Answering Some Basic Questions About Probate In Iowa

People have all kinds of questions about probate in Iowa. There are too many aspects to Iowa probate administration and alternatives to cover in one blog post.  I am providing some basic information below.  I’ll be adding more posts about the probate process and issues in probate in the future.

What is probate? 

In the strictest sense, “probate” is the process of submitting a dead person’s last will and testament to the Probate Court to prove that it is authentic and valid. Sometimes “probate” is used broadly to mean any of the processes or procedures that must be completed before a dead person’s property is transferred.

Usually when lawyers in Iowa and their clients use the term “probate” they are referring to the process of formal administration of the dead person’s estate under the jurisdiction of the probate court. The administration process is typically called “probate” even when the decedent left no will to file with the court.

What is probate court?

In Iowa there is no special probate court.  If an Iowa attorney says “probate court” he or she is just referring to Iowa District Court, where a judge will preside over the administration, as governed by Iowa Probate Code, the Rules of Probate Procedure, and related laws.

The Probate Code does have provisions for a judicial officer known as the Probate Referee.  When I started practicing in Cedar Rapids, there was a part time magistrate who served as Probate Referee.  That position was eliminated for budget reasons.  In the last several years the only full time Probate Referee in Iowa was Associate Probate Judge Ruth Klotz, serving Polk County in Des Moines. She retired in January, 2013 after a long and distinguished career.

The probate court in Iowa also has jurisdiction to establish and administer guardianships and conservatorships, and will hear  disputes concerning the creation, interpretation, administration, and revocation of trusts.

What is the purpose of probate administration? 

Probate administration is an official process for resolving claims that creditors and others have against the deceased.  This allows the people who receive the deceased’s property to have good title to the property, free and clear of claims.  The administration process also gives parties who believe they should be beneficiaries of the decedent’s estate an opportunity to have their claims heard.

Can a power of attorney be used during the period between death and the start of probate administration?

I am often asked by family members of a deceased person or potential clients if the person holding a power of attorney from a decedent can use that document to transact business after the death.  Technically a power of attorney document is the designation of an agent, and at law the agency ends upon the death of the person who made the designation.  So death terminates the agent’s power to act for the deceased.  As often happens with the law, there is an exception to this rule for special circumstances. IF the agent does not have actual knowledge of the death, he or she may transact business and bind the estate and heirs by doing so in good faith. The exception doesn’t apply after the agent learns of the death.

How is the probate process started? 

The Iowa Code specifies who can ask the court to start the administration.  When the deceased leaves a will, the person nominated in it to serve as executor may file the original will with the Clerk of Court, along with a petition asking to have the will be accepted and an executor appointed.  If that person does not start the process, then any other interested person may do so.  The family members of the deceased, creditors, and anybody else who is a beneficiary or claims to be a beneficiary are all parties with sufficient interest to ask for the start of administration. When there is no will, the surviving spouse may seek administration, as well as heirs, creditors, and others who can show good grounds to do so.

Are probate lawyers necessary? 

You can represent yourself in court if accused of a crime, and you can pursue or defend a civil lawsuit without hiring an attorney.  So if you are the executor in a probate, you ought to be able take care of the job without hiring an attorney, right?  No, not in Iowa.  Under Iowa’s Probate Code, the executor or administrator of the estate “shall” file a “designation of the attorney employed by the fiduciary to assist in the administration of the estate“.

Why the difference? It’s not spelled out in the Probate Code, but it has to do with the old saying that anybody who represents himself in court has a fool for a client. In other words, self-representation is not considered wise, but it is allowed because if the ‘client’ is being foolish, she is only hurting herself.  The executor, on the other hand, is not representing himself or herself.  Instead, the executor is a fiduciary, one charged with acting in the most responsible manner to protect the interests of others, in a fair and unbiased way.  An executor who makes mistakes because he doesn’t have the advice of counsel could end up harming many people other than himself.

If you are going to  be the beneficiary of an estate, you might not like the idea of the estate spending money to hire a probate attorney.  But ask yourself, do you want or trust your Uncle Charley, who will serve as an executor or administrator, to figure out the 20 divisions and 140 pages of the Probate Code.  Would you want to do that if you were an executor?  I don’t think so.  I think you’d rather have someone with expertise that you trust assisting you.  So while the Iowa requirement that a probate lawyer be hired might seem overbearing at first, it actually serves a good purpose.

