House File 367 - Introduced HOUSE FILE 367 BY COMMITTEE ON JUDICIARY (SUCCESSOR TO HSB 41) A BILL FOR An Act relating to probate and estate-related laws, including 1 the deduction of administrative expenses on the Iowa 2 fiduciary income tax return, the Iowa inheritance tax, 3 fiduciaries’ right to property and information, and 4 the surviving spouse’s elective share, and including 5 applicability provisions. 6 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 7 TLSB 1061HV (2) 86 jh/rj

H.F. 367 DIVISION I 1 FIDUCIARY INCOME TAX 2 Section 1. Section 422.7, Code 2015, is amended by adding 3 the following new subsection: 4 NEW SUBSECTION . 57. On the Iowa fiduciary income tax 5 return, subtract the amount of administrative expenses that 6 were not taken or allowed as a deduction in calculating net 7 income for federal fiduciary income tax purposes. 8 DIVISION II 9 INHERITANCE TAX 10 Sec. 2. Section 450.9, Code 2015, is amended to read as 11 follows: 12 450.9 Individual exemptions. 13 In computing the tax on the net estate, the entire 14 amount of property, interest in property, and income 15 passing to the surviving spouse, and parents, grandparents, 16 great-grandparents, and other lineal ascendants, children 17 including legally adopted children and biological children 18 entitled to inherit under the laws of this state, stepchildren, 19 and grandchildren, great-grandchildren, and other lineal 20 descendants , and stepchildren and their lineal descendants are 21 exempt from tax. “Lineal descendants” includes descendants by 22 adoption. 23 DIVISION III 24 FIDUCIARY WRITTEN REQUESTS 25 Sec. 3. Section 633.78, Code 2015, is amended by striking 26 the section and inserting in lieu thereof the following: 27 633.78 Fiduciary written request and third-party protection. 28 1. A fiduciary under this chapter may present a written 29 request to any person for the purpose of obtaining property 30 owned by a decedent or by a ward of a conservatorship for 31 which the fiduciary has been appointed, or property to which 32 a decedent or ward is entitled, or for information about such 33 property needed to perform the fiduciary’s duties. The request 34 must contain statements confirming all of the following: 35 -1- LSB 1061HV (2) 86 jh/rj 1/ 7

H.F. 367 a. The fiduciary’s authority has not been revoked, modified, 1 or amended in any manner which would cause the representations 2 in the request to be incorrect. 3 b. The request has been signed by all fiduciaries acting on 4 behalf of the decedent or ward. 5 c. The request has been sworn and subscribed to under 6 penalty of perjury before a notary public as provided in 7 chapter 9B. 8 d. A photocopy of the fiduciary’s letters of appointment is 9 being provided with the request. 10 2. A person to whom a request is presented under this 11 section may require that the fiduciary presenting the request 12 provide proof of the fiduciary’s identity. 13 3. A person who in good faith provides the property or 14 information a fiduciary requests under this section, after 15 taking reasonable steps to verify the identity of the fiduciary 16 and who has no knowledge that the representations contained in 17 the request are incorrect, shall not be liable to any person 18 for so acting and may assume without inquiry the existence of 19 the facts contained in the request. The period of time to 20 verify the fiduciary’s authority shall not exceed ten business 21 days from the date the person received the request. Any right 22 or title acquired from the fiduciary in consideration of the 23 provision of property or information under this section is not 24 invalid in consequence of a misapplication by the fiduciary. A 25 transaction, and a lien created by a transaction, entered into 26 by the fiduciary and a person acting in reliance upon a request 27 under this section is enforceable against the assets for which 28 the fiduciary has responsibility. 29 4. If a person refuses to provide the requested property 30 or information within ten business days after receiving a 31 request under this section, the fiduciary may bring an action 32 to recover the property or information or compel its delivery 33 against the person to whom the fiduciary presented the written 34 request. An action brought under this section must be brought 35 -2- LSB 1061HV (2) 86 jh/rj 2/ 7

