Sunday, June 14, 2020

Cheated Out of an Inheritance? Better Stay on Your Toes If You Want to File a Lawauit.

As I discuss in more detail on the post on my Iowa probate blog, a recent ruling from the Iowa Supreme Court significantly changes the time period in which to bring a lawsuit for interference with inheritance.  In short: don't wait very long.

Sunday, April 12, 2020

Protection for Elders in Iowa From Financial Exploitation

What is "elder abuse"?
As provided in Iowa Code 235F, elder abuse means any of the following:
1.     Physical injury to, unreasonable confinement, punishment or assault of a vulnerable elder
2.     Sexual offense with or against a vulnerable elder
3.     Neglect by a caretaker of a vulnerable elder
a.     Includes the deprivation of the minimum food, shelter, clothing, supervision, or physical or mental health care necessary to maintain life or health
4.     Financial exploitation of a vulnerable elder.

Who is considered a vulnerable elder?
A vulnerable elder means a person sixty years of age or older who is unable to protect himself or herself from elder abuse as a result of age or a mental or physical condition or because of a personal circumstance which results in an increased risk of harm to the person.

Did you know that the elderly poor are at greater risk of financial exploitation than the wealthy?
Many low-income older Iowans are financially exploited by caretakers, family and "friends". Approximately 8,195 reports of alleged dependent adult abuse or neglect were made to the Iowa Department of Human Services between July 1, 2017 and June 30, 2018. After filing a claim, an abused or neglected dependent adult has less than a five percent chance of formal litigation taking place.
Prior to 2014, the only options for victims of elder abuse were through the Iowa Department of Human Services, or taking the expense of hiring a private attorney to file a lawsuit against an alleged abuser which might cost more than what you can recover...if you win.
Now, Iowa Code 235F comes to the rescue. This new law broadened the definition of abusers to include persons beyond just the caretaker. Iowa attorneys can now utilize a relatively new action called a 235F petition for relief from elder abuse.  Unlike a traditional civil action that can take more than a year before it’s tried, a petition for relief from elder abuse hearing shall be set between five and 15 days after commencing a proceeding and notice to the other party.  Also, there is extremely little formal discovery in these cases based upon the Iowa Supreme Court 2019 ruling in Struve v. Struve.  (Good case to read for explaining the law.)

Moral of the Story:
Don’t try and pull a fast one on your grandma. Iowa is closing loopholes in elder abuse situations. No longer is it only the “caretaker” that can commit elder abuse. The “abuser” can be a family member, spouse, child, neighbor, friend, etc.

Probate Issues in Iowa Now a Separate Blog

Way back in 2009, or whenever I started this blog, I posted about probate topics as well as estate planning.  (I'm not sure I expected to be blogging still in 2020.  My dream of retiring at age 44 and retiring to a caribbean island just didn't materialize.)  Then one day I looked at the site address-Iowa Estate Plan--and decided maybe it made more sense to keep probate topics on one site and keep this as estate planning.  Plus, I purchased the Probate Iowa site and decided I should probably put something on it.

There will always be some overlap between the topics, but with the convenience of a computer mouse and a click, you can easily maneuver back and forth to your heart's content.

Check out Iowa Probate for posts about probate matters in Iowa.

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!