle investments, accounting, and tax returns.  Some people's brains turn to mush with visions of talking cats when faced with dealing with financial issues.  Your Uncle Bob might be a great guy, but if he is putting a name to the talking cat and not looking at investment returns and allocations, he might not be the best choice for trustee.
  2. Discretionary - Sometimes trustees have to make tough decisions.  These may not be popular decisions with the beneficiaries and Uncle Bob may not want to disappoint his nephew/nieces.  Does the 18 year old nephew entitled to get that Corvette Supercar?  Unless his name is Matt Gardner, probably not.  But Uncle Bob may have to tell him "no".
  3. Available - Life is busy.  Raising two kids with activities, community activities, family events, work commitments, is busy and asking someone to handle another activity in life can be overwhelming.
  4. Trustworthy -There are frequent stories of people get tempted by easy access to money that isn't theirs.  Whether they just needed a "short-term loan" or they've fallen on hard times, sometimes the candy becomes too tempting.
Rather than putting a friend or family member in a difficult position and responsibility, a professional trustee maybe better suited to handle the job.  Banks and trust companies (that are qualified) meet all of these qualifications.  Of course, they do charge a fee for their services.  (Not everything, like this blog, in life is free.)  But having peace of mind that the future of your beneficiaries is being safely and properly managed is worth something.

Sunday, January 04, 2015

What Happens When your Special Needs Child Turns 18 in Iowa?

A common scenario for children with special needs can arise when the child turns age 18 (age of majority in Iowa).  Once they are an adult, they are entitled to make their own decisions and healthcare information to others may be restricted.

To deal with this situation as they relate to medical issues, there are a couple of different options:

  • Medical power of attorney/HIPAA Release - If your child has sufficient capacity to execute documents, a medical power of attorney (MPOA) and a HIPAA release form would aid a parent in getting access to that information and being involved in health care decisions. The key question is whether the child is able to legally execute these documents.
  • Guardianship - If the child doesn't is unable to understand and knowingly consent and authorize a MPOA document, the next step would be to establish a guardianship for the child.  A guardianship is a court proceeding where you would request court approval to be appointed guardian (co-guardians) for your child to be involved and make certain decisions.  Once appointed, you will continue to have regular court filings and be limited to certain decisions.  You should consult with an Iowa probate attorney to get the guardianship properly set up and operating.
Raising a special needs child may be a lifelong commitment.  In addition to dealing with these decisions once they are an adult as discussed above, you should examine your plans for taking care of their finances and health care decisions when you are no longer able to serve in that position.

Sunday, November 30, 2014

Now and Later: Power of Attorney Authority in Iowa

When I was younger, I used to love Now and Later candy, despite the "workout" it gave my mouth/teeth.  You can enjoy the candy as a hard candy, and continue to enjoy it later when it is soft and chewy. It was like having having a different piece of candy, all in one piece.

When I discuss a power of attorney document with a client, one of the questions that I go through is whether they want the authority to be a springing power or an immediate power.  For example, do you want the person you identify to have authority to act on your behalf only when your doctor says you don't have sufficient capacity? Or, alternatively, do you want that person to have authority immediately, regardless of your capacity level?

For many clients (and for many attorneys) the initial thought/answer is 'why would you give someone power over your assets when you don't need any help?'  Here are my three responses:

1.  You may have sufficient capacity, but you aren't around.  Some examples work best.  You are on vacation in a remote location where you don't have access to modern communications.  Lake in northern Canada.  Cruise.  Mars.  You get the idea.
2.  Good Days - Bad Days.  With many forms of dementia, it is a gradual deterioration and not a "black and white" diagnosis.  Thus, when you are at a doctor's office, it may be a better day and your doctor may not be willing to cooperate in determining whether you are incapacitated or not, even though your family members are observing your struggles on the bad days.
3.  Convenience.  Sometimes it may just be easier to have someone sign documents on your behalf because you can't get away; or you are traveling for work.
4.  Trust Issue.  For me, this is the clincher/closer.  If you trust someone to act on your behalf when you are incapacitated, surely you would trust them to act in your best interest when you have your full capacities?  More importantly, if you don't trust this person for any reason, then we really need to look closer at your nominee.

