Iowa Law Blog : Iowa Lawyer & Attorney : Sullivan & Ward Law Firm : Iowa Law Blog

Once in awhile you'll come across someone that wants to disinherit their spouse.  Sometimes it isn't done with ill-will.  For example, maybe it is a second marriage situation and both spouses decide they don't need to leave anything for the survivor.  Sometimes it is ill will. 

The general rule is that you can only disinherit your spouse if he or she agrees to it.  In other words, a surviving spouse can choose (elect) after your death to basically ignore your will or trust that doesn't provide for that surviving spouse, and have basically a third of your estate go to them.  For example, if you left your entire estate to your children and not your spouse, your spouse can say "wait a second.  I don't like that idea.  I'll take one-third of the estate thank you very much."   And believe it or not, money can make people change their minds.

For a while, individuals were using trusts to get around this "election against the will", but eventually the Iowa laws corrected that "end around" planning.  But now, a recent ruling out of an Iowa district court in Pottawattamie County created another option.  In a December 2009 ruling, the district court permitted some bank accounts with a payable on death (POD)/ Transferrable on Death (TOD)  designation to escape the spouse's ability to get the one-third elective share.  The result, under this ruling, is that you can now disinherit your spouse by using the POD/TOD designation on these accounts.  While this ruling is not the law of the state, the court creates a roadmap for a valid argument to properly disinherit your spouse.

TOD and POD accounts are very easy and flexible planning tools.  In fact, they can be almost too easy.  If this ruling continues to stand, it may result in some unintended consequences contrary to the intent of the spousal election laws.  The court places the burden on the Iowa legislature to correct the statute if they don't want this type of "loophole".  Time will tell.

• Email This
• Print
• Comments
• Trackbacks

A recent ruling from the Iowa Court of Appeals dictates that once a natural parent loses custody of their child in a guardianship proceeding, if the parent seeks to terminate the guardianship and regain custody, it is necessary that the parent seeking to terminate the guardianship must show a "substantial change in circumstances" in order to terminate the guardianship. 

To understand the significance of this ruling, it is important to understand the normal rule involved with guardianships where a natural parent is involved.  The normal rule in establishing a guardianship for a minor is that a natural parent, if qualified and suitable, shall be preferred over all others in an appointment as a guardian.  This strong legal presumption is a result of the strong societal desire to preserve the natural parent-child relationship.

The Iowa Court of Appeals stated that once the issue of the natural parent's ability is litigated in the establishment of a guardianship, the normal rule in favor of a natural parent doesn't apply in later proceedings to terminate the guardianship as it is not in the child's best interest.

• Email This
• Print
• Comments
• Trackbacks

Prior posts on this site have dealt with terminating a trust or breaking a trust in Iowa.  A recent case from the Iowa Court of Appeals further clarified the ability of beneficiaries to terminate a trust in Iowa under the Iowa Trust Code.  In the Matter of the Trust under the Last Will and Testament of Mary E. Weitzel, Mom executed a will which provided that her assets would stay in trust for her life, then upon daughter's death, the balance of the estate would pass to daughter's children (mom's grand kids).  The will contained a relatively common provision, called a "spendthrift" provision, which prevented the daughter or the creditors of the daughter from getting access to the trust principal.  The daughter claimed that the creditor issues that once existed were no longer an issue, and thus the spendthrift provision was no longer needed.  Apparently, daughter and sons didn't care for the bank as the trustee and having restrictions in their access to the trust assets, so they sought to have the trust terminated. 

The Iowa Trust Code permits termination of a trust if all of the beneficiaries consent and there remains no further material purpose of the trust.  The question in this case focused on whether the spendthrift provision constituted a material purpose, thereby not permitting the trust to be terminated even if all of the beneficiaries consent to the early termination.  The ruling from the Iowa Court of Appeals was that the spendthrift provision, with the facts of this case, was a material purpose and would not permit the trust to be terminated before the trust was directed to be terminated.

