April 2020 – Probate 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.