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.

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.

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.  

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?

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".

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.

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.

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!

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.

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.

Inheritance Rights of Unborn Iowans

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With today's medical bio-technology, it is not unusual for a couple to "store an embryo", or other "genetic material" for future use.  Perhaps they had multiple embryo's created, or they are going through a medical treatment which may affect their reproductive capabilities, or heading to war.  Regardless of the reason, the legal issues that can be raised with such foundations of life are interesting. For example, if a baby is eventually born as a result of the "stored genetic material" and the parent dies before they are born, what rights as a child/heir do they have?

The Iowa Code was modified in 2011 to provide a window of opportunity for an unborn to have rights of inheritance following the death of the parent.  Essentially, if a child is born within two (2) years after the death of a parent, they can inherit from that parent just as if they had been born prior to the parent's death.  If a deceased has left any genetic material, the personal representative of the estate must report that fact to the court and also leave sufficient assets for that potential person to receive their inheritance.

While it is possible that an embryo, or other material, can be frozen much longer than two years, the two year window was used merely to provide some reasonable period time and not to keep it indefinitely   Medical advances certainly create some interesting legal scenarios.

Gardner Law Firm, PC - Open for Biz

"Faith is taking the first step even when you don't see the whole staircase."  Martin Luther King, Jr.

Well, it was 15 years in the making but the time has come...Gardner Law Firm, PC, located in Urbandale, Iowa, is created, established and the doors open (except I close for lunch and occasional golf).  While the struggles that I will likely have as a solo attorney pale in comparison to those of Martin Luther King, Jr., I find his quote inspirational as I open the door on the day we celebrate his birthday. 

I will be doing the same work that I did previously at my previous firm: estate planning (wills/trusts), probate administration (handling final matters for deceased people), real estate, and business planning (setting up business entities, helping individuals buy or sell businesses, succession planning, etc.) 

Check out www.gardnerlawpc.com for more information (when the site is completed).  

FINALLY...Estate Tax Rules Updated for 2013

Almost exactly 2 years ago, I blogged on the updated federal estate taxes for 2011 and 2012 and noted that the rules put in place then were just punted down the road.  That "punt" finally landed when the "Fiscal Cliff" doomsday of 1-1-13 approached.

Finally, today we received some updated rules on the federal estate tax system for 2013 and beyond.  (Can I say "permanent"?).  I'll update more on the details of the statute after it is digested, but essentially most of the rules from 2012 will remain in place.  (Slightly more than $5 million exemption per person and continued portability options for spouses.) The Iowa Academy of Trust and Estate Counsel have a quick summary of the tax bill here.

I expected this to happen, but I'm often wrong when it comes to predicting what Congress will do.  At least we have a better set of rules to work with and estate planners will know what to tell clients for the future.