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Real Estate Issues
Wills and Trusts
Wills are a method to dictate the division of your property following your death, and are an important part of estate planning, but the will must be valid at your death. A will must be read to be determined if is is valid, as a will only speaks at the death of the signer (the testator) and has no effect until the testator is dead. If a will is not valid, then state intestate procedures may apply or the will may be determined to be only partially valid, and partial intestate procedures apply. If the will is valid then the will is entered into probate. Only an original will can be entered into probate. A copy cannot be entered into probate, as it is assumed that if the original cannot be found then the original was purposely destroyed by the testator.
Wills should be stored in a readily accessible location where they can be easily retrieved upon death, such as a desk drawer. Do not place in a safety deposit box, as a safety deposit box is sealed upon the death of the holder and is not unsealed until too late for the will to be retrieved and read. Wills can be filed with the probate court, but then it is difficult to change or destroy the will if the testator changes his mind later. It is advised to file the will in a desk drawer in a sealed envelope clearly marked as a will.
Will Changes/ alterations:
If the testator later decides to change his will after it has been drafted, do not cross out and make a pen change. All changes must be made with the same procedures as the original signing as the will. Thus it is strongly advised that a will be drafted by an attorney and that all changes be made by an attorney. Small errors can invalidate a will and can result in state intestacy procedures (statutory taking procedures without consideration of the will).
Defects in the will can be changed by a codicil (Iowa Code 633.282), however, it is advisable to redo the entire will rather than make changes to the will with a codicil.
Reasons for will:
1. avoid probate decisions- determine who receives. However, a will only affects property that goes into probate. If an estate is properly designed, much if not all of the property may not even go into probate and the will may not affect that property.
2. Costs reduced
3. Not public
4. Avoid estate tax
5. Control assets
6. Ease changing beneficiaries
7. Avoid creditors- watch fraudulent transfers
8. Avoid election by surviving spouse
9. Lessen possibility of will contest
10. Tax and estate planning
11. Reduce conflicts
12. Leave property in trust
13. Name conservator or guardian to avoid fight
14. Instructions on how to be buried or cremated
15. Instructions on how pets to be taken care of
16. Name executor to administer estate and how to administer
Prerequisites for valid will:
Iowa Code 633.264 - full age
Iowa Code 633.03 - at least 18 or married.
Sound mind- ability to understand making will and objects of bounty
(takers)- Incompetency is not the same standard as being committed for mental health reasons
Know what signing, nature and extent of property
Don’t need to know ages and number grandchildren.
Can be in nursing home, be committed, etc. as long as has a lucid
moment when signing and has testamentary capacity at that moment.
Simultaneously hold elements in mind and make reasonable judgment.
Compliance with statutory formalities
Ceremony. Must have ceremonial procedures observed.
Will must be in writing- no oral will (noncupative) in Iowa. No holographic- (handwritten) will in Iowa
Must be Signed by testator
Valid otherwise if valid in the state signed- Iowa Code 633.283 (not valid if other state authorizes oral will, no ceremony, no signature, etc.)
Must be Witnessed by 2 witnesses-Iowa Code 633.280, 279 . If not disinterested witnesses, then witness takes what would get under intestate. The best procedure is a self proving affidavit where the witness signatures are notarized so the witnesses do not have to be located during the probate procedure. If no self proving affidavit, the witnesses must be located and they must testify that they were disinterested witnesses, were competent, and of age, and signed the document, and witnessed the testator sign the document.
Provisions in will:
1. Dispositive provisions- who gets what
2. Residuary clause- what happens to the left over property
3. Executor- who is the executor
4. Bond waiver for executor
5. Tax payment instructions
6. Provisions for minors
7. Properly signed
8. Attestation clause
9. Self proving affidavit
10. Definitional section
1. Enter will into probate
2. See if property is nonprobate.
3. See if executor qualified- then appointed.
4. Look at specific bequests .
General bequests- give to someone general property
Specific – “my” or specific property
Residuary- left over assets
If no residuary then passes intestate.