This ruling further emphasizes the direction that Iowa courts are going in preserving trusts.  Some other states are taking a different approach in adopting a flexible approach permitting the termination of trusts when all of the beneficiaries consent.

Rather than terminating a trust, what if the beneficiaries sought to simply amend the provisions of the trust?

• Email This
• Print
• Comments
• Trackbacks

In a follow-up to a recent post, Jason Clayworth of the Des Moines Register recently updated the situation concerning a young girl's application for social security benefits as a result of her father's death.  A federal judge has overturned the rejection of benefits and thus permits her to receive benefits.  The article continues to point out that legislators are examining long overdue updates to the Iowa statute to address these types of situations.  The Social Security Administration has until January 11, 2010 to appeal.

The complexities that are involved in cases like this are challenging.  A recent Probate Section meeting of the Iowa State Bar began to examine some of the issues and an approach to take with this issue.  The discussion revealed that there is a split in the probate section as a result of numerous questions and possible approaches.  Beyond the basic philosophical question of is this "right", there other other related matters beyond social security benefits.  Can the father's wishes restrict future usage of his genetic material?  Does he need to sign a written consent to authorize the use after his death? Should that consent be notarized? How far in the future will this material be permitted to be utilized?  How will this impact settlement of estates and determination of heirs?  How does this issue impact review of real property titles in abstract examinations?

I look forward to how the Iowa legislature approaches this issue in the spring and hopefully they consider all of the interrelated issues.

• Email This
• Print
• Comments
• Trackbacks

Former NFL football player Steve McNair is just another too-common of an example of someone who failed to plan their estate with so much at risk.  As Todd Ratner on the Estate Planning Bits blog noted in his post, there are several legal issues associated to the unfortunate demise of Steve McNair that will likely result in significant cost and struggle to his family.  Fame and fortune alone won't guarantee you a structured estate plan.  And you don't have to be a Steve McNair to have the same issues and risks that he did.

• Email This
• Print
• Comments
• Trackbacks

A recent story in the Des Moines Register Dead Iowan fathers child; is daughter entitled to survivor benefits?  illustrates the need for the laws, in Iowa and elsewhere, to catch up to today's technologies or at begin discussion of bioethics for certain medical situations that have significant legal impacts.

Patti Beeler is fighting for social security benefits for her daughter, who was conceived after the death of the girl's father from frozen sperm after the father died from cancer. This story is another example of why laws need to be updated to address these types of situations. This case is just one of several that will likely continue to emerge in the near future as courts from around the country have taken opposite positions as to whether a posthumously conceived child is entitled to inherit.  Iowa laws currently do not permit such a child to inherit as an heir as the child was conceived after the biological parent's death.  See Iowa Code 633.220.  The social security administration looks to local law to determine who would qualify as a dependent for purposes of social security benefits.  Thus, Iowa law is not favorable for this little girl, who will never know her father.

• Email This
• Print
• Comments (3)
• Trackbacks

At Iowa Estate Plan, I have a post about the benefit of using a Power of Appointment in your estate plan.

• Email This
• Print
• Comments
• Trackbacks

Todd Ratner of the Estate Planning Bits has a good post about the dangers of using estate planning software to prepare your estate plan.  Like the old adage goes, "you get what you pay for."  I have probated wills for individuals who drafted wills on their own and more often than not, mistakes were made, or believed to be made as it was unclear what the decedent intended.  When it comes to selling your house, performing surgery or handling your investments, most people don't try to do it themselves - they get an expert.  Putting together an estate plan that distributes your wealth, plans for your incapacity, and cares for your family is just as important and should be handled by an experienced attorney, not a "point and click" software program or on-line service.

Of course, I know there are cynics out there that believe that "you lawyers" just say these things to make money.  To which I respond - the cost and attorney fees in any court battle will quickly dwarf the cost of drawing up and executing a well-drafted will.  So go ahead, do your own estate plan and then have your family spend your money fighting over the money you "saved".

