Sunday, December 27, 2009

Gift Tax Exemption Amount for 2010

As David Goldman of the Florida Estate Planning Lawyer Blog recently noted, the IRS has announced that the annual gift tax exemption amount for 2010 will stay at $13,000.00. This represents the amount that each individual can give to another person without having to either pay any gift tax or file a gift tax return. If you decide to make a gift in excess of the exemption amount, then it is necessary to prepare and file a gift tax return with the IRS. Whether you will have to pay any gift tax on a gift depends on how much you gifted already during your life.

For more information on using the valuable estate planning tool of gifts, contact an estate planning attorney.

Thursday, December 03, 2009

Social Security Benefits for Posthumously Conceived Child Upheld

In a follow-up to a recent post I had on the Iowa Law Blog, Jason Clayworth of the Des Moines Register recently updated the situation concerning a young girl's application for social security benefits as a result of her father's death. A federal judge has overturned the rejection of benefits and thus permits her to receive benefits. The article continues to point out that legislators are examining long overdue updates to the Iowa statute to address these types of situations. The Social Security Administration has until January 11, 2010 to appeal.

The complexities that are involved in cases like this are challenging. A recent Probate Section meeting of the Iowa State Bar began to examine some of the issues and an approach to take with this issue. The discussion revealed that there is a split in the probate section as a result of numerous questions and possible approaches. Beyond the basic philosophical question of is this "right", there other other related matters beyond social security benefits. Can the father's wishes restrict future usage of his genetic material? Does he need to sign a written consent to authorize the use after his death? Should that consent be notarized? How far in the future will this material be permitted to be utilized? How will this impact settlement of estates and determination of heirs? How does this issue impact review of real property titles in abstract examinations?

I look forward to how the Iowa legislature approaches this issue in the spring and hopefully they consider all of the interrelated issues.

Monday, October 19, 2009

Heemstra Trial Update - No Asset Protection Here

A little bit slow on my part in updating my prior post on the Heemstra case, but the Judge in a harshly worded ruling of September 18, 2009 ordered Heemstra to pay $750,000 in punitive damages, another $204,000 in other damages and ordered the sale of land owned by Heemstra and his wife. The judge found that the Heemstras engaged in a "complex shell game" to try and hide and move their assets to prevent Lyon's widow from recovering on her $5.68 million judgment. William Petroski of the Des Moines Register also covered the ruling in an article on the Des Moines Register.

The judge found that the family fraudulently transferred their assets (even I called this one) to various family members and entities to produce the perception of a "penniless" defendant in order to avoid payment of the wrongful death judgment. The judgment goes beyond just Rodney Heemstra, and also included certain damages against Heemstra's son, an irrevocable trust, his sister, a limited liability partnership and his mother.

Fraudulent transfer statutes can, obviously, produce some harsh sanctions and may even include those involved in the transaction, even if they don't personally benefit. Asset protection is not the same thing as fraudulent transfer. Properly completed, asset protection may protect one's assets from judgment.

Friday, October 09, 2009

Disposition of Partnership Property that Isn't in the Name of the Partnership

A recent case from the Iowa Court of Appeals helps illustrate the importance of putting business matters in writing. In the Matter of the Estate of John Liike, John and his brother had inherited some land from their parent and had operated the land as part of a partnership for several years. The land was never actually placed in the name of the partnership, but kept in their individual names as tenants-in-common. Eventually, they entered into a written partnership agreement which provided that when one of them died, the other partner would have the option of purchasing the partnership property. No changes were made to the title of the land.

After John died, John's widow and John's brother did not see eye-to-eye, with each wanting John's one-half interest in the farmland. The trial court found, and the Iowa Court of Appeals affirmed, that even though the land was not titled in the name of the partnership, the facts and circumstances clearly found that the land was meant to be partnership property and permitted John to purchase the land from the estate.

What does this mean? As a result, John's brother will be able to keep the farm that he inherited and he is not forced to split the farm with his sister-in-law or forced into some business relationship with her. Message to others? Formalize your business arrangements by putting your affairs in writing and establishing what happens in the event of your death. The Liike brothers did some written planning, but a little more thorough planning may have avoided this costly lawsuit.

Aren't families grand?

Monday, July 13, 2009

Heemstra Trial and Asset Protection In Iowa

The local Rodney Heemstra trial has brought asset protection into the local news lately. Mr. Heemstra shot and killed his neighbor during a dispute. After the incident, Mr. Heemstra made several restructuring changes to his finances and assets which involved the use of irrevocable trusts and other entities.