Iowa recently enacted the Uniform Power of Attorney Act this past summer, which incorporated the prevailing preference by the members of the Uniform Law Commission, making the authority an immediate power (i.e., regardless of capacity) as the default provision.  If the document is silent, the statute provides the power is an immediate power.  You can still make the authority a "springing" power by a specific inclusion in the document.

The immediate power gives you the ability to use the powerful authority not only now when you have your capacity, but also later if you don't have your capacity.  You really can't beat that flexibility, in my opinion, although that brings up some discussion points for another post about the potential for abuse.  

Sunday, November 16, 2014

Basic Estate Planning Checklist for Aging Parents

I have previously posted previously pretty much on all of these items separately, but I thought I'd commit to the "checklist-mania" and add my own checklist.  For individuals that are helping out with an aging family member, this can be a quick guide to get you started.  (If you are taking advantage of an aging family member, then you need to get a conscience and turn yourself into the authorities.) While this list can be used for pretty much anybody, young or old, this can be a helpful guide for those assisting a parent/grandparent with planning.

  1. Power of Attorney (health) - This document enables health care decisions, such as medicine, doctor, facility, therapy, etc. to be made by a selected individual.  While more than one can be named, it is typically preferred to name one responsible individual.
  2. Power of Attorney (financial) - This document provides for someone to handle financial matters.  Iowa's recently updated statute provides significant changes to this position.  This can be the same person under health powers, but need not be the same person.  Again, normally better to just have one individual in this position.
  3. Living Will - This document is one that will provide final instructions should the individuals life deteriorate to the point where their existence is continuing only with the help of life-support.  (Not a DNR.  Different topic for another day.)
  4. Declaration for Final Disposition of Remains - Following someone's death, several "permanent" decisions are made as to who will make decisions on the disposition (burial, cremation, other) of the body.  Nothing uglier than fights at the funeral home when it should be a time of memories.
  5. Last Will and Testament/Revocable Trust - The Will only has the authority after death and after it has been admitted to probate.  It will provide directions over are the assets are distributed and who is in charge.  A revocable trust is similar to a Will, but handles things a little differently.
  6. Beneficiary Review - Frequently overlooked (or unable to locate) are beneficiary designations of retirement accounts, life insurance, annuities or other assets.  Hey, even I admit that I myself have neglected to keep up on all of my beneficiary designations.   Remember, that these beneficiary designations take priority over the provisions in a will or trust (unless they are the beneficiary listed). 
  7. Ownership Review - Also frequently overlooked, a common "culprit" are bank accounts where someone is intended to be listed as simply able to sign checks, but is listed as a joint owner instead.  
While not exhaustive and certainly not to be considered legal advice, hopefully this will allow you to be prepared to review and discuss the basic provisions.

Sunday, November 09, 2014

When Your Biological Child is Not Your Child, According to the Iowa Court of Appeals

For the most part, I think our appellate courts do a pretty good job of deciding cases and justifying their rationale.  I may not always agree with the result, but I can at least understand the reasoning.

But in a recent ruling from Iowa Court of Appeals (Mohr v. Langerman and Mohr, No. 13-1422, Oct. 15, 2014), I'm left scratching my head.  As always, the facts are "interesting".  Put all those pieces together and you have a case that makes you go hmmm.

Facts: Jerry Mohr was married for 24 years.  But, while he was married, he (1) intentionally had intercourse with another woman for the purpose of having a child and (2) lived with yet another woman and helped raise her child.  While Jerry lived in Arizona, he died owning some property in Iowa.  And, of course, he apparently didn't feel the need to have a will.  Duh.  So when the end came for Jerry, he left behind quite the legal mess.  Following his death, the biological relationship was conclusively established in Arizona between Jerry and the son that he had with the woman he had one relationship with for that purpose.  You know, that DNA testing that gives you a nearly 100% confidence level.  You know, a court ruling by a court and that whole full faith and credit clause of the US Constitution.

Iowa's intestate laws provide that if someone doesn't have a will, and they die with a spouse and children that are not children of that surviving spouse, the spouse and the children will divide the estate.  (Probably need to update the intestate law summary for this blog...another day.)  In particular, Iowa Code § 633.222 provide that a biological child inherits from their father if there is paternity evidence or the child has been recognized by the father.

