Effect of Divorce in Iowa Estate Planning: Do I Need to Change My Will to Keep My Ex Away?

-
First and foremost, I don't handle divorces and won't go further with any divorce questions because my knowledge ends with that.  In 20+ years of practice, handling a divorce 20 years ago was good enough to put away those materials.

But for those that have gone through a divorce, there is typically the question about how a divorce impacts your estate plan documents.  The Iowa legislators realize that many people don't go through the process to update their estate plans after a divorce, so they have implemented a series of code sections throughout the Iowa Code that essentially provide that if you get a divorce, any provisions that provide for your beloved "ex" are ignored.  Those various code sections are consolidated here to help you sleep a little easier at night:

  • Iowa Code section 598.20A provides that if you list your ex-spouse (or relatives of your ex-spouse) as your beneficiary of life insurance, that designation is ignored.
  • Iowa Code section 598.20B provides that if you list any of the same individuals as beneficiaries of your IRA, annuity, stock option plan, POD (Payable on Death) account, or TOD (Transfer on Death) registration, your beneficiary will be ignored.  
  • Iowa Code section 633.271 provides that any provisions in your will, whether as a beneficiary or appointment to a fiduciary position (executor or trustee for example) are negated.  
  • Iowa Code section 633B.10 provides that if you name your spouse as your agent under your financial power of attorney, their power terminates when the petition for dissolution is filed.  
  • Iowa Code section 144B.12 provides that after a divorce, if your medical power of attorney lists your spouse, that authority is revoked.  (No mention of relatives of ex-spouse).
"SO...with all of these helpful statutes, that means that I don't have to visit my friendly estate planning attorney, right?"  Not so fast my friend.  Updating your plan is still important for several reasons.  

(1) There may be a series of steps and documentation to prove that those provisions shouldn't apply and it may cause some delays in handling those matters.  (e.g., What if your family members have trouble tracking down the divorce decree?) 
(2) Just because your ex and family is out, you should re-examine who you want to handle your affairs or receive assets.  I've seen numerous documents that did not list an alternate/contingent individual.  That leaves all plans up to the court's determination which may not be the result you would like and can cause some legal fees to get that determination.
(3) You may want your ex-spouse to be involved.  **GASP**  Sometimes former spouses maintain a good relationship and still trust them to handle certain aspects.  Maybe not the norm, but it happens.
(4) Your federal laws are not so friendly for those procrastinating individuals.  Your 401k-type plan funds, which are not subject to the Iowa laws, do not have your ex-spouse revoked as a beneficiary.   I suspect that will be enough of a reason to start the process to update your beneficiary ASAP.

Comments

Post a Comment

Popular posts from this blog

Iowa Attorney Fees in Probate

-
Attorney fees in probating an estate of a deceased individual in the state of Iowa are set by the court. Pursuant to a state statute, the ceiling for fees is approximately 2%. Iowa Code section 633.198. While the statute states that it is the maximum, many Iowa attorneys treat it as the standard flat fee and will request - and often receive - fees based upon the 2% figure whether the amount of work equates to the 2% fee or not. Life insurance death benefits are not included when applying the 2% fee, but IRA's, 401k, jointly owned property, real estate, etc. are all included. If there is "extraordinary" services rendered, attorneys can also request extraordinary fees. Iowa Code sec. 633.199 . The statute sets out some examples of extraordinary services, such as sale of real estate, litigation and tax issues. Such fees are in addition to the ordinary 2% fees. An option to avoid paying attorney fees based on this flat rate system and approved by the court, whether the 2% o...
Read more

Compensation for Executor in Iowa Probate

-
In Iowa, the fee for the executor is set by the court and is based upon a state statute. Their fee is also based upon the size of the estate, as reported on the inventory filed with the probate court . Iowa Code section 633.197 provides that the personal representative (executor or administrator) fee shall not exceed $220.00 for the first $5,000 of probate assets, and then 2% on all assets over $5,000.00. All assets of the estate are included in the fee determination, with the exception of life insurance payable to others. Any compensation received by a personal representative is taxable income to that individual. Thus, if a personal representative is a beneficiary, they may want to consider whether to waive their fee and thus increase their inheritance, which may be free of tax, or to take their compensation and pay income tax on that amount.
Read more

Time Period to Administer a Probate Estate in Iowa

-
Iowa law limits the time period in which to administer an estate of an Iowa decedent.  Iowa Code section 633.331.  If an estate is not opened up within 5 years after death of the decedent, it will not be able to opened up.  Iowa currently does not recognize any exception to this rule. What does that mean? If there is a will and you wait more than 5 years after death before doing anything, you've waiting too long.  Good luck on the headaches of transferring any assets at that point. This doesn't mean that you always have to probate an estate, but if there are any possible assets that may need to be distributed, don't wait.
Read more