Probate in Iowa – Helping explain Iowa probate issues by an Iowa attorney.

What is Probate?

Probate is the legal process of administering the estate of a deceased person. In Iowa, the person responsible for administering the probate is the executor or administrator of the estate. This individual is appointed by the court and has several important responsibilities, including:

Collecting and preserving the assets of the estate: The executor or administrator must locate and gather all of the assets of the deceased person, including property, bank accounts, and other financial assets. They are also responsible for preserving these assets and ensuring that they are not wasted or misused.
Paying debts and taxes: The executor or administrator is responsible for paying off any debts that the deceased person had at the time of their death, as well as any taxes that are owed. This includes funeral expenses, medical bills, and mortgages, among others.
Notifying creditors and other interested parties: The executor or administrator must notify all creditors of the deceased person and provide them with an opportunity to make claims against the estate. They must also notify other interested parties, such as beneficiaries, and provide them with information about the estate.
Filing court documents: The executor or administrator is responsible for filing all of the necessary court documents to open the probate and to obtain the court’s approval of the distribution of the assets.
Distributing assets to beneficiaries: Once all debts and taxes have been paid, the executor or administrator is responsible for distributing the remaining assets of the estate to the beneficiaries.

It’s important to note that the Executor or Administrator may also have a fiduciary duty to act in the best interest of the estate and its beneficiaries. An Executor or Administrator who mismanages or steals from the estate may be held liable for their actions.

Administering an Iowa probate can be a complex and time-consuming process. It is important for the executor or administrator to be organized and to have a thorough understanding of the laws and procedures involved. They may also benefit from seeking the advice of an attorney to ensure that they are fulfilling their responsibilities correctly. (I know one or two that could help out.)

Will Contest Before Death? Not in Iowa.

The Iowa Supreme Court recently dealt with the question of a “pre-mortem” will contest. Will contests are typically filed after the person (testator) has died. For example, typical will challenges are based on lack of testamentary capacity or undue influence, or both. However, in the Kiene v. Wash. State Bank opinion from February 19, 2021, the Iowa court ruled that the validity of a Will cannot be determined during the life of the testator. Basically, too many things can happen before the testator dies and there are too many variables to consider.

In this ruling, the individual that had signed a will was under a guardianship and conservatorship proceeding. Contrary to the belief of many, that does NOT create a presumption that a person lacks testamentary capacity. Certain parties wanted to obtain a court ruling that the Will was invalid while the individual was still alive. Based on the court’s interpretation of the statute and some common sense arguments, the Court rejected the ability to contest a Will prior to death in Iowa. Some support for the argument included the potential that the person might do a new will later on, beneficiaries may not survive later which means different beneficiaries would be involved and they would need to be given notice and an opportunity to participate.

However, it is also important to remember that a will challenge after the person dies needs to be acted on quickly after the probate process starts.

Selling Real Estate During Probate

When I’m discussing the probate process with a client, the discussion will get to a point where we talk about how the process may take a year or so before it is completed. And then I get the question:

You mean I can’t sell the house for a year?!?

Not exactly. Potentially as soon as we have a personal representative appointed by the court we are able to sell the real estate and other property.

There is an exception to that statement, however. That is only permissible if there is a will and if the will has the “magic language” that permits the executor to sell property without court approval.

If: (1) there is no will or (2) the will does not have the “magic language”, the the personal representative will need to apply to the court for approval to sell the real estate. That means you will need to give notice to the beneficiaries/heirs and either get their written consent, or set it for a court hearing and give the beneficiaries/heirs 20 days notice of the hearing and potentially have a court hearing for approval of the sale.

Moral of the story: Have the will drafted that gives that authority or plan appropriately to get the consents of the beneficiaries/heirs.

Do Assets with Beneficiaries Go Through Probate?

That’s a common question I get. Here’s the example: we are handling the probate estate for a deceased individual and we are discussing the assets: house, bank account, CD, car, etc. Then we also inquire about retirement accounts (IRA or 401(k) for example) and the client will state “oh, they had beneficiaries listed so they are outside probate”. And then that leads to my somewhat confusing answer: Sort of.

What I mean is this:

The beneficiaries listed receive those accounts directly. They are not controlled by the provisions in the Will or by intestacy (i.e., no will). The personal representative (whether executor or administrator) does not manage those accounts.
BUT, they are reported on the Report and Inventory that is filed with the court. That means we need to identify and list the account, the value at death, and the beneficiaries of that account. The part that gets people upset is that the court and probate costs (court costs, attorney fees, executor fees) are calculated on all assets (except life insurance) on the Report and Inventory. Thus, those retirement accounts add to the calculation of the costs.

