Category: Estate Administration

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:

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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.)

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.

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.

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.

 

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:

  1. When the will is signed (with the two witnesses) a “self-proving affidavit” is signed at the same time and notarized; or
  2. 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.

A Will Means We Don’t Have to Do Probate, Right??

A common question that we get is “Since dad had a will, we don’t have to go through probate.” (I’ve written about this on my sister blog, but read this and save an extra mouse click.)

Not true. In order for a person’s will to “proven” it needs to be admitted to probate court. Once the Will is filed with the court, then the judge will review it to make sure it meets the legal requirements for a valid will. Requirements such as signed and in writing and witnessed by two other individuals.

Once a will is admitted to probate as a valid document, there is also the question if it was the last will of the decedent. For example, you might have a document that satisfies all of the legal requirements of a will, but what if dad signed another will several years later and forgot to tell you? Or what if you grabbed dad’s hand and forced him to sign the will that left everything to you and disinherited your siblings? Those are some examples where the probate process sorts through questions and eventually establishes that a particular will is in fact the last will and testament of the decedent.

Iowa Inheritance Tax

Currently, for Iowa residents, there is an inheritance tax that only certain recipients pay when an Iowa resident dies. Here are a few key points:

The tax is based on the deceased, not the living. Thus, if the beneficiary lives in Texas but the deceased individual lives in Iowa, Iowa law applies.

The tax is based on the relationship to the deceased. If the recipient is a lineal descendant, ascendant, spouse or charity, there is no inheritance tax. Regardless of the amount. But others would be subject to a tax. Siblings are taxed at a different rate than friends, for example.

Currently, however, there is a bill pending in the 2019 Iowa legislature to repeal, in full, the Iowa inheritance tax. While that does come at a $90 million dollar cost to the state, that does remove a frustrating tax for many individuals that choose to leave assets to in-laws, friends, cousins, nephews/nieces, attorneys…