Probate and real estate in Iowa
The requirement of probate in Iowa stems from how the asset is owned and how it transfers by law. Real estate is an asset that requires probate to transfer or be sold if there is not a surviving joint owner.
How can I transfer real estate to my heirs?
If you are married, the best way to avoid probate is for your deed to include you and your spouse as joint tenants with full rights of survivorship. You can look up your deed through your county recorder’s webpage to see if you own it with your spouse as joint tenants.
If you are unmarried, the best way to avoid probate is to transfer your home into a Revocable Trust. Other methods of titling real estate to avoid probate exist, but an experienced estate planning attorney should be consulted. Unintended consequences could result if you change your real estate ownership without the advice of an attorney.
Can I use a transfer on death deed?
The State of Iowa does not recognize transfer on death deeds (TODs). A deed that transfers real estate ownership to a named person upon the owner's death is not a valid transfer. A transfer on death deed should not be confused with a life estate transfer.
A life estate is created when the owner of real estate transfers legal ownership to another person and reserves a life estate for themselves. A life estate holder has a legal right to occupy and enjoy the real estate during their lifetime, but they do not have the right to sell or borrow against it. Creating a life estate can cause problems like triggering a due-on-sale clause for your mortgage that requires it to be paid in full. Another unintended consequence of creating a life estate is the owner of the life estate loses all rights of financial equity in the real estate.
Why doesn’t Iowa law allow transfer on death deeds?
There have been recent attempts to pass a transfer on death deed as law in Iowa. Three attempts have failed during the legislative session in the past decade. A comprehensive look at the history of the legislative bills and those in favor and opposition of the bills are written in Mark Stephen Hart’s Legal Note “It Sure Can Get Cold in Des Moines: Why the Iowa Legislature Has Remained Frozen on Transfer on Death Deeds for Real Property.”
The appellate court in Iowa confirmed that a transfer on death deed is void. The court affirmed that it doesn’t write the law on the matter, it is up to the Iowa legislature. A helpful summary of the case can be found in an article written by Kitt Jensen for the Iowa State University Center for Agriculture and Taxation.
How does real estate transfer in Iowa?
Joint Tenants with Full Rights of Survivorship: If real estate is owned as joint tenants with rights of survivorship, it transfers to the surviving joint tenant. If there is no surviving joint tenant, the real estate transfers by the terms of the Last Will and Testament of the last joint tenant to die.
Tenants in Common: If real estate is owned as tenants in common, the ownership is transferred by the terms of the tenant’s Last Will and Testament. Tenants in common is not a form of joint tenancy. Two or more people own the real estate without a right of survivorship.
Using a Revocable Trust: If real estate is owned in a trust, it transfers by the terms of the trust. For a trust to own real estate, the owner(s) transfers their legal interest to the trustee of the Revocable Trust using a quit claim deed. Because a trust is not an individual, it survives upon the death of the trust's creator.
Does a Will avoid probate?
No. A Will is a legally enforceable set of instructions for transferring assets to beneficiaries. The Will controls the transfer of assets when there is no surviving joint owner of an asset and no named beneficiary. A Will instructs the executor how the real estate is required to be transferred. The court-supervised probate assures that the real estate is transferred according to the instructions in the Will.
You can learn whether your situation requires a Revocable Trust by scheduling a Revocable Trust Consultation with Hope Wood JD.