What are probate assets?

Probate assets are the items of property owned by the deceased that will be subject to administration of the deceased’s estate.  In other words, it is the group of property items that is under the jurisdiction of the court and can be used to pay court costs, other administrative expenses, or creditor claims.  Assets don’t fit into this class if by law they automatically passed to, or were payable to, another person upon the decedent’s death.  This happens if property was co-owned in joint tenancy with rights of survivorship.  It also happens when a life insurance policy or investment account designates a beneficiary other than the estate.  In Iowa the beneficiary designation takes precedence over the terms of the will.

The benefits and perils of using nonprobate assets as part of an estate plan will be the subject of upcoming blog posts.

How long it does probate administration last?

There is no set or standard time for the length of probate administration.  It lasts as long as it takes for the executor or administrator to accomplish all of the tasks required by the Probate Code.  We can say that administration is guaranteed to take at least 6 months or more.  A notice has to be published twice as part of the administration of every estate.  Then there is a 4-month period when creditors can file claims and interested parties can challenge the validity of the will.  After that period ends, an income tax return has to be filed for the estate, followed by the receipt and filing of a certificate from the Iowa Dept. of Revenue.  It usually takes about 6 weeks for the Dept. of Revenue to issue the Certificate.  Then the Final Report has to be filed.  If waivers cannot be obtained from everybody involved, at least another 20 days must pass to give all interested parties an opportunity to object to the Report.

In my experience, a large percentage of estates can be fully administered and closed within a year or slightly longer.  The time can be significantly longer when the estate has assets that are difficult to locate or administer, or if there are disputes that require a hearing to be resolved.  The Probate Code states that the administration shall be finalized within 3 years of the second publication of the notice of administration, but the court can order an extension of that time.

When do beneficiaries receive their share of the probate assets? 

The executor or administrator has a duty to pay valid creditor claims before distributing any nonexempt property to the beneficiaries.  The amount to pay for such claims cannot be known with certainty until the 4-month period for filing claims has ended.  So it is not prudent for the executor to distribute nonexempt assets to the beneficiaries before the 4-month period expires.  Sometimes doubt about the amount of claims exists after the 4-month period ends.  This can happen if there is a claim being disputed, or if the estate will have a tax liability and the amount of the tax is not yet known.  When this happens, the executor is likely to delay any distributions at least until the tax liability has been determined.

Beneficiaries of a specific devise in a will receive slightly more favorable treatment in the Probate Code.  Section 633.355 provides that such property is to be delivered to the devisees after 9 months have expired since the time the executor was appointed.  (The federal estate tax return and the Iowa inheritance tax, if required, are due 9 months after the death of the decedent).  However, that section allows the court to delay the distribution if good cause is shown.  The beneficiaries who share the residue of the estate are not entitled to receive their share until the estate is finally settled.

A number of times during my career an estate has had assets far in excess of any possible tax liability.  In those circumstances, I have advised the executor that partial distributions can be made to the beneficiaries.  Making partial distributions results in some more work, but I think that is better than letting significant sums of money sit idle in the estate checking account when the beneficiaries could use the funds in a number of different ways.

If you have a question about the probate process that you’d like to see covered in this blog, please let me know in a comment.

 

 

Please check out the Arenson & Maas PLC website here.

You can leave a question or comment below, or contact me here.

 


Comments

Answering Some Basic Questions About Probate In Iowa — 10 Comments

  1. My mother died December 2011 in Des Moines. My sister is the executor of her will. The greatest bulk of my mother’s money was tied up in a down payment at an assisted living facility (90,000.00), and we are advised that that money will not be distributed until the unit is once again rented. Can you comment on this?

    Also, my mother had some very valuable belongings, and so far, my sister has done nothing except store it in the house that she purchased that is next door to the home she resides in. Her daughter lives there, and utilizes many of the items. What is the time frame to submit an inventory and liquidate the assets?

    Thank you for your consideration.

    Please do not post my name on your blog.

  2. Angela, I do not see anything unusual in being told that the assisted living investment will not be paid until there is another occupant. The beneficiaries receive the same rights as the decedent had. Here your mother’s rights were set by the contract with the facility, and the same terms apply to the estate/beneficiaries. I do wonder about the unit not being disposed of in a 2-year period. That’s not a matter that is governed by the Probate Code, but the Executor and the Executor’s attorney have an obligation to make sure that the contract rights are being enforced.

