Iowa Estate Planning Considerations
Iowa is a Common Law State, which means the rules governing the ownership, division, and inheritance of income and property acquired by a husband or wife during their marriage hold that subject to various qualifications, each spouse owns and has complete control over their own her income and property.
Last Will and Testament
The minimum age of a person competent to make a will is 18 or younger if they have been legally married. The number of witnesses necessary to execute a will is two.
Uniform Transfers to Minors Act (UTMA)
The original custodial gift may be a life insurance policy or annuity contract.
Custodial property may be invested in or used to pay premiums on (1) a policy on the minor’s life if the minor’s estate is the sole beneficiary, or (2) a policy on a third party in whom the child has an insurable interest if the minor or the custodian is the irrevocable beneficiary.
- The custodial arrangement terminates when:
- The minor child reaches age 21, or
- The minor child dies.
Dying without a Last Will, the Iowa laws of Intestacy
The estate goes to the surviving spouse, as follows:
- If there are no descendants, or if descendants are also descendants of the spouse, —100% of the estate
- If there are surviving descendants where at least one is not also a descendant of the spouse, the surviving spouse takes:
- 50% of the real property possessed during a marriage
- 100% of the personal property owned by the decedent as “the head of a family.”
- 50% of all other personal property of the decedent
- If these do not total $50,000, additional homestead interest and other real and personal property is given to the spouse (up to the entire net estate) to make $50,000
If there is no surviving spouse, or if a portion of the estate does not go to the spouse:
- 100% (or applicable portion) to descendants, per stirpes
If there is no surviving spouse or descendant:
- 100% to surviving parent or parents equally
If there is no surviving spouse, descendant, or parent:
- 50% to the descendants of decedent’s mother and 50% to the descendants of decedent’s father, per stirpes
- If one deceased parent has no surviving descendants, the entire estate passes to the other deceased parent’s descendants, per stirpes.
If none of the above:
- Intestacy laws outline further distribution steps to grandparents, great-grandparents, deceased spouses, and their descendants. See Iowa Code §633.219, 4, 5, 6.
- If no legally described recipient can be found, estate assets go to the state of Iowa.
Iowa follows the Uniform Fiduciary Access to Digital Assets Act to ensure that testators can retain control of their digital property and plan for its ultimate disposition.
- Iowa imposes an inheritance tax on estates valued at $25,000 or more. The inheritance tax rate and exemption amount depend on the relationship between the decedent and the beneficiary.
- Unlimited exemption for surviving spouse and parents, grandparents, great-grandparents, and other lineal ancestors; children, stepchildren, grandchildren, great-grandchildren, and other lineal descendants.
- No exemption for other persons (e.g., siblings, aunts and uncles, nieces and nephews, sons-in-law, and daughters-in-law).
- Full exemption for life insurance proceeds payable to a named beneficiary other than the insured’s estate.
- For a brother, sister (including a half-brother, half-sister), son-in-law, and daughter-in-law, the tax rate begins at 5% for the initial $12,500 of the share the way up to 10% of net taxable value over $150,000.
- For all other beneficiaries, the tax rate begins at 10% for the initial $50,000 of the share, all the way up to 15% of net taxable value over $100,000.
Iowa does not impose an estate tax.
Generation-Skipping Transfer Tax (GST Tax)
Iowa does not impose a GST tax.
Iowa does not impose a gift tax.