The Iowa Supreme Court, on November 17, 2017, issued an opinion interpreting a definition utilized in an inheritance tax exemption. The Court points out that for many years prior to 1997 the Iowa inheritance tax had an unlimited exemption for any share of the estate passing to the surviving spouse, limited exemptions for lineal descendants and lineal ascendants and no exemption for step-children. In 1997, the Legislature eliminated inheritance tax on property passing to parents, grandparents, great grandparents, children, stepchildren, grandchildren and great grandchildren among others. In 2003, the Legislature added a definition for “stepchild” which defined “stepchild” as the child of a person who was married to the decedent at the time of decedent’s death, or the child of a person to whom the decedent was married, which person died during the marriage to the decedent.
The case before the Court involved stepchildren whose biological parent divorced the step-parent. The step-parent’s Will and Revocable Trust divided the entire estate among his former wife, and the children of his former wife. The Court found that the act in question was not unconstitutional and that under the act, no inheritance tax exemption exists for bequests to stepchildren when the marriage between the parent and the step-parent was dissolved before the step-parent’s death. The Court found a rational basis exists for the Legislature to exclude stepchildren post-divorce from the inheritance tax exemption for surviving spouses, lineal descendants, lineal ascendants, and other stepchildren.
The Court concluded that the tax classification furthers the objective of promoting and preserving family relationships.
By James D. Beatty