Iowa Inheritance Laws

The Court of Appeals of Iowa decision in Algoe vs. Johnson illustrates the delicate balance between individual wishes and legal safeguards in inheritance matters. In this case, William Johnson contested the lower court's ruling that reduced his inheritance in favor of an equal distribution among his siblings.

The contested will replaced an earlier testamentary document, leaving all assets to Johnson. Probate Judge Keller set aside the second will, citing concerns about the mother's mental capacity at the time of its creation. Contributing factors included the mother's recent stroke, which significantly limited her mobility and communication, and the involvement of Johnson, who managed her finances and personally drafted the contested will.

The court's verdict proves the importance of legal counsel during the critical process of will drafting and estate planning. A well-crafted will prepared with professional assistance helps ensure the clarity of the testator's intent and minimizes the risk of challenges to the distribution of assets.

With that in mind, this article delves into the complexities of probate administration, particularly in situations where a loved one has passed away with or without a will. By providing information and insights, it aims to help families navigate this sensitive process with understanding and confidence.

What Happens if Someone Dies With a Will in Iowa?

In Iowa, when an individual passes away with a legally valid will, their assets are given to their designated heirs or beneficiaries. The appointed executor assumes the responsibility of managing this distribution. This individual acts as a steward, ensuring a smooth and lawful distribution of the estate according to the deceased's intentions.

Here are some of their responsibilities:

1. Locate testamentary documents: The executor must look for the testator’s will. They must seek legal advice to know whether the estate should enter probate. 

2. Register the will in probate court: Even if probate is not necessary, testamentary documents must always be filed with the court.

3. Create an inventory of assets: The executor must work with the court-appointed appraiser to determine the value of assets. They must wait for the appraisal before reporting the asset’s value. Note that they only have 90 days from the time they were appointed as executors to appraise the estate and make an inventory.

4. Notify all interested parties: As an executor, they have the legal responsibility to inform beneficiaries, heirs, creditors, and public agencies regarding the testator’s death. Public probate notices should be in local newspapers for two consecutive weeks.

5. Open an estate or bank account: The executor must create an account that can be used to settle expenses during the probate process. 

6. File estate tax returns: The decedent’s final income taxes must be paid. The Iowa Department of Revenue will certify the testator once they settle all estate taxes.

7. Prepare estate reports: As an executor, they must provide informal accounting to interested parties. Estate reports and accounting are also requested before asset distribution. 

8. Distribute assets: The executor must distribute assets to the heirs and beneficiaries in compliance with the terms of the will. Afterward, they need to file a petition for executor discharge. Their fiduciary obligations will end once the court releases them. If the court does not provide a court-ordered discharge, the executor is still liable for the estate.

Executors in Iowa must act in the best interest of the deceased and their heirs. As such, they must not do the following:

• Stop heirs or beneficiaries from contesting the will.

• Change any provision in a will. 

• Sell assets for less than their fair market value without the approval of the beneficiaries.

• Sign an unsigned will on behalf of the deceased.

• Make financial decisions about the decedent’s assets.

Who Can Be Named as an Executor in Iowa?

In Iowa, the deceased can appoint either residents or non-residents as executors. Moreover, trust companies and banks authorized to represent the testator are also eligible to fulfill this role. 

The size of the estate determines the designated executor’s compensation, with a maximum fee of $2,200 for the first $5,000 of probate assets and 2% for all assets exceeding that amount. This ensures fair compensation for handling estates of varying sizes while adhering to established fee regulations.

What Is Considered a Valid Will in Iowa?

Iowa state law sets forth specific requirements for a valid will. These are designed to safeguard the testator's wishes and protect beneficiaries from potential legal challenges.

• Minimum age: At the time of will creation, the testator must be at least 18 years old. This ensures that the individual possesses the maturity to understand the implications of their decisions. A person under the age of 18 is generally considered to lack the legal capacity to make informed decisions regarding their estate.

• Sound mind: The testator must also be of sound mind when creating the will. This means they must be able to comprehend the nature of their actions, the value of their assets, and the potential consequences of their decisions regarding their beneficiaries.

• Written format: Iowa law requires wills to be in written form for verifiability. No specific format is mandated, but the document should clearly outline the testator's wishes regarding the distribution of their assets.

• Signatures: The testator and two disinterested witnesses must sign the document to validate the will's authenticity. These witnesses must be present during the signing ceremony and should not be beneficiaries named in the will. Their role is to attest to the testator's mental state and awareness at the time of signing.

