It is with deep regret and sorrow that Sullivan & Ward, P.C. notes that one of the members of the firm, John Donnelly, recently passed away. Mr. Donnelly was a distinguished member of the Iowa Bar, graduate of Harvard University and University of Michigan Law School. We are saddened by the premature departure of our friend and colleague.
Prior posts on this site have dealt with terminating a trust or breaking a trust in Iowa. A recent case from the Iowa Court of Appeals further clarified the ability of beneficiaries to terminate a trust in Iowa under the Iowa Trust Code. In the Matter of the Trust under the Last Will and Testament of Mary E. Weitzel, Mom executed a will which provided that her assets would stay in trust for her life, then upon daughter's death, the balance of the estate would pass to daughter's children (mom's grand kids). The will contained a relatively common provision, called a "spendthrift" provision, which prevented the daughter or the creditors of the daughter from getting access to the trust principal. The daughter claimed that the creditor issues that once existed were no longer an issue, and thus the spendthrift provision was no longer needed. Apparently, daughter and sons didn't care for the bank as the trustee and having restrictions in their access to the trust assets, so they sought to have the trust terminated.
The Iowa Trust Code permits termination of a trust if all of the beneficiaries consent and there remains no further material purpose of the trust. The question in this case focused on whether the spendthrift provision constituted a material purpose, thereby not permitting the trust to be terminated even if all of the beneficiaries consent to the early termination. The ruling from the Iowa Court of Appeals was that the spendthrift provision, with the facts of this case, was a material purpose and would not permit the trust to be terminated before the trust was directed to be terminated.
This ruling further emphasizes the direction that Iowa courts are going in preserving trusts. Some other states are taking a different approach in adopting a flexible approach permitting the termination of trusts when all of the beneficiaries consent.
Rather than terminating a trust, what if the beneficiaries sought to simply amend the provisions of the trust?
In a follow-up to a recent post, 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.
The eviction process (also called a "Forcible Entry and Detainer" or "FED) in Iowa is just a little more strict. A ruling from the Iowa Supreme Court today now requires that the landlord give personal service notice of the eviction hearing. Previously, under the Iowa Uniform Residential Landlord Tenant chapter of the Iowa Code (Iowa Code 562A), if a landlord was ready to evict and had followed the necessary "notice to quit" requirements, the landlord could give the tenant notice of the eviction hearing (which must be less than 7 days away from the notice) by certified mail. Whether the tenant actually received the notice or signed for the certified letter was irrelevant as notice was deemed made when mailed.
The Iowa Supreme Court found that service of the eviction hearing by certified mail was unconstitutional as it violates the due process clause of the Iowa Constitution. Accordingly, in order to evict a residential tenant, the landlord must give the tenant timely personal service of notice of the hearing. Personal service requires, basically, delivered in hand to the tenant.
We've previously posted on the subject of the danger of personal guarantees when entering into contracts through a business entity. Normally, the officer/agent of the company needs to sign such an agreement in his or her capacity in the company, and not in their individual capacity in order to avoid personal liability. A recent case out of the Iowa Court of Appeals clarifies that signing in your corporate capacity isn't enough on its own to limit your personal liability.
In this case, which was handled by our own Lou Hockenberg, the defendant had signed an application for credit and signed the application as "Pres." Right above that signature line, however, was a provision that provided the applicant was also personally liable for the debt. The Iowa Court of Appeals affirmed the judgment by stating that the the provisions of the binding agreement should not be negated by simply signing such an agreement in one's corporate capacity.
Moral of the story: Read what you sign.
Former NFL football player Steve McNair is just another too-common of an example of someone who failed to plan their estate with so much at risk. As Todd Ratner on the Estate Planning Bits blog noted in his post, there are several legal issues associated to the unfortunate demise of Steve McNair that will likely result in significant cost and struggle to his family. Fame and fortune alone won't guarantee you a structured estate plan. And you don't have to be a Steve McNair to have the same issues and risks that he did.
Sullivan & Ward's own attorneys, Larry McLellan and Mark Landa, have been selected for inclusion in the 2010 edition of Best Lawyers in America in environmental law. Larry McLellan was also included in the 2009 Great Plains Super Lawyers listing under 
environmental law. Congratulations to Mark and Larry for these honors!
