South-Western Legal Studies in Business

Insurance Proceeds for Damage to Homestead Exempt from Attachment
Description Iowa high court held that insurance proceeds received by an estate for damages to a home that was left as part of an estate could not be attached by creditors of the estate. The proceeds were part of the homestead. So long as the money was used to repair the home, the funds could not be attached.
Topic Wills, Estates, and Trusts
Key Words Insurance Proceeds; Creditor's Claims
C A S E   S U M M A R Y
Facts Tolson's will left her home to her three children. After her death, a lien holder filed a claim against the estate. Before the matter was resolved, the house suffered extensive water damage, resulting in a payment from the insurance company of $47,000. The estate executor asked the court to declare the insurance proceeds to be exempt from the claim of the lien holder. The bank that held the mortgage on the house moved to use the insurance money to settle the mortgage. The district court held that the mortgage holder and lien holder could attach the insurance proceeds. The executor appealed.
Decision

Reversed and remanded. The insurance proceeds were exempt from the claims. The homestead was exempt during Tolson's lifetime, so claims against her were not allowed merely because the homestead sustained damage after her death. The proceeds, as substitute for the homestead, belong to the heirs as new owners of the homestead. If it could be shown that the insurance money was not going to be used to repair the homestead, then the claim holders could move to attach the funds.

Citation In the Matter of the Estate of Tolson, 690 N.W.2d 680 (Sup. Ct., Iowa, 2005)

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