Revocable trusts are a common estate planning tool, but they do not provide any asset protection for the person who creates the trust. With revocable trusts, the person has the power to revoke, or cancel the trust. That power to yank the assets back removes the option to protect those assets from your creditors as your creditors can access them as well.

The question of when is it "too late" is a key issue in the asset protection plan is important. If transfers are made after an event that gives a basis for someone to bring a claim to collect, the state's fraudulent transfer statute under Iowa Code chapter 684 can apply to revoke those transfers as if they didn't happen. In the Heemstra trial, I would think that Iowa's fraudulent transfer would be applicable.

Proper asset protection planning takes place prior to any potential threat of a lawsuit or a claim. Once there is a basis for a claim, it is usually too late.

Monday, June 22, 2009

When is an Heir an Heir?

An Iowan is struggling with the definition of heir under the Iowa Probate Code. In order to qualify as an "heir" under Iowa law, you must have been conceived prior to the death of the biological parent. This has been the definition of an "heir" for 150 years. However, with advances in medical science, it is now possible that a child can be conceived after death through fertilization from frozen sperm. Still a child right? Wrong, under Iowa intestate law and for social security benefits.

Despite the same result, social security administration has ruled that being conceived after death is not the same as being conceived before death of the biological parent. As a result, the child, who has her father's DNA and is in fact the biological daughter of her father, will not be able to reap the benefits of her father's social security benefits, as other children would, that he contributed to during his life.

Due to a split in the circuit courts, expect to see either this case or a similar case before the US Supreme Court in the future. Until then, the legislature should examine the definitions in light of changes in medical science.

Friday, June 19, 2009

Planning Your Estate in Iowa for Future Changes

A power of appointment is special planning tool that not many people are aware of. What if you didn't know exactly how you wanted your assets distributed in the future at your death, but you did trust someone else, such as your spouse or child, to make those decisions for you? A power of appointment is a special authority that you can pass to someone to make distribution decisions for your assets in the future. For example, Husband's Will keeps his assets in trust for the life of Wife, and then it gives Wife the authority, at her death, to distribute the assets out as she chooses. Thus, if Son is in a bad financial situation or marital situation and it is not wise to give the money to Son now, the surviving spouse (Wife) could say that Son's share will stay in trust and not be given out to him. Or conversely, rather than keeping it in trust, it could be paid immediately to Son if his affairs are in order. If flexibility for future decisions is sought, this can be an answer.

This decision deferral, called a "Power of Appointment", is an effective estate planning tool. You can also limit how much discretion the appointee (person with the power) has so that they can't distribute it to someone that you have no intention of providing funds.

Matt Gardner - Published Author

I've always wanted to say that. Now I can. I recently had a chapter published by Aspatore Books in the book titled "Estate Planning Client Strategies: Leading Lawyers on Understanding the Client's Goals Using Trusts Effectively, and Planning in a Changing Economic Climate (Inside the Minds)." (Say that in one breath.) If you are interested in purchasing, go here (none of the proceeds go to me).

Thursday, May 07, 2009

Death of a Beneficiary - Iowa's Antilapse Statute

Quiz time - You leave a bequest in your will for a gift to an individual, but that individual dies before you do, leaving their own children.  Do those kids inherit their parent's share or do the other beneficiaries named in your will receive an increased amount?  If you guessed that the children of the beneficiary inherit, you are correct (but with an asterisk).

Iowa's antilapse statute (Iowa Code sec. 633.273) provides that if a devisee dies before the testator, leaving issue who survive the testator, the devisee's issue inherit the property devised unless the terms of the will indicate to the contrary.  Huh?

What this means, if you want person A to receive property, but only if they survive you, then you need to specifically require that they must survive you in order to receive their inheritance.  Otherwise, if you don't, their children will inherit what you intended to go to their parent.

A recent case of In re: Delmege Estate, the Iowa Court of Appeals addressed the application of the Iowa antilapse statute.  In that case, five siblings were named as devisees under a will, but one of the siblings predeceased the testator leaving two daughters.  The Court found that if the decedent didn't want his nieces to inherit, he could have easily crafted his will for that purpose by including a survivorship clause.  There is a presumption that the testator knew about the antilapse statute.  (I wonder if the DIY wills fully address this issue.)

Sunday, April 05, 2009

Power of Attorney Dangers - License to Steal

A local couple (a pastor and his wife nonetheless) were recently charged with theft and dependent adult abuse.  There were charged with taking money from both of their elderly parents, under authority of a power of attorney to pay for vacations, airfare, motels and eating out frequently.  

