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 (ahem...you 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.

6 comments:

Unknown said...

Could you guide me on this issue:
My dad died a month ago. he was remarried for 20+years. She is still alive. Our farm was never put in her name. The farm is located in Clayton county, IA. Now as a blood child do I have any rights to this family farm? Apparently she is having papers drawn up to put it in her name. She should be able to live there until her death, but what doesn't sit well with me is that her children could inherit our family farm in the future.
Thank you for any help-
Jackie

Matthew Gardner said...

To properly address this issue, more information is needed. For example, did you dad have a will, and, if so, what did it provide? You indicate that the farm was not put in her name, but was it jointly owned? Did they live on the farm? The surviving spouse has certain rights and elections to make. See http://www.iowaestateplan.com/2012/09/surviving-spouse-rights-in-iowa-still.html However, if there is no will, the children from a prior marriage have certain rights as well under the laws of intestacy.

Anonymous said...

Matthew,
My single 80-year-old mother has all of her accounts set up for TOD, and her home and auto are both placed into joint ownership with my sister and me (her only children). She divorced our father about 30 years ago and he is deceased. Otherwise, she has a small coin collection, stamp collection, and some jewelry, which very likely total less than $25,000 in value. She also has a will but wishes to revoke it since most everything is taken care of. After reading your questions, it sounds as though she could sign an affidavit (notarized I presume) establishing joint ownership of those other personal effects, revoke the will, and if so would we then be able to avoid probate? The will splits everything between my sister and me anyway, but she still wishes to revoke it. Her attorney is discouraging that because of the possibility of something happening to both me and my sister before mom is gone. This is highly unlikely; mom has an enlarged aortic aneurysm for which she is declining surgery, and she will likely be gone in the next year or two.

Matthew Gardner said...

I agree...don't revoke the will. Just because you have it doesn't mean you have to go through probate. But if you have it, and do need to go through probate, it is better to have it. Let's say your mom inherits something. Or buys a lottery ticket. Or ends up suing a doctor for malpractice. Or...you get the idea. In summary, you may not need it but it doesn't hurt anything to have it.

As for the misc property, I wouldn't worry about it. No one will question who gets the misc. items. Just have her list who gets what so you and your sister don't fight. Then sign and date it.

Lorraine Gaddini-Smith said...

I just spent 90 minutes with an attorney we hoped would help us probate mom's estate. She had a house in her name alone. She has three surviving children, all sitting in the room with the attorney. She died without a will. We just wanted him to put the case through probate. He was very worried about the estate being "cash poor". My wife and I told him would stand the cost of probate. He just kept telling us how complicated the case is. Can you tell me what makes our case complicated?

Matthew Gardner said...

Lorraine-

Nope. Can't tell you. :-)

If the estate is truly "cash poor", there are typically two options: (1) sell the non-cash assets, or (2) contribute your own cash to preserve the non-cash assets and not be forced to sell them. If, after you liquidate the non-cash assets there still is not enough cash to pay creditors/expenses, then you go to the court to approve a reduced liquidation to the creditors.