• Email This
• Print
• Comments (1)
• Trackbacks

Intestate is the "estate plan" for everyone who dies without a will.  Intestate is a term which refers to the state statute that each state has which dictates who receives your assets upon your death, if you don't direct otherwise by a will.  A common misconception is that the state gets it all.  That isn't necessarily true.  In fact, that very rarely ever happens.

However, many people may be surprised what does happen in certain situations under application of the intestate statute.  For example, assume John Smith is married to Mary Smith for over 30 years and have four kids together, including two that are still minors.  It is the second marriage for John and he has one child from his prior marriage.  John dies without a will owning assets in his name.  Who receives those assets as an inheritance from John's estate?

ANSWER:  Mary Smith, as the surviving spouse, only gets some of the assets, even though it was a long marriage and they have several kids together.  In fact, Mary would only receive, generally speaking, one-half of the real property and one-half of the personal property.  See Iowa Code 633.212.  There is a minimum of $50,000 that the surviving spouse gets to keep, so she might get more than half, depending on the assets and their values.  But you can imagine the interesting situation where the child from the first marriage is entitled to one-half of the property.  John is lucky he is dead as Mary probably isn't really thrilled with his procrastination to see a lawyer about getting his will done.

Doesn't seem fair or right? Maybe it isn't, but every individual can avoid that scenario by executing their own estate plan and avoiding surprise endings.

• Email This
• Print
• Comments (3)
• Trackbacks

Tracy Ellis has a good post and solution on an alternative method to dividing up personal property items.  As I frequently tell clients, its not the division of the bank accounts or stocks that cause family rifts, but the division of the personal family mementos and heirlooms.  Edivvyup provides an alternative method for dividing the family items amongst the family members in the form of an on-line auction.  Rather than using your own money, you are given a certain number of credits and through the the private on-line bidding process, you can use your credits to secure the family items.

To avoid any bidding or fighting over your personal items, preparation of a list for distribution of your personal assets is the ideal planning method.  No method is perfect and sometimes a fight cannot be avoided, but attempting to equitably divide the assets and preserve family harmony are important goals that an attorney should aim for.

• Email This
• Print
• Comments (6)
• Trackbacks

Besides taxes, the other sure thing in life is that it comes to an end eventually.  A common question becomes "what's next?"  (I'll skip the whole afterlife heaven and hell discourse and stick to the worldly issues.)  And of course you have the whole "what to do with the body issue".

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.

Taxes

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.

Summary

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.

• Email This
• Print
• Comments
• Trackbacks

All of the glamor and attention of Hollywood celebrities provide an effective example of how important proper estate planning can be and how even the rich and famous can fail to properly plan, despite their vast resources.  I've previously mentioned mistakes and oversights by Heath Ledger and Anna Nichole Smith.  As Steve Follet with the Arizona Estate Planning & Probate blog points out in his post, Britney Spears failed to properly fund and maintain her trust that she established.  Now, with the "issues" in her life, court involvement and publicity will continue to provide fodder for entertainment shows...and estate planning attorneys.  You gotta love Hollywood.

• Email This
• Print
• Comments
• Trackbacks

Did you ever want to know how much your neighbor or a family member had when they died?  Were they the "millionaire next door"?  Did so-and-so blow through all that money? Well, in Iowa, as in many states, a complete listing of a deceased person's assets are listed in the public court records.  The Report and Inventory, as it is called in Iowa, is a filing that the personal representative (either the executor or the administrator) is obligated to file with the court which breaks down the assets into real estate, stocks, bank accounts, life insurance, miscellaneous property, and annuities (retirement).  The itemized assets also show the value as of the date of death.

To get this information, all you need to do is go down to the courthouse and look up the file number for the deceased individual, have the courthouse personnel pull the file, and then review the information.  Pretty easy to review someone's financial life!

