Estate and Transition Planning FAQs

March 5, 2022 | Jennifer Harrington

What is the Basic Exclusion Amount? How much is it currently?

Current federal gift and estate tax law includes a “basic exclusion amount,” which is the combined value of property an individual can give away during lifetime and at death without incurring any tax liability.  In 2021, the basic exclusion amount was $11.7 million per individual.  Because this amount increases each year for inflation, this exclusion amount increased to $12.06 million in 2022. Absent congressional action, the basic exclusion amount will decrease to $5,000,000, plus an applicable inflation adjustment, in 2026. 


What is the Annual Exclusion Amount?

Each year an individual can gift the “annual exclusion amount” to another individual or organization without having to file a gift tax return or without have to track the gift for gift and estate tax purposes. In 2021 the amount was $15,000 per person. In 2022, the applicable exclusion increased to $16,000 per person.


What is Portability?

Portability ensures that a married couple can take full advantage of each spouse’s basic exclusion amount, without the requirement of special trusts or other estate planning techniques. Specifically, “portability” allows the estate of a decedent survived by a spouse to elect to transfer the deceased spouse’s unused basic exclusion amount (DSUE) to the surviving spouse. If the estate elects portability, the estate of the surviving spouse (at his or her death) can apply the DSUE of the surviving spouse's last deceased spouse to the surviving spouse’s transfers. An estate elects portability on a Form 706.


What is the Martial Deduction?

This provision allows an individual to transfer an unrestricted amount of assets to a spouse at any time, during their lifetimes or at the death, free from estate or gift tax.


What happens if I die without a will or a trust?

If a person dies intestate (without a will), state law specifies how the property will be distributed among the heirs. The distribution scheme depends on the decedent’s marital status, lineage of any children, and/or whether certain family members are still alive.


What is required for a will to be effective in Iowa?

You must be of full age and sound mind. The will cannot be the result of undue influence by another person. Further, the will must be signed by the person making the will (testator) and witnessed by two disinterested witnesses. Witnesses are disinterested when they don’t receive anything from the will upon the passing of the testator. Each state has its own requirements for a will.


Can I submit a copy of the will to the court for probate purposes?

 No. Only the original will can be submitted to the court. If an original will cannot be located, the law presumes that the decedent intentionally destroyed the will for the purpose of revoking it. This presumption exists even if a copy of the will is located. Although a proponent of a lost will can overcome the presumption through the introduction of clear and convincing evidence, it is a difficult task. Those making a will should be very careful to safeguard the original document and let family members know where they can find it.


What is the difference between a Health Care Power of Attorney and a Living Will?

A Living Will is a person’s stated wishes for end-of-life medical decisions. A Health Care Power of Attorney provides legal authority for a person or persons designated to make medical decisions for you when you are not able to make the decisions yourself. The Health Care Power of Attorney should be someone willing to make decisions in harmony with your Living Will. Having a Health Care Power of Attorney allows medical personnel to know whom they need to talk to and can help alleviate legal battles regarding who has authority to make medical decisions for you. It will also ensure that only someone you trust is making these decisions.


Is a trust better than a will?

The answer to this question will likely be different from person to person and typically depends on the type and amount of assets the individual holds. Trusts can be administered without probate, which might provide some level of increased privacy (probate documents are public documents). A revocable living trust might also provide for the consistent management of assets in the event of disability and provide an efficient way to manage property in multiple states at death.  There are costs associated with establishing and maintaining a trust and probating an estate. Putting your property in a revocable trust will not change your estate or income tax liability. The determination of whether to have a trust or will is best made after discussing the issue with a trusted attorney.


Some states have an inheritance tax. What is that?

Unlike an estate tax, which is paid by the estate of the person who died, an inheritance tax is paid by the beneficiary who receives the property. In Iowa, for example, there are many exceptions to the inheritance tax depending on the beneficiary's relationship to the person who died. The Iowa inheritance tax usually applies in situations where you have bequeathed to a non-relative individual, nieces/nephews, or brothers/sisters. In 2021, Iowa passed a law that will phase-out the inheritance tax over a four-year period. For more information on the Iowa inheritance tax, read this document.


Do I have to open a probate estate if my spouse or a parent dies?

It depends. Strictly speaking, there is no legal requirement that a probate estate is opened. However, it may be necessary to properly transfer assets. Further, opening a probate and publishing notice of the probate estate limits the amount of time creditors have to file a claim against the estate. You should talk to an attorney once a loved one has passed to see if the decedent’s estate should be probated.


Is there a deadline for when a probate estate can be opened?

Yes. State laws will differ, but in Iowa, you must petition the court to open a probate estate within 5 years after the death of the individual.


My spouse and I co-owned land as joint tenants with right of survivorship. My spouse has died. What do I need to do to show that I am the only owner of the land?

File an Affidavit of Surviving Spouse with the County Recorder. An attorney can help you out for a minimal fee to ensure that the affidavit is prepared correctly. After the Affidavit is recorded you do not need to get your abstract updated, but you may choose to do so.


I am the beneficiary of a life insurance policy. What do I need to do to receive the life insurance payout?

Contact the life insurance company that wrote the policy and ask what documentation they need to issue the death benefit. They will likely need an original Death Certificate to proceed with the payout. 


Where does the Death Certificate come from?

In Iowa, the Iowa Vital Records (an agency within the Department of Health) issues Death Certificates. Every state will have a similar agency. Often, the funeral home that is handling the body after death will help you obtain the death certificate. In general, you will want to have more than one original Death Certificate.


My parent died in a nursing home on Medicaid, and we’ve informed DHS of their death. Now what?

You will receive a form from DHS which states the amount they paid on behalf of your parent. The form will also ask you to list the assets that your parent owned at the time of their death, include those that were exempt for qualification purposes (usually, a homestead and burial contract). In general, you must pay the bill to DHS before paying anything to a beneficiary/heir. If there is a question about the form, please see an attorney or contact the Legal Hotline for Older Iowans at (800) 992-8161.


The Center for Agricultural Law and Taxation is a partner of the National Agricultural Law Center (NALC) at the University of Arkansas System Division of Agriculture, which serves as the nation’s leading source of agricultural and food law research and information. This material is provided as part of that partnership and is based upon work supported by the National Agricultural Library, Agricultural Research Service, U.S. Department of Agriculture.