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?