For most people, keeping financial information confidential is very important.  Now, you might say, "what do I care, I'm dead?'"  True, but as far as your family members are concerned, your financial information soon becomes their financial information.

If your estate does not go through the probate process, then this listing of a report and inventory is not necessary.  To avoid probate in Iowa (& most other states) you can use a revocable trust plan.  A properly created trust, that is properly funded,skips the probate process and helps maintain your privacy.

• Email This
• Print
• Comments (2)
• Trackbacks

Surely celebrities take their estate planning seriously, don't they?  Millions of dollars, easy access to legal advisers.  Well, not Heath Ledger, who recently passed away from an accidental prescription drug overdose.  Unfortunately, after executing his will in 2003 leaving his estate to his sister and parents, he failed to make any updates to his will after the birth of his child in 2005.  When news of his will was made public in a New York filing, Heath's father was quick to note that they would take care of Heath's young daughter (Matilda Rose) and his ex-fiance.

However, recent reports confirm that if there is money involved and poor planning, legal battles will ensue.  It is being reported out of Australia that Heath's uncles are now getting involved in a fight over the inheritance from Heath's estate.  Apparently, brotherly love between Heath's father and Heath's uncles is strained as a result of some alleged improprieties by Heath's father concerning the mismanagement of Heath's grandfather's estate.

This is a simple reminder that it doesn't matter whether you're famous or not, your estate plan is important and should not be overlooked as part of your periodic life review.  Especially as you marry or have young children, it becomes even more significant to get your plan updated and reviewed.

• Email This
• Print
• Comments (3)
• Trackbacks

MSN Money and Bankrate.com have an excellent article about how to leave a mess for your heirs.  So many of the points ring true with many people.  With as much research people put into buying a toaster, they should do as much research into their estate plan and organizing their affairs.  As the article states, estate planning isn't fun and I can't make fun.  However, unless you truly don't like your family, take some relatively simple steps to get your affairs in order.

• Email This
• Print
• Comments
• Trackbacks

A recent article and analysis of a Florida case by Juan Antunez emphasizes the need to funding a revocable trust and what can happen if you skip that step of the plan. As this case illustrates, the best drafted trust may not handle the disposition of your assets as you anticipate if you don't properly fund the trust and the ruling from this case illustrates one of the pitfalls of failing to do just that.

In the Florida case, certain real property was never conveyed to the trust during the life of the individual who established the trust. As a result, despite specific provisions in the trust on who and how the property was to be conveyed, the property went to another individual. This resulted in the second wife getting all of this real property, which was intended to pass to the adult children from the first marriage. This was the important second step of the estate plan which the client failed or refused to follow, despite warnings by his estate planning lawyer. As a result, families were forced to litigate the issues and spend attorney fees for a determination of the matter. I doubt that the children from the prior marriage will entertain their step-mother during the holiday season.

If you're going to spend the money on establishing a revocable trust, do it right: transfer your assets to the trust.

• Email This
• Print
• Comments
• Trackbacks

Not everyone has an idyllic marriage, and some have much less.  One issue to keep in mind as you plan your estate is that in Iowa, you can't entirely cut your surviving spouse out of an inheritance, unless they consent to it.  The Iowa Code provides surviving spouse with many rights which are not affected by the testamentary documents.

For example, if you execute a will that leaves all of your assets to your secret lover, your spouse can "elect against the will" and receive basically one-third of your probate assets.  Iowa Code § 633.238 (2007).  It doesn't matter if you've been married one day or ten thousand days.  It doesn't matter if the surviving spouse is a billionaire and you're just trying to leave your small estate to your children.  The result is the same - the surviving spouse can elect out of the disinheritance under your will.

Leaving your spouse out of your will doesn't invalidate the will, but don't expect it to be binding.  You might think you got the last laugh, but your spouse will be laughing last.  If you have any concerns or special matters, you should contact your legal advisor. 

• Email This
• Print
• Comments
• Trackbacks