Local authorities and national organizations are reporting an increase in elder abuse in the past year, likely attributable to challenging economic times.  The typical power of attorney grants the attorney-in-fact broad power to act in their stead.  This power is typically granted without any oversight, which can be too tempting for some people.

If you suspect that someone is misusing the power granted to them, report the information immediately to the local police who will be able to properly investigate the case.

 

Monday, March 23, 2009

Iowa Courts Fail to Honor Postnuptial Agreement Terms

A recent ruling from the Iowa Court of Appeals continued to reinforce the surviving spouse's right in the case of In the Matter of the Estate of Herbert C. Shaffer, issued March 11, 2009.  Husband and wife had executed a postnuptial agreement (presumably in another state as postnuptial agreements - agreements entered into after a marriage - are not recognized in Iowa but are recognized in other states).  The postnuptial agreement basically provided that each would be responsible for their own expenses and would not look to the other party for reimbursement.  Subsequently, husband executed a will in which he left all of his property to his children from his earlier marriage.

After husband died, wife had a change of heart and decided to exercise certain rights of a surviving spouse.  Specifically, she sought to elect to (1) take against the will and (2) request spousal support.  

First, a little background on these rights.  Basically, you can't disinherit your spouse unless he or she agrees to it.  If a spouse is excluded, they have the right to declare the disinheriting provision of the will as invalid and receive a share of the estate, despite the will.  This is the right to elect against the will.  A second right of a surviving spouse is the right to request a spousal allowance.  After taking into consideration certain factors, a court can award an allowance from an estate for twelve months of support to a surviving spouse, whether they need an allowance or not.

Despite the provisions of the postnuptial agreement, the Iowa Court of Appeals determined that a postnuptial agreement could NOT waive the right to elect against the will.  Thus, while while a premarital agreement could permit a spouse to waive the right to elect against the will, a postnuptial agreement, even though presumably valid where executed, will not be enforced in Iowa to force a waiver of that right.  Interesting result leads to some interest scenarios.  

Additionally, the Court of Appeals further authorized the spousal allowance the surviving spouse sought.  Under Iowa Code 633.374 and prior cases, the spousal allowance provisions cannot be waived by agreement.  

The Court of Appeals has basically called out the Iowa legislature to amend the Iowa Code to approve postnuptial agreements by statute, as the court will not accept the limiting provisions otherwise.  Thus, if you have a postnuptial agreement, be wary of moving to Iowa or other states that have not adopted postnuptial agreements.

Sunday, March 01, 2009

Will Contests in Iowa

Not happy with the distribution provisions of a will?  Like any good American you have the right to go to court.  On the Iowa Law Blog I have a post about what is required to be shown in a will contest.

Example #517 of Poor Estate Planning

At the Ohio Estate Planning, Trust & Probate Law blog, there is another great example of why will preparation should not be handled by yourself, especially if you have any unique situations in your family.  Imagine after trying to kill your parents, you inherit $500,000 from them after they, understandably, attempted to disinherit you.  Just another example of seemingly easy estate planning gone wrong.

Monday, February 02, 2009

Preserving Your Assets and Possessions

I recently had the opportunity to sit down and visit with Gabriel Glynn of Iowa's Asset Protection Specialists, LLC (APS) about his business.  After learning about the services they offer, I believe that his company offers an excellent supplement and expansion to the "standard" estate planning.  Basically, APS will come to your house and inventory all of your belongings by video and photographic means.  They will also scan any important receipts, which can document prices paid for certain items and they will also scan other important documents.  After their inventorying job is complete, APS will provide you with a complete copy of the inventory as well as maintain two separate back-ups.

Imagine trying to replace all of the items in your house following a flood, fire or burglary.  Not easy, eh?  With the APS system, imagine how much easier it would be to complete an insurance claim when you have a verifiable record of those assets lost.  Or, what about trying to determine the assets that your parents have and how they should be divided? There are multiple uses for the asset inventory.

Most people will continue to accumulate assets over their life - some of which may be valuable.  Even for those non-valuable assets, they are not easily replaced.  Family heirlooms, antiques and collectibles can hold special value and history that could be lost if not preserved properly.

I would encourage you to contact Gabriel Glynn at APS and learn more about what they can do for you.

Wednesday, January 28, 2009

Estate Planning Basics Course for Urbandale

For anyone interested in attending a no-pressure-educational class on estate planning basics for Iowa residents, feel free to check and sign up for the Estate Planning Basics class I'll be teaching through the Urbandale Parks and Recreation Community Education Program.