    A Report and Inventory listing all items in the estate is supposed to be filed within 90 days after the Executor is appointed. If any of the items were specifically bequeathed to anyone, those items were supposed to be delivered to the beneficiary within 1 year after the Executor is appointed. If there were no specific bequests, the disposition of the personal property is governed by the terms of the Will. Quite frequently the Will gives the Executor a lot of discretion in determining what to do with tangible property. However, the Executor has an obligation to act reasonably and to treat all the beneficiaries fairly. Keeping all of the items for what is in effect her sole personal use would not be right. You should bring this situation to the attention of the attorney for the estate. There may be circumstance that explain what is being done, or it may be that the attorney is unaware of what is being done.

  3. There were U.S. Savings bonds paid to the beneficiaries before the probate process was started, Dp these bonds then become an as asset to which the executor can receive 2 per cent of the total estate value.

  4. Jeff, the answer is yes. Under Iowa Code section 633.197 the fee is to be based on “the gross assets of the estate listed in the probate inventory for Iowa inheritance tax purposes . . .” The Iowa Supreme Court stated in the 1992 case In re Estate of Lynch, 491 N.W.2d 157, that:

    The maximum fee is calculated by applying the statutory schedule of fees to the gross assets of the estate as listed in the probate inventory for Iowa inheritance tax purposes. The gross assets of the estate listed in the probate inventory for inheritance tax purposes include all property passing by any method of transfer specified in Iowa Code section 450.3 without reduction for the liabilities specified in Iowa Code section 450.12.

    Putting these two points together in a 2006 opinion (IN THE MATTER OF THE ESTATE OF MELBA N. MARTIN) the Iowa Supreme Court ruled that an attorney may be awarded fees for annuities payable directly to a designated beneficiary in an amount of %537,500, and that the fee based on the amount could be deducted in full on the inheritance tax return.

    The timing of the distribution of the bonds to the designated beneficiaries does not change the result. The Executor and lawyer may still have to do some work in connection with the bonds, especially if the beneficiaries are subject to the inheritance tax. However, if there is not much else to do in the estate, you may be able to find an attorney willing to negotiate the amount of fees so that all factors are taken into account.

  5. My mother died in 2011 and didn’t have a will but had considerable valuables , jewelry, antiques, collectibles ETC.My sister claims that my mother had no money and that she had to pay for the funeral and has acted as the executor.She has since said she is going to sell off all the items tore coop her money. Me and my 4 remaining brothers all believe my sister is lying and have caught her hiding some items from my mothers estate. To this date my brothers have only received some glassware from my Mothers china cabinet.

  6. Robert, your sister’s claim that she has acted as executor is wrong from a legal perspective. This unfortunate situation is an example of why we recommend that people make a will before they die. If that had been done, you would know who your mom wanted to be in charge, and there would be some accountability.

    Assuming your mother lived in Iowa, it’s not too late to seek an administration of your mother’s estate. That can be done for up to 5 years after the date of death. All of the brothers and sisters are heirs, and have the right to ask the court for administration.

    I suggest that you or your brothers contact a lawyer to discuss the situation in more detail. The decision about starting administration often depends on the value of the property that was left by the decedent. In your case, that fact is subject to speculation, which makes the decision more difficult. Waiting 2 to 3 years also makes the decision more difficult, because the passage of time makes it harder to prove what assets were owned by your mother at the time of her death.

    If you decide to seek administration, your sister has a right to submit a claim to be repaid the amounts she spent for your mom’s funeral.

  7. My mother died recently. She had a will that appointed me as executor. All of her investments have beneficiaries. I am a co-owner of her bank accounts. Her home is in a trust. She has no assets that need to be probated. Do I still need to file her will with the court? Do I still need to hire an attorney? Thanks for your help.

  8. Robert, there are times when there is no reason to probate a will. This appears to be one of them because title to all of your mother’s property passes automatically outside of the will. However, it is possible that some issues exist that should prompt you to get specific advice from an attorney.

