- 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.
Sunday, December 28, 2008
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.
Friday, May 09, 2008
For example, if you have young children and you aren't interested in a revocable trust, a testamentary trust would control when and how your children would access those funds in the future if something should happen to you. Without such a testamentary trust and with just a simple will, your children would receive 100% of the assets at the "mature" age of 18. Not ideal, eh?
While you maintain control, such a plan does require your estate to go through the probate process before the assets are transferred to the trustee. In other words, you maintain control over distribution provisions, but you do lose the probate avoidance by planning with a testamentary trust. Certainly a middle ground approach for many individuals that accomplishes many goals.
Monday, April 28, 2008
Depending on the planning that was done beforehand will dictate a lot that will be done afterwards. For example, if the decedent properly used a revocable trust, it may not be necessary to go through the probate process. Good planning and organization prior to our "time" is important in helping to alleviate the work that our family and friends are forced to go through.
Transfer of Assets
If all of the assets were held jointly, it may not be necessary to go through the probate process, although there may be some other advantages with going through probate. Also, if the asset has a named beneficiary (e.g. life insurance, IRA, etc.), that asset will pass automatically and not subject to any will, trust or other dispositive document. Otherwise, other than joint assets or named beneficiaries, the estate plan of a will, trust, or the state's plan will determine where those assets go. (And it might not matter that you're the child from the first marriage or dad liked you the best.)
Payment of Bills/Claims
Depending on financial situation of the decedent, there may be certain bills and expenses that need to be paid. Through certain publication processes in the probate process, all potential claims can be "pulled out of the woodwork" in order to determine how much should be paid and whether it is a valid debt or not. Also, if the decedent was receiving certain public assistance benefits (e.g. Medicaid) during life, of if the decedent's predeceased spouse received such benefits, there may be a lien against any remaining assets that follows those assets.
In Iowa, if the only beneficiaries are a surviving spouse, children, grandchildren, parents or other lineal descendant or ascendant, there is no Iowa Inheritance tax and no need to file an Iowa inheritance tax return. There are some issues if there have been certain gifts within the past three years which should also be examined.
Federal estate taxes are normally not applicable for estates less than $2,000,000 (for 2008). If the estate is below that figure, typically it is not necessary to file a federal estate tax return. Again, gifts during life of the decedent are important to review also.
This list is not meant to be exhaustive, but mainly as a guide of some items to consider when it becomes necessary, and hopefully help you choose to do some proper planning ahead of time. You should consult with an experienced attorney when it becomes necessary to sort through all of these items.
Thursday, April 24, 2008
If you don't have an advanced directive already, take steps to have one signed. Then, after getting it signed, the next step is to have it included as part of your medical record.
Sunday, April 13, 2008
While it is possible to transfer certain types of assets that are left in an individual's name to a trust post-death, there are no guarantees that it can be accomplished. It typically involves time and expense, some of the key issues a trust seeks to avoid.
Thursday, March 20, 2008
Tuesday, March 11, 2008
Thursday, February 14, 2008
While the question over how your bodily remains may not matter to you as you're dead, it may create conflict amongst your family. (Remember Ted Williams?) Hopefully you do want to avoid that.
Check out my post to see the different options that are currently being discussed and stay tuned.