In this article, we discuss important questions surrounding wills and trusts in Iowa. We cover the following:
In Iowa, if you die without a will, your property follows what is known as intestate succession. In short, this will give all of your property to your closest relatives, beginning with your spouse and children. If you don’t have a spouse or children, your grandchildren or parents will get the property and if you have none, then distant relatives will get the property. Should you have no relatives, then the state will take your property. To avoid this process and have decision making power in who will get your property when you pass, you need to draft a will.
A will, also known as a last will and testament, will help you protect your family upon your passing. Without a will, in Iowa, when you pass, your property will follow intestate succession. This will often lead to family members being left out of receiving anything or property going to the wrong people. A will allow you to leave your property to people and organizations, name a personal guardian to care for any children you may have, name someone you trust to manage any property you leave to your minor children and name an executor to make sure your will is being properly carried out.
In short, to have a will drafted and executed, you need to make the following decisions:
A trust is where one person, called the trustee, holds the title to property on behalf of someone else, known as the beneficiary. This can be the same person, allowing for a person to maintain control of the property held in the trust.
Living trusts, specifically, are trusts created while the party creating it is still alive, rather than one that is created upon the person’s death under the terms of something like a well. The beneficiaries named in the living trust will receive the trust property upon your death.
The main advantage of making a living trust is to avoid the potential family conflicts and delays of probate court proceedings following your death. Because Iowa doesn’t follow the Unform Probate Code, a living trust can be a much easier solution than going through Iowa’s complex probate process.
Iowa does have a simplified process, but it is limited to situations where there are under $25,000 and the decedent doesn’t have any real property. For many people in Iowa, the assets left upon their deaths will be above the amounts for a simplified probate. Should this be the case for you, a living trust may be the right option for you.
To create a living trust in Iowa, you need to do the following:
Once the living trust is created and the property is transferred, everything is complete. The beneficiary will receive the benefits of the trust’s property and the trustee will manage the trust.
Iowa’s new directed trust statue went into effect July 1, 2020. The statue benefits families who want to assign management roles within their trusts. While Iowa trusts were traditionally administered by corporate trustees that control all aspects of management, families can now create directed trust structures as part of their estate planning, giving them options for deciding who can or can’t manage certain aspects of their trusts.
Traditionally, trusts are managed by a trustee holding the power of accounting, investment management and making distribution decisions. One party used to hold these powers under Iowa law. Under the updated Iowa code, trust structures can be created dividing roles to multiple professional advisors that focus on specific aspects of your trust.
The investment trust director will tell the trustee which assets to hold and decide when to buy or sell investments. This person appointed can either be an individual like a family member or someone already handling your investments or an advisory form or committee of investment advisors. The benefit here is that the trust no longer needs to manage the investments within the trust and can instead take direction from this director that can better manage investments than a traditional corporate trustee that takes more of a safe and conservative investment approach.
The new Iowa statute also created the Distribution Trust Director position. Under the hold code, the sole trustee would receive and respond to all requests for distribution, making decisions on them. If you appoint a Distribution Trust Director, they will be able to analyze the family dynamics and tailor the distributions to bet meet their needs. Ideally, this person will be a neutral party without any conflicts of interest with the family.
Having a Distribution Trust Director can increase the efficiency of trust management, tailoring distributions to meet the family’s need. This is also helpful specifically for situations where a trust beneficiaries have significant financial needs, mental health or addiction issues that could impact distribution decisions.
Trust planning is intended to last multiple lifetimes. Over these time periods, changes happen to tax laws, family dynamics and the economy. Because of this, having a Trust Protector will modify the trust to address tax changes, updates to trust laws, beneficiary interests, replace trustees and trust directors, and appoint successors to roles designated in the trust. Iowa code specifies the exact duties of the Trust Protector.
Disclaimer: The information provided on this blog is intended for general informational purposes only and should not be construed as legal advice on any subject matter. This information is not intended to create, and receipt or viewing does not constitute an attorney-client relationship. Each individual's legal needs are unique, and these materials may not be applicable to your legal situation. Always seek the advice of a competent attorney with any questions you may have regarding a legal issue. Do not disregard professional legal advice or delay in seeking it because of something you have read on this blog.
Eugene NassifEugene Nassif is an associate attorney in Des Moines, Iowa.
