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2015 Legislative Changes Regarding Probate & Trust

The 2015 Legislature recently adjourned for the year. I will summarize the major items of legislation which were passed by the House and Senate.

inheritance tax code iowaIowa inheritance tax changes were made in regard to bequests going to the children of step-children.   Prior to the passage of the act, there was no Iowa inheritance tax owed from bequests passing to the surviving spouse, parents, grandparents, great grandparents, children, stepchildren, grandchildren, great grandchildren, and other lineal descendants. The new Act provides that bequests passing to lineal descendants of a decedent’s stepchildren will also be exempt from Iowa inheritance tax.   The bill does not become effective until July 1, 2016, and as of the date of this article, the Governor has not signed the legislation.

A bill was passed amending the Guardianship Provisions of the Probate Code which clarifies the rights of an adult ward of a guardianship to visit, communicate and interact with others of their choosing, subject to reasonable limitations by their court appointed guardian. A new provision further provides that a court has the authority to approve the denial of all communication, visitation or interaction with another person only upon a showing of good cause by the guardian. The Act further provides that if an adult ward is unable to give express consent to such communication, visitation or interaction with a person due to a physical or mental condition, consent of an adult ward may be presumed by a guardian or a court, based on an adult ward’s prior relationship with such person. Said bill has been signed into law by the Governor.

Another bill which passed and has been signed into law by the Governor changes Chapter 252 of the Iowa Code. Said Chapter previously gave counties the authority to demand support from parents, children, grandparents and grandchildren of welfare recipients. As a practical matter, counties have not exercised such authority in the past. The new Act limits the authority of the counties to seek such support. The Act becomes effective July 1, 2015.

Finally, both Houses in the Legislature passed the ABLE Act which stands for “achieving better life experience”. The Act authorizes states to permit savings accounts for the disabled which are similar to the 529 College Savings Plans currently allowed. The income earned on such accounts are exempt from federal tax as long as the money is spent for eligible services. The person contributing funds in the account will receive a deduction on their state income tax return. The ability to open said accounts in Iowa will begin on July 1, 2016. Eligible individuals must be severely disabled before turning age 26. Individuals with ABLE accounts will be allowed to maintain eligibility for SSI and Medicaid subject to some restrictions. The annual contribution limit is $14,000.00 per year. The Act is an alternative to the establishment of a special needs trust for a disabled individual. The Act has not been signed into law at the time of this article by the Governor. Given the financial impact of the Act, there appears to be a possibility that the Governor will veto the bill.

In my article next month, I will update you on which of the bills were signed into law and which were vetoed.

– By James D. Beatty