Iowa Estate Plan

" 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).  

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.

In a ruling issued today by the Iowa Supreme Court, the Court ruled that a spouse can be cut out of an elective share by utilizing a non-probate transfer.  In the Myers case, the decedent had placed beneficiary designations on a checking account, CD and an annuity to her children and not her husband.  The trial court initially had ruled that those assets, despite the beneficiary designation, were still subject to the spousal elective share based on earlier court rulings. However, on appeal, the Iowa Supreme Court determined that the statutory language of the spousal elective share provisions (Iowa Code § 633.238) specifically limits the elective share to ONLY the probate property.  Thus, payable on death (POD), transferable on death (TOD), or any other account that has beneficiaries listed upon death could be passed on to other beneficiaries and exclude the spouse.  In other words, if you want to disinherit your spouse, this is how you accomplish that result. T...

The rights of a surviving spouse (male or female) in Iowa are not exactly "clear cut".  When you have numerous methods on how property can pass at death (named beneficiary, joint ownership, will, trust, intestate) and sprinkle in second marriage situations with kids from an earlier relationship, you can create a minefield of problems.  I have written previously on a court's allowance of the disinheritance of a spouse  in a December 2009 district court case.  In a different district court, another court has taken a different approach. Betty Rich was the surviving spouse of William Rich.  William Rich had three daughters from a prior marriage and none from his marriage with Betty.  Mr. Rich's will & trust combo created the standard AB trust with the QTIP provisions.  (Another future blog post.)  Betty wasn't thrilled with what she was receiving under her husband's estate plan (or from the insurance policies) so she proceeded to opt for her e...

The Iowa Court of Appeals issued a ruling today affirming a ruling of an appeal in a will contest case.  The contestants to the will were basing their argument that the testator (decedent) lacked sufficient capacity to execute her will as she suffered from certain delusions as to certain family members/beneficiaries.  According to the ruling, certain medical evidence was properly excluded as the proposed evidence related to medical information after the execution of the will, and not during the time period the will was executed.  In other words, any evidence concerning the testator AFTER the signing of the will may not be relevant in determining capacity at the time of signing the will.  In this case, the testator was diagnosed with cancer after signing the will and was under medication for that treatment.  The contestants also objected to the jury instructions used in referring to the delusions.  The Court rejected the appeal and affirmed the findings of t...

Okay, let's assume person D had a will executed in 1980, then dies in 1987.  Will says 'all my assets in trust to my wife for her life, then to our 2 kids when she dies.'  Child #1 dies in 2002 and then wife dies in 2008.  Child #2 is alive, child #1 has a surviving widow and a surviving daughter.  Who receives the remaining assets at the death of the wife?  Is it: (a) daughter of child #1 (b) widow of child #1 (c) child #2 or (d) the attorney. If you guessed (d), I like the way you think, but unfortunately you are wrong.  If you guessed (a), you are correct!!  Congratulations on your first star to being a junior lawyer.  The Iowa Court of Appeals affirmed this position in an opinion issued June 13, 2012.  (See the opinion here .)  One of the issues in this case involved the issue of whether the Iowa Trust Code, which became effective in 2000, applied to trusts that were in existence prior to that time.  (For example, a trust esta...

My daughter Maggie I recently have had a couple of situations where minor children are heirs of a parent that passed away.  As a result, the minor children are beneficiaries of their parent's estate.  However, in Iowa, it can be a challenge when a minor is inheriting money/assets. Iowa law provides that if the amount of the inheritance is above $25,000, it is necessary that a conservatorship be opened for the minor.  A conservatorship, while beneficial in handling the assets for a minor that can't handle those assets, can be a challenge and potentially frustrating experience.  Some issues associated with a conservatorship: Annual reporting requirements - each year (or occasionally other periods) a report is filed and review by the court for all income and expenses of the conservatorship. Annual expenses - there are annual court costs and potentially attorney fees to handle those reports. Bonding requirements - a conservator has to post an ins...

With a recent ISU survey showing Iowa farmland values continuing to skyrocket , there is an increase in attention to dealing with the big values involved. Some issues to keep in mind when your estate involves Iowa farmland: "Death Taxes" - For 2012, the federal estate tax exemption amount is $5M , which excludes are large portion of the individuals dying in 2012.  However, for the larger estates, or estates with significant life insurance or retirement plans, there may be some issues.  Also, in less than a year, the exemption amount is scheduled to be reduced back to $1M.  With just a 150 acre farm, at average values, you potentially have estate tax exposure. Disputes - Handling the farm if there is more than one child can be challenging.  What if there is one child that is involved in farming and one that isn't?  What if neither are involved?  What if the kids don't get along with each other? How will decisions be handled in the future when there a...

Iowa law limits the time period in which to administer an estate of an Iowa decedent.  Iowa Code section 633.331.  If an estate is not opened up within 5 years after death of the decedent, it will not be able to opened up.  Iowa currently does not recognize any exception to this rule. What does that mean? If there is a will and you wait more than 5 years after death before doing anything, you've waiting too long.  Good luck on the headaches of transferring any assets at that point. This doesn't mean that you always have to probate an estate, but if there are any possible assets that may need to be distributed, don't wait.

Hopefully you've done the proper thing and put together an estate plan.  But what do you do with the original will?  The original will is an extremely important document.  In Iowa, as in many other states, if the original will cannot be located, there is a presumption under the law that the decedent intentionally destroyed the will.  Even if you can find a copy of a signed will, it may not be enough.  It is possible to argue to a court that it was not revoked, but the law requires you to show by clear and convincing evidence that they did not destroy (revoke) the will. So, some options and things to think about for storing a will: Keep it with the attorney - normally the safest, so long as the family can find the attorney and the attorney/firm is still in business. ( We don't charge for this service, but we are a pretty cool law firm.) Keep it in your freezer - never understood the use of a freezer as storage.  Could get tossed out, cooked, freezer...