Normally the next question is “why” which is harder to explain but like I told my girls when they were younger: just because. Some additional reasons are that inheritance taxes, estate taxes, and the associated returns utilize that information. So we have additional work as a result of those assets. We also typically provide some assistance on handling those items.

So, in short, they are part of the probate process but not controlled by the probate process.

New Law for Iowa Small Estates Starting July 1, 2020

For deaths of Iowa residents that occur after July 1, 2020, Iowa law now permits estates up to $200,000 in total “probate” value to use Iowa’s small estate chapter (Iowa Code chapter 635). So–as I typically ask–what does that mean?

Iowa’s small estate proceedings provide a few minor procedural differences than a “regular estate” under Iowa Code 633. Principally, the closing process is a different procedure, although most clients won’t realize the difference in procedure.

However, the main difference to clients involves court costs savings. Court costs in a small estate proceeding are significantly less than a regular estate. For example, “regular” estate court costs are approximately .2% of the size of the gross estate. Conversely, small estate court costs will typically be around $35.00. That results in an approximate savings of $365 for a $200,000 estate, or the equivalent of 60 Big Mac meals.

This also helps the situation where an individual has established a revocable trust as their estate plan structure but failed to get an asset properly titled. If the asset that wasn’t properly titled is (now) less than $200,000, the small estate proceeding can be used even if the total estate is substantially more than $200,000. Again, conversely, if you are using the regular probate proceedings and calculating court costs, the court costs would be .2% of ALL assets. So if you have a $1,750,000 estate, just the court costs to deal with a $150,000 probate asset would be approximately $3,500.00. Or 583 Big Mac meals.

Now, with typing this post, I realize I need to have a better blog post explaining revocable trusts in Iowa at Iowa Estate Plan. But, its late now so that will be another rainy day post.

BIG Changes to Iowa’s Intentional Interference with Inheritance Claims

Following a ruling from the Iowa Supreme Court issued June 12, 2020 in the Estate of Youngblut, cheated heirs now need to be aware of some very short deadlines to bring a claim. BE AWARE.

Will Contests Generally

If someone wants to contest a will, there are two main grounds to do so: (1) lack of capacity or (2) undue influence. Such claims must be brought at the later of: (a) four months after the 2nd publication of notice in the newspaper, or (b) one month after being mailed notice to the person. As a result, potentially within a few months after someone passes you have to determine what your rights are under the will, determine if there was any “funny business”, secure a lawyer, have the lawyer investigate and then file the contest. Don’t waste time is the basic rule. Otherwise, you snooze you lose.

1978 Recognition of Tortious Interference with Inheritance in Iowa

Following a case from about 40 years ago, the Iowa Supreme Court allowed a claim of intentional interference with inheritance, sometimes called tortious interference with inheritance separate from a will contest. In the Frohwein case from 1978, a plaintiff missed the filing deadline to contest the will. While it was after the will contest period, the Iowa Supreme Court allowed the plaintiff to bring this newly recognized claim against the individuals that interfered with their inheritance. This claim was allowed to proceed separate from a potential undue influence claim. Since that point, plaintiffs (including those that I have represented) have filed these types of claims at a different points after the will contest period. I’ll save the specifics for the claim for a future post.

New Deadline in Iowa for Tortious Interference Claims

In Youngblut‘s ruling from last week, one of the sons chose not to contest the will, but decided (after the claims period but during the estate administration) to bring a tortious interference claim. This 2020 Iowa Supreme Court reversed 40 years of Iowa law and is now establishing the law in Iowa that you must bring the claim for tortious interference during the will contest period and join with the undue influence claim. Unfortunately, this puts a serious time crunch on a plaintiff to (1) determine what the will provides (2) determine if there was potential wrong-doing; (3) identify legal counsel; and (4) have counsel do enough investigation to determine if there are legal grounds to make the claim.

There are a few other exceptions to this new rule. For example, sometimes claims are base on other wrongful actions. Getting someone to change the beneficiary of an insurance policy, for example. Cases like those are separate from a will contest claim and presumably would not be tied to the will contest.

Some other states are declining to recognize this tort. It appears that the Iowa Supreme Court is wanting to limit these types of claims. For now, they are viable but it is more important now to not wait to start the lawsuit.

