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.