One of the reasons that individuals form business entities, such as corporations and limited liability companies, is to protect their own personal assets from the debts and liabilities of the business. The law does provide some protection, but in order to get that protection, the company owners need to follow certain requirements. Fail to follow those requirements opens the individual owners up to liability of the company through a process called "piercing the corporate veil".
The Iowa Court of Appeals recently affirmed a basic case permitting the piercing of the corporate veil. In this particular instance, the individual defendants claimed they were not sufficiently aware that the Plaintiff was pursuing the defendants individually (attempting to pierce the corporate veil) in the lawsuit, rather than suing just the corporation. In the court's ruling, the court found sufficient evidence to put the plaintiff's on notice before the trial that the Plaintiffs intended to pursue them individually. The defendant's claim of "trial by ambush" was rejected.
This case serves as a reminder to all business owners that the liability protection that can be provided by an entity, such as a corporation or a limited liability company, is only valid if you follow the proper formalities. Failing to keep corporate minutes and records, separate corporate finances, routine government filings and separate books of the business entity can expose the individual owners of the company to the company's liability. Setting up the corporation is only the first step and that step alone does not necessarily provide the corporate liability protection.
Employers need to be aware of the effect the H1N1 flu virus may have on its workforce this winter and be prepared to deal with issues that arise. According to the CDC the H1N1 flu virus attacks young children and young adults. This means many employees will either contract the H1N1 virus themselves or have a child that contracts the virus. The CDC is recommending that those that contract the virus stay home and away from the public for at least 24 hours after their fever is gone.
For employees with sick leave or paid-time-off (PTO), staying home to take care of a sick child or themselves does not present a problem. But there are employees who either have no available time off or have exhausted all their available time off. What can or should an employer do in that case?
Employers are under no obligation to provide those infected with the H1N1 virus any additional time off. Providing sick leave or PTO is not required, at this time, under any Iowa or federal law. There have been no requirements from Iowa or the federal government mandating that employers allow persons infected with the H1N1 virus time off from work (either paid or unpaid). However, persons infected with the virus may potentially spread it to others, thus resulting in a “pandemic” in your workplace. It may be possible for you to adopt policies which allow sick workers to stay at home. Examples of such policies include granting more PTO; allowing sick workers to “borrow” time from a future allotment; allow employees to work from home.
Even if none of the above options are appropriate for your work site, it is still important to stress preventative health options to your workers—washing hands, using antibacterial hand gels etc.
"No-Fault" Divorce: Iowa has what is known as a "no-fault" divorce law. This means that neither party is required to prove that the other party was "at fault" or caused the marriage breakup. Instead of proving fault, a person must simply show there has been a breakdown in the marriage relationship, the legitimate objects of matrimony have been destroyed, and there remains no reasonable likelihood that the marriage can be preserved.
Custody: Child custody can be divided into two categories - legal custody and physical custody. Rights and responsibilities of legal custody include, but are not limited to, decision making affecting the child's legal status, medical care, education, extracurricular activities and religious instruction. Joint legal custody is common and means that neither parent has legal custodial rights superior to the other parent. While joint legal custody is common, it does not require joint physical custody. Physical custody or physical care means the right and responsibility to maintain a home for the minor child and provide for the child's routine care. Physical custody may be given to either parent, subject to the visitation rights of the other. In the alternative, joint physical care can be awarded and in which case neither parent has physical rights superior to that of the other parent. In determining custody, the Court looks at what is in the "best interests of the child." In doing so, the Court also tries to assure maximum continuing physical and emotional contact with both parents.
Visitation: Visitation rights will, in most instances, be granted to the non-custodial parent. Visitation between a non-custodial parent and a child typically involves visitation during the week, on weekends, holidays, birthdays, and school/summer vacations.
Child Support: New child support guidelines were adopted by the Iowa Supreme Court effective July 1, 2009. The new guidelines are based upon a pure income shares model of child support. Either parent can be ordered to pay child support and typically a parent's child support obligation continues until the child for whom support is being provided, (1) reaches 19 years of age or graduates from high school, whichever occurs first; (2) marries; (3) dies; or (4) otherwise becomes emancipated and self-supporting.
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