5. Abatement-Not enough assets for bequests, so gifts must be cut down in particular sequences. Iowa Code 633.436-437
Surviving Spouse provisions- Iowa Code 633.236-237
Divorced spouse is out of will, same as predeceased- Iowa Code 633.271.
Caused death- no taking under the will. Iowa Code 633.535-537
Simulataneous death- Iowa Code 633.523 - as if testator survived the other party.
Elective share- Surviving spouse has elective share of 1/3 regardless of will. Iowa Code 633.236-237
Spousal allowance- Iowa Code 633.374
Surviving children- Iowa Code 633.267. If born after will, children can take. If born before will, they are cut out. Surviving children allowance- Iowa Code 633.376
Ademption by extinction- If the property doesn’t exist when testator dies, in Iowa you don’t get. In some states there is ademption for specific gifts, but not in Iowa.
General property provisions: After acquired property is covered in Iowa Code 633.269. Property is taken subject to debt unless provision in will- Iowa Code 633.278.
Cy pres- intent of testator in giving to charity. Codified in trust code but not will code.
Contractual wills- Iowa Code 633.270
Antilapse- Iowa Code 633.273
Separate writing- Iowa Code 633.276
Mention letter in will and transfer as per letter
Not for real estate.
Writing doesn’t have to witnessed
Marking by tape- not valid.
Disclaimer to Taking- Iowa Code 633.901-917
Must be in writing
Delivered to personal representative.
Must do before receive property or interest
Treat as predeceased so goes to descendants of disclaimant under anti-lapse.
Must do within 9 months for tax purposes.
Can be fraudulent conveyance if attempt to disclaim to avoid creditor.
Trust included in will-
Pour over will- assets from estate to trust.
Use to avoid placing assets forgotten into probate.
Revocation of Will :
Provision in new will to revoke all prior wills.
If no revocation provision, then revokes only inconsistent provisions.
Iowa Code 633.284- cancel or destroy will by act or testator. Must be
witnessed in same manner as making will. Testator must be competent.
Revoke by physical act- tear up, burn, shred, draw lines through, write void
or cancelled on top (some not good if in margin)
Tearing, burning must go across written part.
Partially revoked by law- divorce, murder
Will contests- Grounds for contesting the will:
Lack of testator capacity
No testator intent
Insane Delusion v. False Belief
Fraud in the inducement- telling testator something false causing change in will.
Primary factor in contesting.
Messes with mind- not threatening physical harm.
Untraditional disposition- disturb taking of close
Opportunity and access- close proximity to testator
Relationship between testator and alleged undue
influencer-confidential relationship and take advantage
Testator susceptible and ability to resist- rely on
Connection between will and alleged undue
Burden on person trying to contest will. Chances of
winning not great.
Not valid in Iowa.
Mistake in the Inducement-thought child killed- cts won’t
Connotes direct use of violence, threats of brutality, or withholding food or medicine.
Settlor-> Trustee (legal title)-> beneficiary (equitable title)
Why create trust?
Protection of loved ones
Minors or incompetent persons
Spendthrift Iowa Code 633A.2301.
Eliminate influence of friends, relatives
Management of trust assets to preserve assets
Flexibility of distribution of assets
Blind trusts to prevent conflicts of interest
Don’t want income stuck in trust- high income tax (35%) in
Charitable trust- control how use
Asset protection and estate planning
Continue business after death.
Create Trust- Iowa Code 633A.2101.
Inter vivos v. will: Transfer property to someone who holds as trustee for benefit of someone else.
Valid trust: Iowa Code 633A.2102
Trust terms control. Iowa Code 633A.1105
Can trump IA Trust Code by provisions in trust, except maybe
validity of trust
Competent- 633A.1102(4)- Not the same as commitment
for mental health reasons.