    These issues relate to whether your mother had debts that are not satisfied. Even though her accounts pass automatically outside of the estate, Iowa has statutes that allow unpaid creditors to collect from the beneficiaries of the accounts. Iowa Code section 524.805 applies to Pay On Death (POD) accounts held at state banks. Code section 633D.8 applies to investment accounts that have To On Death (TOD) beneficiary designations.

    Iowa’s Department of Human Services could have a claim against the property if your father or step-father had received Title 19 benefits to stay in a nursing home before his death. The Estate Recovery Program in Des Moines is supposed to be notified so that it can determine whether DHS has a claim. General information about the recovery law can be found here: https://www.iowa-estates.com/. The notice can be done by email. There is an online form that can be used when there is no probate.

    Another possible claim against the assets is the Iowa Inheritance Tax. If any of the account beneficiaries are not lineal descendants of your mother, there will probably be some tax due. (A chart showing the different applicable rates is here.) You won’t be responsible for collecting any of the tax due on funds that are not within your control, but you might consider notifying the Iowa Department of Revenue.

    Finally, if the house was held in a revocable trust established by your mother, the Iowa Trust Code allows creditors up to a year after her death to file claims against the Trustee, unless the Trustee elects to publish and mail notice. The publication shortens the period for filing claims to four months after the second publication of the notice. Also, if the trust was your mother’s, there will be inheritance tax due if the beneficiaries of the trust are not her lineal descendants.

  9. Mr. Radig;

    Mother passed in September of 2012. I am appointed Executor of the estate in her will dated 2003.
    I was co-owner of a bank account with mother and I paid the final bills before exhausting the balance.
    In 2008 her lawyer filed a lien on her house in favor of several children who had furnished mom with money to make her house payments since 1990.
    Mother went on title 19 in I believe 2002.
    Her house is the only asset of the estate.
    DHS sent a bill for $89,900 and said if there is more money available, they would come up with more expenses.
    The house will not bring $90,000 and in fact needs quite a bit of work in repairs.

    The Estate Recovery has appointed a lawyer to probate the estate. We were advised not to since we might get nothing in return.

    I have read your blog site information. It has already been very helpful.

    What do I need to do in regard to the circumstances listed?
    What can I expect from the probate by the Estate Recovery lawyer?

    I request you do not use my name on your blog site.

    Sincerely,
    XYZ

  10. XYZ, although I haven’t been involved in an administration started by Estate Recovery during my practice in Cedar Rapids, I can give some information.

    First, being named as executor in the Will is only a nomination. You are free to decline to serve. If you do, then you have the obligation to deliver the original Will to the Estate Recovery attorney. If you decide to go ahead as the Executor, you will also have the obligation to help the estate’s lawyer in collecting assets and records, and signing appropriate court documents, including the deed to the house when it is sold. If you serve as Executor you may be compensated for your service, but the amount of the fee is subject to statutory limits and court approval.

    Second, you can expect the Estate Recovery lawyer to be primarily interested in liquidating the house to cash that can be paid to Estate Recovery. Since it does not appear there is any cash available now to fund repairs and improvements, the house will most likely be sold “as is”, possibly at an auction. I’m not sure from your comment if there were any funds left over in the bank account that listed you as co-owner when you were finished paying bills. If there were, the lawyer may look into collecting them under the provisions of Iowa Code section 524.805.

    This does not mean that the attorney is relieved of the other obligations of regular administration. He or she must arrange for publication of notice, file a Report and Inventory, attend to tax returns for the estate, and prepare and file a Final Report. As executor you will have to cooperate with him or her on each of these tasks.

    If there is in fact a lien on the house in favor of your bothers and sisters, then that will have to be dealt with during the probate. The general rule is that the lien which is created first has priority to the proceeds after a sale. It looks like the Title 19 payments started in 2002 before any judicial lien arose. If the Estate Recovery preference for payment ahead of general creditors found in the Probate Code is treated like a lien, then your family may get nothing. On the other hand, sometimes when parties provide funds that preserve of increase the value of property that is collateral for another party the courts will rule as a matter of equity that the ones contributing the funds are entitled to be paid first, to the extent of the benefit that they have provided. Decisions in such situation depend upon the entire set of facts and circumstances. If it ends up looking like there are complex legal issues that will be very expensive to litigate, the parties may decide to work out a compromise.

    I hope things go well for you in this situation.

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