The Iowa Legislature just passed House File 661, which was proposed by the Probate and Trust Law Section of the Iowa State Bar Association and supported by the Iowa Academy of Trusts and Estates Lawyers.
The legislation contains the following provisions:
- Beginning on July 1, 2016, a step grandchild will no longer be subject to Iowa Inheritance Tax. Currently, direct ancestors and descendants, including stepchildren, were exempt from the tax, while step grandchildren were grouped with other individuals, such as siblings, nieces and nephews and unrelated individuals and were subject to the tax. This is a good step forward in modernizing the Iowa Inheritance Tax, given the presence of many loved step grandchildren in many of our lives.
- Under Iowa law, Iowa Code chapter 633.238, a surviving spouse has a right to take an elective share of a deceased spouse’s estate. That share is generally one-third of the spouse’s estate. The legislation authorizes a spouse to relinquish the right to property transferred to a trust during the marriage, with certain protections so that a spouse who is asked to relinquish the right is made aware of the legal rights being surrendered. This is a good step forward in allowing spouses to plan their estates in a way that provides both for the surviving spouse and each of their intended beneficiaries.
- Trusts and Estates subject to filing an Iowa fiduciary income tax return will be authorized to deduct certain expenses even if not deducted on a federal income tax return.