Revocable same as for will 633A.3101
Irrevocable- need to understand effect on future financial security and anyone dependent on you- higher level of understanding.
Statute of frauds compliance 633A.2103. Part performance may take out of statute of frauds
Purpose- can’t be illegal purpose 633A.2104
Property- dry or unfunded trust only comes into being when trustee receives property, but can’t be created earlier.
Precatory language- I wish, I recommend, not binding- must be mandatory language or doesn’t create trust.
Watch fraudulent conveyance-
IA- no conveyance to wealth preservation trust
Life insurance trust-
Trustee- but doesn’t fail for want of trustee. If dies, alternate.
Trustee must have duties.
Trustee doesn’t have to be bonded
No oath required- but executor of will has oath.
Liability of trustee- 633A.4601, 4503
Nonliability- beneficiary consent- 633A.4506
Breach of trust- 633A.4501
Remedies for breach of trust- 633A.4502
Limitation of liability- 633A.4505
Duty to inform and account- 633A.4213
Certification of trust- 633A.4604
Discretionary powers- 633A.4214
Discretionary powers unless trust says so.- 633A.4702
Standard of care- prudent investor- 633A.4302
Transfer to minors through uniform transfers to minor- 633A.4706
Trustee can’t be sole beneficiary- merger when legal and equitable titles merge so no longer have trust. But not always 633A.2102(3).
Must have beneficiary unless charitable, honorary, or pet trust.
Rule against perpetuities- can’t violate. Dynasty trust- goes on forever, can only be created in states without rule against perpetuities.
Must vest within 21 years of lives in being (age + 21).
Written- IA doesn’t recognize oral trust. So doesn’t violate statute of frauds. 633A.2103
Trust not subject to court jurisdiction, unless petition. 633A.6202,
Trust must keep beneficiaries informed (trust created before 2002)- 633A.4213
Petition court for accounting- 633A.6202(2)(g)
Resulting trusts- 633A.2106 . Trust fails, but holds as resulting trust.
If illegal purpose, trustee may keep if equitable
If trust fulfilled purpose, revert back to settler or estate.
Honorary trust- 633A.2105 . For pets
Constructive trust- 633A.2107 . Equitable duty to convey on ground unjustly enriched.
Charitable trust- 633A.5101 et seq.
Revocation or modification- Common law- irrevocable unless stated. In Iowa- revocable unless said.
Reasons for revocable trusts-
Only goes to probate when can’t determine who receives.
Still need will as backup since trust may not be valid.
Pour over trust.
Revocable can amend as long as competent.
Irrevocable can be amended. 633A.2202
Consent of all beneficiaries and settler
Modification by court- 633A.2203
Parents can bind children even though they don’t consent.
If everyone consents can terminate trust, but settler must be alive unless court.so orders
Combination of trusts- 633A.2207
Division of trusts- 633A.2208,
Uneconomically low value- 633A.2205
Challenge Trust- same as for wills
Must be aggrieved person to challenge trust
Contest revocable trust- 633A.3108
Elective share of surviving spouse- 633.238 . 1/3 of property in trust where decedent was settler of revocable trust. Applies to revocable trust. Also applies to revocable trust changed to irrevocable trust within 1 year of death.
After born or adopted children- 633A.3106, share of trust.
Divorce- 633A.3107 - revoked spousal provisions.
No anti-lapse in trust code
Person causing death-633A.4707
Claims against revocable trust- 633A.3104
Trustee can cut off claims of creditors.
Notice to creditors, claimants, heirs, spouse, and beneficiaries- 633A.3109,
When settler dies, subject to debts if estate can’t cover debts and estate probated. Must exhaust assets of estate first.
Paid first 633.425/426
Claims of creditors- 633A.3109
Trustee liability- 633A.3111
Provisions for trust:
Trustee and successor
Bond for trustee
Provision to select successor trustee
Rule against perpetuities saving provision
Tangible personal property
Revocable or irrevocable
Power of appointment-general or specific