H.F. 367 within one year after the date of the act or failure to act. 1 If the court finds that the person acted unreasonably in 2 failing to deliver the property or information as requested 3 in the written request, the court may award any or all of the 4 following to the fiduciary: 5 a. Damages sustained by the decedent’s or ward’s estate. 6 b. Costs of the action. 7 c. A penalty in an amount determined by the court, but 8 not less than five hundred dollars or more than ten thousand 9 dollars. 10 d. Reasonable attorney fees, as determined by the court, 11 based on the value of the time reasonably expended by the 12 attorney and not by the amount of the recovery on behalf of the 13 fiduciary. 14 5. This section does not limit or change the right of 15 beneficiaries, heirs, or creditors to estate property to which 16 they are otherwise entitled. 17 DIVISION IV 18 ELECTIVE SHARE OF SURVIVING SPOUSE 19 Sec. 4. Section 633.238, Code 2015, is amended to read as 20 follows: 21 633.238 Elective share of surviving spouse. 22 1. The elective share of the surviving spouse shall be 23 limited to all of the following: 24 a. One-third in value of all the legal or equitable estates 25 in real property possessed by the decedent at any time during 26 the marriage which have not been sold on execution or other 27 judicial sale, and to which the surviving spouse has made no 28 express written relinquishment of right , including but not 29 limited to any relinquishments of rights described in paragraph 30 “d” . 31 b. All personal property that, at the time of death, was in 32 the hands of the decedent as the head of a family, exempt from 33 execution. 34 c. One-third of all personal property of the decedent that 35 -3- LSB 1061HV (2) 86 jh/rj 3/ 7

H.F. 367 is not necessary for the payment of debts and charges. 1 d. (1) One-third in value of the property held in trust 2 not necessary for the payment of debts and charges over which 3 the decedent was a grantor settlor and retained at the time of 4 death the power to alter, amend, or revoke the trust, or over 5 which the decedent waived or rescinded any such power within 6 one year of the date of death, and to which the surviving 7 spouse has not made any express written relinquishment in 8 compliance with subparagraph (2) . 9 (2) The elective share of the surviving spouse shall not 10 include the value of the property held in a trust described in 11 subparagraph (1), if both of the following are true: 12 (a) The decedent created the trust after the date of 13 decedent’s marriage to the surviving spouse. 14 (b) Every transfer of property into the trust, except 15 for tangible personal property, included a written statement 16 which complied with this subparagraph division. The written 17 statement shall be in boldface type of a minimum size of ten 18 points, signed and dated by the surviving spouse with a valid 19 notarial acknowledgment, and in substantially the following 20 form: 21 By signing below, I acknowledge that I am giving up all 22 rights to enjoyment of the property described above, regardless 23 of whether or not I survive my spouse and regardless of any 24 rights Iowa law otherwise gives to me with respect to such 25 property. I am specifically waiving my elective share in the 26 property described in this waiver. 27 This waiver shall apply regardless of any changes made to the 28 trust in the future, including any change to the beneficiaries 29 of the trust. 30 2. When a settlor of a revocable trust transfers real 31 property to the trustee of the revocable trust and the 32 settlor’s spouse signs a conveyance of the real property to 33 such trustee which includes a general waiver of rights of 34 dower, homestead, and distributive share, the spouse is only 35 -4- LSB 1061HV (2) 86 jh/rj 4/ 7

H.F. 367 relinquishing the right to that real property and its value 1 under subsection 1, paragraph “a” , for the purpose of conveying 2 marketable title to a subsequent purchaser from the trustee 3 and is not relinquishing the right to the value of the real 4 estate under subsection 1, paragraph “d” , unless the spouse 5 specifically states in writing an intent to relinquish the 6 right to the value of the real estate under subsection 1, 7 paragraph “d” . The relinquishment of right under subsection 8 1, paragraph “a” shall not prevent the surviving spouse from 9 electing one-third in value of such real property under 10 subsection 1, paragraph “d” . 11 2. 3. The elective share described in this section shall 12 be in lieu of any property the spouse would otherwise receive 13 under the last will and testament of the decedent, through 14 intestacy, or under the terms of a revocable trust. 15 DIVISION V 16 APPLICABILITY 17 Sec. 5. APPLICABILITY. 18 1. The section of this Act amending section 422.7 applies to 19 Iowa fiduciary income tax returns filed for tax years ending on 20 or after July 1, 2015. 21 2. The sections of this Act amending sections 450.9 and 22 633.238 apply to estates of decedents dying on or after July 23 1, 2015. 24 3. The section of this Act amending section 633.78 applies 25 to written requests presented by a fiduciary on or after July 26 1, 2015. 27 EXPLANATION 28 The inclusion of this explanation does not constitute agreement with 29 the explanation’s substance by the members of the general assembly. 30 This bill relates to probate and estate-related laws and the 31 deductibility of administrative expenses on the Iowa fiduciary 32 income tax return, the individual exemptions from the Iowa 33 inheritance tax, rights of fiduciaries of decedents and wards 34 under the probate code to information and property, and the 35 -5- LSB 1061HV (2) 86 jh/rj 5/ 7