Seems simple enough.  Code says if there is paternity evidence or recognition, and since we have DNA evidence, end of story.  Not so fast my friend.  Although pretty much every person 5 years of age or older knows what "or" means, our court feels that they can't give a plain English interpretation of "or".  What the Iowa Court of Appeals basically said was 'while we think we know what "or" means, because the Iowa Supreme Court says that "or" doesn't mean "or" in these circumstances, we are stuck with that ridiculous position.'  What????

Keeping in mind that this statute was originally written decades ago before we knew what DNA was or what we can do with DNA, and realizing that once statutes are written, it is a slow and difficult process to amend a statute, the court still maintained that the legislature needs to amend the statute to prevent our Supreme Court's ridiculous ruling from over a hundred years ago.  Another reason why judges and lawyers get a bad rap, should anyone care to read this probate case.

Now, in all fairness, the Court eventually comes around and determines that the son is actually Jerry's son, but it does so via an awkward, backdoor analysis that contorts itself to fit on the page it was written.  Maybe they felt they were constrained by ancient rulings and couldn't establish/correct the proper rationale, so they wanted to get the right result in another method.  Basically they relied on the testimony of the mother of the child and her basically self-serving statements that Jerry "recognized" their child as his son.  Never mind that we have this fantastic DNA evidence that can conclusively establish that it was his son, we're going to follow this testimony of a mother trying to get an inheritance to her son.  Good grief.

The morale of the story: if you have a biological child out there that you want to disinherit, and you don't want to spend a minimal amount of money to have a will written, you can just refuse to recognize that child as in fact your child and, according to Iowa courts, that child will not inherit from you.

Sunday, September 28, 2014

New Law in Iowa Involving Joint Ownership Designation and Deeds

Effective January 1, 2015, a new law will go into effect that can be effective and useful in several situations.

Deeds with married couple, joint tenants or survivor language - As I've written before, there can be issues (and have been many issues) where the way ownership of real property is listed on the deed can have serious impact on estate plan.  Tenants-in-common, joint tenants with full rights of survivorship, etc.  It used to be if you had a deed that transferred ownership to two or more people (such as a couple) without the magic language of "joint tenants with full rights of survivorship and not as tenants-in-common" it was presumed to be tenants-in-common which can have a significant different intended result.  Soon, that will no longer be true.  NOW, straight from the Iowa legislature, that rule is changed. Iowa Code §557.15 will soon provide that IF a deed fits under any of the following descriptions: (a) identifies two grantees as married to each other at time of instrument; (b) says "joint tenants" or something similar; or (c) includes language such as "or their survivor", the presumption is that ownership is with full rights of survivorship and NOT as tenants-in-common.  This can be a significant benefit to property owners (in the future) that may be a little lax in using legal services.

Sunday, June 22, 2014

Post-Marital Agreements in Iowa - Inching Closer?

Iowa remains one of the few (if not last) hold-out state that doesn't permit post-marital agreements.  (Agreements that allow a married couple to plan the division of their assets by their own agreement and separate from some default protective rules.)  However, the Iowa Supreme Court has finally allowed enforcement of a post-marital agreement.  Sort of.

Herbert and Velma were married in Florida.  While they lived in Florida, they signed post-marital agreement which included certain limitations on rights of each spouse at the death of the other.  Florida permitted post-marital agreements.  After 14 years, they moved from Florida to Iowa.  (Quick aside: Really? I love Iowa and all, but moving to Iowa from Florida in the retirement years seems a little backwards.)

After moving to Iowa, Herbert passed away and Velma tried to do an "end around" the post-marital agreement and take a spouse's elective share.  I don't feel like going into an extensive analysis of the Iowa Court's ruling, but basically they said the contract was validly made in Florida and should have Florida laws applied to it and that there wasn't an Iowa public policy argument that should prevent the application of the post-marital agreement.  One of the key points to keep in mind here is that they lived in sunshine state for 14 years after they signed the agreement.

What was especially interesting in the Court's ruling were some of the comments that the court made that clearly indicated that they would like to see Iowa move to a point where post-marital agreements are allowed.  Unfortunately, there are a few key Iowa lawmakers that have refused to allow this change in Iowa law.

As we continue to have more and more second marriages, the role of a post-marital agreement can become even more important for couples choosing to make their own decisions and arrangements.  Refusing to allow adult couples the freedom to make these decisions needs to be changed.

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.