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Our estate planning attorneys discuss living trusts, revocable and irrevocable trusts, and any changes that have been made to Iowa living trust laws in 2022.

What is a living trust and why do I need one? Our estate planning attorneys discuss living trusts, revocable and irrevocable trusts, and any changes that have been made to Iowa living trust laws in 2022. After reading this article, you should have the knowledge to get started on creating a living trust for your property.  

What Is A Living Trust?  

A living trust is simply a trust that is created during the settlor’s (creator of the trust) lifetime. The settlor will name beneficiaries of the living trust. Upon the settlor’s death, the beneficiaries will receive the property in the trust. This is also known as an “inter vivos” trust.    

A will could also accomplish transferring property to your loved ones. However, a will must go through the court system, known as probate, before this is possible. Probate is an expensive and time-consuming process, but we are here to make it as painless as possible. Iowa’s probate process will be discussed further below.  

Learn How to Contest A Trust In Iowa in our recent article.

What Is A Revocable Living Trust in Iowa?  

A revocable living trust is a common estate planning tool. As the name suggests, a revocable living trust can be revoked or modified at any time during the settlor’s lifetime. The settlor will be named as the trustee of the living trust. The trustee of a revocable living trust maintains control of the property in the trust, as well as control of the trust itself. A revocable living trust also requires that a successor trustee be named to manage the trust once the trustee is deceased. Suppose the irrevocable living trust is a shared living trust, which is common practice among spouses. In that case, the successor trustee takes over after both spouses are deceased.    

What Is an Irrevocable Living Trust in Iowa?  

Irrevocable living trusts differ since they cannot be changed or modified once they are executed. An irrevocable living trust makes it so that the settlor of the trust does not maintain control of the property and the trust once it is signed. One benefit of irrevocable living trusts is that they may be beneficial for tax purposes.  

Why Should I Use A Living Trust As An Estate Planning Tool In Iowa?  

Using a living trust can transfer the property to the beneficiaries of the trust without the added expense and aggravation of going through the probate process if the property is left in a will. The probate process can often take several months or even years to disperse the property. This will add court and attorney costs. Using a living trust will save time and money by avoiding the probate process.    

Read our article The Iowa Probate Process Explained for more in-depth information on how probate works in Iowa.

How Can I Avoid The Probate Process In Iowa?  

Iowa does offer a streamlined probate procedure for small estates.  

  • One method to avoid probate is the use of an affidavit if the estate does not contain any real property (other than property that passes to a spouse in joint tenancy) and the total value of your estate is less than $50,000.00  
  • If the estate’s total value is $200,000 or less, the estate qualifies for a summary probate

These methods to avoid or reduce the time in probate court are more cost-effective and efficient.

Do I Still Need A Will In Iowa If I Have A Living Trust?  

Generally, yes, you will still need a will because there are some things that a living trust cannot do under the law.    

  1. A living trust cannot name a guardian of a minor child. If you have minor children, you will need a will to designate a guardian. 2
  1. Property not mentioned in a living will cannot be distributed according to your wishes. Often, people will create living wills and later acquire property that does not get transferred to the living trust. If the property is not transferred to the living trust, it will not be distributed according to the trust. A will serves as an umbrella for this type of property and ensures distribution. Under a will, any property not transferred to a living trust can still be distributed to your close relatives, according to Iowa law.

Learn more about wills in our recent article Recent Updates to Iowa Wills and Trusts.

Are There Tax Implications or Benefits Of Having A Living Trust In Iowa?

Creating a living trust does not impose federal tax implications because the estate must be worth around 12 million dollars for this to happen. Iowa does not have any estate taxes, but it does have an inheritance tax set to be eliminated in 2025.  

Suppose you are dealing with an estate worth 12 million dollars or more. In that case, there are more options available to ensure that your estate is protected. These options tend to be more complicated, though, since the size of the estate is much larger.    

How Do I Set Up A Living Trust In Iowa?  

Below is a brief overview of the steps needed in order to set up a living trust in Iowa. For more in-depth information on Forming a Trust in Iowa, read our recent article.

  • Decide if you are creating an individual or shared trust (as is common with spouses)  
  • Take inventory of the property that will be included in the trust  
  • Name a successor trustee  
  • Decide who will be the beneficiaries of the trust (those that will get the property after you die)  
  • Seek an attorney to help prepare the trust documents  
  • Sign the trust documents in front of a notary public  
  • Transfer the property title (ensure that the title includes the living trust and the trustee as the owner)

What Changes Have Been Made in Iowa for Living Trusts in 2022?

While there haven’t been any noteworthy changes in Iowa living trusts this year, it is important to stay informed of any upcoming legislation. If you have any questions regarding living trusts or estate planning in Iowa, contact one of our experienced Iowa estate planning attorneys. You can fill out our confidential contact form or give us a call at (630)-324-6666 to get in touch with a member of our team.

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