H.F. 367 surviving spouse’s elective share. 1 DIVISION I —— FIDUCIARY INCOME TAX. This division amends 2 the definition of net income for an Iowa fiduciary income tax 3 return to allow administrative expenses not taken or allowed 4 as a deduction in calculating net income for federal fiduciary 5 income tax purposes to be subtracted from adjusted gross income 6 when calculating net income. This division applies to Iowa 7 fiduciary income tax returns filed for tax years ending on or 8 after July 1, 2015. 9 DIVISION II —— INHERITANCE TAX. This division amends the 10 individual exemptions from the Iowa inheritance tax to include 11 a decedent’s stepchildren and their lineal descendants. Lineal 12 descendants include descendants by adoption. This division 13 applies to estates of decedents dying on or after July 1, 2015. 14 DIVISION III —— FIDUCIARY WRITTEN REQUESTS. Under current 15 law, a person who in good faith pays or transfers money 16 or other property to a fiduciary, which the fiduciary is 17 authorized to receive, is not responsible for the proper 18 application by the fiduciary. This division amends current 19 law to permit fiduciaries of decedents or wards to present 20 a written request to any person to obtain property to which 21 the decedent or ward is entitled or for information needed 22 to perform the fiduciaries’ duties. The division specifies 23 the representations required to be in the request. If the 24 person receiving the request takes reasonable steps to verify 25 the identity of the fiduciary and has no knowledge that the 26 representations in the request are incorrect, the person who 27 provides the property or information requested shall not be 28 liable to any person for so acting. The person who received 29 the request has 10 business days to provide the information or 30 property. After 10 days, the fiduciary may bring an action to 31 recover the property or information or compel its delivery. If 32 the fiduciary prevails in the court action, the court may also 33 award damages sustained by the decedent’s or ward’s estate, 34 costs of the action, a penalty determined by the court of 35 -6- LSB 1061HV (2) 86 jh/rj 6/ 7

H.F. 367 not less than $500 and not more than $10,000, and reasonable 1 attorney fees. This division applies to written requests 2 presented by a fiduciary on or after July 1, 2015. 3 DIVISION IV —— ELECTIVE SHARE OF THE SURVIVING SPOUSE. 4 This division relates to a surviving spouse’s elective share 5 with regard to the value of property held in the deceased 6 spouse’s revocable trust. Under current law, the surviving 7 spouse may waive the surviving spouse’s right to include the 8 value of property held in the deceased spouse’s revocable 9 trust with an express written relinquishment. This division 10 specifies the form of the express written relinquishment and 11 adds new requirements that the deceased owner’s revocable 12 trust be created after the date of the marriage between the 13 deceased owner and the surviving spouse and that every transfer 14 of property must include an express written relinquishment. 15 This division also states when a settlor of a revocable trust 16 transfers real property to the trustee of the revocable trust 17 and the settlor’s spouse executes a conveyance which includes a 18 waiver of rights of dower, homestead, and distributive share, 19 the spouse does not waive the right to include the value of 20 the real property in the elective share unless the spouse 21 also specifically states an intent to do so in writing. This 22 division applies to estates of decedents dying on or after July 23 1, 2015. 24 -7- LSB 1061HV (2) 86 jh/rj 7/ 7