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

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.

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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.

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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.

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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.

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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.

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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.

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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. 

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