Do I Need An Estate Plan In Iowa If I List Joint Owners On All My Assets?

In this article, we discuss listing joint owners for all of your assets to avoid probate in Iowa and answer the following questions:

• What’s the risk in only utilizing joint owners to avoid probate?
• What happens when a will lists someone other than the joint owner on an asset?
• What is a “confidential relationship” Under Iowa probate law?
• What is “intentional interference with inheritance” in Iowa probate law?

Listing a joint owner for all your primary assets such as property, a car, bank accounts, retirement accounts, etc may seem like a simple, cheap, and clever way to avoid probate, but like most shortcuts, it rarely works the way you intend. 

What’s the Risk In Only Utilizing Joint Owners To Avoid Probate?

There are a number of inherent risks in only utilizing joint owners on accounts and assets to avoid probate, both when still alive and after death:

• A joint owner can withdraw the entire amount of the account from the bank. Listing a joint owner you don’t fully trust on an account would be considered extremely careless by most standards, but those you trust can also make poor decisions when under stress. For example, let’s say a mother lists her sister as a joint account in case of an emergency. The mother has complete trust in her sister; believing the sister would not touch the money unless it was needed for the mother’s children and the mother was incapacitated. But the sister has an online gambling problem she hasn’t told any of the other family members about. She gets in over her head one evening and decides to pull money from the joint account thinking she can win everything back. You know the rest of the story;
• Joint accounts are not safe from the joint owner’s creditors. As soon as you list a joint owner on an account the joint owner’s creditors can get access to those funds through claims against the joint owner;
• The joint owner gets the entire account regardless of what your will or other estate planning device states;
• The joint owner now has to list the funds present in the account on any applications that ask, such as college financial aid applications;
• Only having joint owners for all your accounts and assets doesn’t provide protection for other aspects of estate planning such as Medicaid planning protection.

What Happens When A Will Lists Someone Other Than The Joint Owner On An Asset?

Think of the surprise when at probate court an inheritance you suddenly thought to be shared equally amongst your siblings instead goes entirely to your sister Karen. How’s this possible? Your father’s last will and testament clearly describes how the accounts and assets are to be split evenly amongst you and your four siblings. But your sister Karen was a joint owner on the primary account used by your father for his end-life care, so now she assumes total control of the account, and according to the law, without evidence of a confidential relationship and/or intentional interference with the inheritance, you have no legal claim to the funds in the account.

Joint ownership of an asset or account will typically always supersede the inheritance directions in an estate plan. This is because the joint account doesn’t really become part of the inheritance, but continues to be the property of whatever owners are left. This is a common point of conflict when an account was used for medical treatment or other end-life care for the decedent, but the account was managed by a joint owner, usually one of the children of the decedent.

What Is A “Confidential Relationship” Under Iowa Probate Law?

A confidential relationship is characterized as having an elevated level of trust and confidence between the parties, with one party often having focused knowledge, experience, or skill and is responsible for some task related to the other party or represents the interest of the other party. A common example of a confidential relationship in everyday life is that between an attorney and client or doctor and patient. 

Probate conflicts involving an alleged confidential relationship and undue influence between one party and the decedent are common in Iowa probate court. These confidential relationships are seen frequently between the caretaker and the decedent, especially if the caretaker was a family member. However, the nature of family relationships calls into question an allegation of a confidential relationship. The focus mostly falls on proving that the confidential relationship was used to generate undue influence on the decedent leading to intentional interference with inheritance. For example, one brother lives near an ailing parent while the other lives a ten-hour drive away. The nearby brother spends more time with the ailing parent. At the probate hearing, the court shows that the ailing parent’s estate plan is leaving the majority of the estate to the closer brother. The brother who lives farther away was under the impression he was to receive an equal distribution of the estate. While there are a number of other factors that will come into play when proving undue influence and intentional interference with inheritance a “confidential relationship” between the closer brother and the decedent is pretty clear.

What Is “Intentional Interference With Inheritance” In Iowa Probate Law?

Intentional interference with inheritance involves one party deliberately interfering with another party’s estate plan, whether through fraud, undue influence, duress, or some other means, and preventing a third party from receiving some or all of an inheritance. If you’re unsure if you have a legitimate intentional interference claim check the following criteria:

• You have evidence or had a reasonable expectation that you should have received an inheritance;
• You have evidence that shows if the other party had not interfered, the inheritance you expected to receive would have still been in place at the time of the decedent’s death;
• The defendant in your claim knew about your expected inheritance and took deliberate action to interfere;
• The interference by the other party was deliberate and wrong beyond simple meddling and interference;
• You suffered damages from the interference; and
• The other party’s interference lead to your loved one taking action that ultimately resulted in the deprivation of your inheritance.

Proving intentional interference can be difficult, especially in family and caretaker relationships. If you feel you have a valid claim it’s best to reach out to a competent probate attorney. And when it comes to estate planning, the time and money saved by relying on joint ownership of all your assets can easily be outstripped by the potential legal and financial pitfalls. If you have any questions about estate planning or probate claims in Iowa give us a call at 563-503-6910.