Legal Question in Wills and Trusts in Iowa

Re: Inheritance Tax in Iowa

Your father had an interest in the retirement fund since it was a 403(b). Such a plan requires employee contributions, and many are also matched by employer contributions.

Such interests are included in the taxable estate of a decedent. Depending on the age of your father when he died (whether he was vested, and whether he was required to be taking a distribution), some of the funds could also be considered "income with respect to a decedent" and could also be subject to income tax.

When an estate is heavy in retirement plan assets, some of the retirement plan assets may have to be distributed in order to pay the estate taxes. Upon distribution, the funds are then also subject to income tax, resulting in a rather large tax bill.

Individual states may also have estate taxes based on different amounts and types of assets than the federal tax.

You should ask your attorney to thoroughly explain this tax to you since it is a complex and confusing area of law. If the amount he is stating is correct, estate assets will need to be sold in order to pay it.

Good luck to you.