Overview of the Probate Process for an Iowa Estate

Probate Process in Iowa — Overview of the probate process in Iowa

I’m Fine With Inheriting Assets, But What About the Debts?

Another common question we hear is concern about “inheriting” the debt of a deceased individual. That doesn’t happen in the probate process, but a broader explanation is necessary.

Probate involves dealing with assets AND debts. For example, notice is given to all creditors, potential creditors, and unknown creditors. The creditors can then file a claim in the probate proceedings. After the prescribed time has elapsed after giving the required notices, any potential claims that are not filed are dismissed, or, in other words, not paid. Yay. For those creditors that do file a claim, there is still an option to challenge a claim and potentially even a filed claim may not need to be paid. Yay again.

If a claim is filed, and not challenged by the personal representative, then the assets of the decedent are used to pay that claim before the estate can be closed. BUT, if the those claims exceed the total amount of assets, you don’t personally have to pay those unpaid debts. There is a hierarchy of who gets paid first and if certain claims are reduced because of insufficient assets. (For example, the courts, funeral, attorney and personal representatives get paid first.)

The value of using an experienced probate attorney will also open up some options to increase the inheritance and make sure that sum funds are paid, even if there is an excessive amount of debt. I can’t give away all my secrets here, but feel free to contact me if you would like to learn more.

Who Needs Probate: Can’t I Avoid Probate by Listing Joint Owners?

If all of your assets have a joint owner and/or a beneficiary listed, your estate may not need to go through the court-supervised probate process. But before you rush out to make those changes on your accounts, here are some things to think about joint accounts:

The other joint owner can withdraw the entire account out of the bank.
Creditors of the joint owner can zap the account and clean it all out. Think judgments, tax liens, back child support, bankruptcy, divorce, etc.
Surviving joint owner gets the entire account at death–regardless of what your estate plan provides.
Funds are reported on college financial aid applications for the joint owner.
Doesn’t provide any Medicaid planning protection.

I frequently get calls from children questioning why their parent’s estate didn’t go through probate after the parent died. If we start doing a little digging, we typically find out that at some point the parent listed another individual (typically another sibling) as the joint owner. Thus, when the parent dies, the child listed as the joint owner gets 100% of that account. Maybe they will share with the other family, but commonly they don’t. Imagine the frustration/anger when the others see the Will that provides for an equal distribution. That doesn’t mean what happened is automatically wrong, but there can certainly be questions.

For example, this can raise a question as to whether there is a cause of action for some type of improper activity in getting that person listed as a joint owner. This gets into the area of confidential relationships that you can read a little more about here or intentional interference with inheritance here.

What If the Will Isn’t Notarized? Is It A Waste of Paper?

What comes as a surprise to many people, a Will does not need to be notarized to be a valid document. It just needs to be signed by the testator and then witnessed by two individuals. That’s basically it. No notary needed. No blood oath or blood covenant.

Now, you might be asking yourself (or your screen) “why did I sign an affidavit when I did my will?” And that is a very good question.

When it comes time to probate the Will in court after the testator has died, we do need an affidavit of the witnesses. We have two choices to satisfy that requirement:

When the will is signed (with the two witnesses) a “self-proving affidavit” is signed at the same time and notarized; or
Later, after the will was signed, one of the witnesses signs an affidavit attesting to the event and their signature, which is then notarized at that time.

Option #1 is the easiest and recommended option if possible. Why not do it now? Relying on Option #2 can create challenges as the witnesses may be deceased, moved, name changed, incapacitated, etc. and you can have trouble tracking down those witnesses years later. For example, a client came in last week with a will signed 36 years ago. The attorney is long deceased (I was only 15 at the time) and the firm is no longer in existence. I was initially concerned about tracking down the witnesses, but when I reviewed the Will, one of the witnesses was actually now a judge here in Polk County! Glory be.

Normally the witnesses need to be in the actual presence of the testator. As in a critical requirement. They can’t be in the next room or presented later for signing. But for now, at least temporarily, as we are going through our COVID-19 new world order, Governor Reynolds signed a proclamation that allows the witnesses to view the Will signing via a video call. This is unprecedented in decades/centuries of Wills and the laws we inherited from across the pond.

Just because the will isn’t notarized doesn’t invalidate it, but you might have some work to do in tracking down witnesses in order to have it admitted to probate down the road.