Iowa recognizes two types of wills, each with specific circumstances for validity:

• Online wills: These wills, drafted and signed electronically, are valid as long as they meet specific legal requirements. Individuals seeking a convenient and potentially lower-cost alternative to traditional legal assistance may find online wills a good option.

• Out-of-state wills: Wills created and executed while residing in another state remain valid in Iowa if they comply with the legal requirements of both the original state and Iowa. This option typically applies to individuals who have moved to Iowa but have previously drafted their will elsewhere or own property in the state.

Remember that Iowa law does not recognize holographic wills (handwritten, unsigned documents) or oral testamentary statements as valid forms of wills.

Iowa’s Probate Process

In Iowa, probate procedures can vary depending on the specific circumstances of the estate. However, a general framework guides individuals through the process of settling an estate:

1. Filing a petition for probate: If the deceased left a valid will, the executor initiates the process by filing a petition for probate in the District Court.

2. Publishing a probate notice: A public announcement of the probate proceedings is published in a local newspaper where the deceased resided. This serves to notify creditors and allows them to file any claims against the estate within a designated timeframe.

3. Receiving a letter of testamentary: Upon the court's approval, the executor is issued a letter of testamentary, formally granting them the legal authority to act on behalf of the estate.

4. Inventorying assets: A comprehensive inventory of all assets belonging to the estate is prepared and filed with the court. This includes details such as property, vehicles, bank accounts, and investments.

5. Settling debts and closing the estate: Once all outstanding debts and expenses have been paid, the executor can file a petition to close probate. This finalizes the estate administration and allows for the distribution of the remaining assets to the designated beneficiaries.

Non-probate Assets in Iowa

Not all assets in Iowa are subject to probate. These include:

• Living trusts: Assets transferred to a living trust during the owner's lifetime typically avoid probate, passing to designated beneficiaries outside of court supervision.

• Retirement accounts: Accounts like IRAs and 401(k)s often have designated beneficiaries who inherit the funds directly, bypassing probate.

• Life insurance policies: If a life insurance policy names a beneficiary, the payout generally goes to them without going through probate.

In essence, assets with designated heirs outside the will often avoid the probate process, simplifying and potentially expediting the inheritance process for those beneficiaries.

Contesting a Will

In Iowa, any party with a vested interest in the estate can contest a will. These include individuals such as current or former spouses, children, siblings, and parents. A will can be disputed or challenged if any of these interested parties doubt its validity. However, they must act within specific timeframes: a contest must be filed within four months of the second publication of the Notice to Creditors or one month after the date of its mailing.

Common grounds for contesting a will include:

• Failure to follow will execution formalities: This refers to cases where the will does not meet technical requirements for its validity, such as lacking the necessary two witness signatures.

• Lack of testamentary capacity: This occurs when the testator, at the time of signing the will, did not possess the mental capacity to understand the document's contents and its implications.

• Fraud: This involves the testator being misled or deceived into creating or signing the will.

• Forgery: This refers to instances where the testator's signature is falsified on the will document.

Contesting a will can be a complex legal matter. Thus, those considering such an action should seek legal advice to understand their rights and obligations, as well as the potential consequences of their decision. 

What Happens if Someone Dies Without a Will in Iowa?

If a person dies without a will in Iowa, the court will choose the deceased’s administrator to manage and distribute their estate. Then, the estate will be given to the heirs and beneficiaries in accordance with the law. This process is called intestate succession. 

Generally, the decedent’s surviving family members or interested parties can be the named heirs or beneficiaries. These can be parents, spouses, children, and siblings. The specific division of assets depends on the relationships between the deceased and the eligible heirs, as well as the nature of the assets being distributed (separate property vs. communal property).

In Iowa, anyone who is 18 years of age or older and a resident of the state can be an administrator or personal representative. While relatives commonly apply for this role, preference may be given to individuals with experience in estate administration and financial matters to navigate probate proceedings efficiently.

The law allows the surviving spouse to file a petition to administer the estate. They must file the petition within 20 days. Other heirs, starting with surviving children, are given an additional 10 days to file a petition.

Once the petition is filed, a hearing is scheduled to allow interested parties to potentially waive their right to administration. Ultimately, the judge appoints the administrator via a formal letter, marking the official start of the estate distribution process.

Spousal Rights

In Iowa, surviving spouses have inherited rights to a deceased spouse's estate even if no will exists. However, the amount may depend on several factors.

One option for a surviving spouse is to choose the elective share. This grants them all personal property exempt from creditor collection, which they can claim by filing an affidavit with the court. Under specific circumstances, they may even inherit the entire intestate estate. This occurs if the decedent leaves no children or if all surviving descendants are also the spouse's own descendants.

However, in cases where the deceased spouse had children not shared with the surviving spouse, the latter is not entitled to the entire estate. Iowa law grants them ½ of the decedent's real property in such situations. Furthermore, if the estate's value falls below $50,000, the surviving spouse receives an additional homestead interest and the remaining personal and real property after debts and charges are settled.

Beyond inheritance, the government grants surviving spouses the right to receive a spousal support allowance for up to 12 months following the decedent's death. The spouse has four months to apply for this allowance, and the estate's personal representatives must notify them of their eligibility.

Children’s Rights

Surviving children in Iowa may receive an inheritance share even if their deceased parent did not leave a will. However, not all children can automatically receive a share. 

Rights of Other Surviving Relatives

In Iowa, if the testator dies with no surviving spouse and children, their family members can obtain an inheritance share. These are the related provisions in the state:

Estates With No Heirs

As stated earlier, if an individual dies without a will in Iowa, their estate will go to their surviving family members. However, if the testator dies without surviving heirs or beneficiaries, the state will handle their properties or assets.

Unique Situations in Iowa Inheritance Law

In Iowa, inheritance rights extend to non-residents named in a will, regardless of their immigration status. Full and half-blood relatives receive equal inheritance shares under the law. However, the law stipulates that anyone convicted of intentionally killing a testator is barred from inheriting. This "Slayer Statute," enacted in 1987, prevents inheritances from benefiting murderers.

For same-sex couples, Iowa's legalization of same-sex marriage ensures inheritance rights for surviving partners named as beneficiaries in a will. Intestate succession (dying without a will) automatically grants inheritance to a legally recognized spouse. However, LGBTQ+ individuals may consider drafting a will to specify beneficiaries when state recognition of their relationship might be unclear.

Does Iowa Impose Inheritance and Estate Taxes?

While Iowa lacks an estate tax, its residents may incur federal estate taxes based on the total value of their assets. This tax typically applies to property and money held within an estate before being distributed to heirs or beneficiaries.

However, Iowa does levy an inheritance tax, with the duty falling on the recipients rather than the decedent's estate. For siblings, half-siblings, and children-in-law, the tax rate ranges from 5% to 10% based on the inheritance amount. Other family members, such as foster children, in-laws, cousins, nieces, nephews, aunts, and uncles, face a steeper tax bracket of 10% to 15%.

There are ways to avoid inheritance tax in Iowa. As outlined by the IDR, exemptions apply to:

• Estates under $25,000: No inheritance tax is levied on estates with a total value below this threshold.

• Charitable bequests: Property inherited by charitable or non-charitable organizations is exempt from the tax.

• Pre-1991 deaths: Inheritances received from decedents who passed away before July 1, 1991, are not subject to the tax.

• Spousal inheritances: Surviving spouses inherit tax-free from their deceased partners.

Legal Resources Related to Inheritance Law in Iowa

Overall, families and individuals dealing with probate-related cases and inheritance issues are encouraged to seek legal help from probate lawyers. They can also refer to the following resources for more information:

Iowa State Bar Association

The Iowa State Bar Association is an organization that represents more than 7,000 lawyers from all walks of life. These legal professionals cater to families and individuals dealing with probate cases. They help clients understand the importance of having a will and what makes a testamentary document valid. Moreover, the association assists people in contesting a will.

Iowa Legal Aid

Iowa Legal Aid is a nonprofit organization that provides critical legal assistance to low-income individuals and vulnerable residents dealing with inheritance issues. It takes on various probate-related cases and educates Iowans about the advantages of having a will. The organization also helps people make their own wills to enable them to distribute their assets to their preferred heirs or beneficiaries.

Iowans seeking legal assistance may call 1-800-532-1275.

People’s Law Library of Iowa

The People’s Law Library of Iowa helps residents understand some legal issues through the basic information on the website. It connects users with statutes, administrative rules, and cases. The website also connects users to important sources, including the Iowa Attorney General and Iowa Judicial Branch websites. However, the People’s Law Library of Iowa is not a replacement for a lawyer. Contents only include basic, introductory information.