Iowa Law Blog : Iowa Lawyer & Attorney : Sullivan & Ward Law Firm : Iowa Law Blog

A recent ruling from the Iowa Court of Appeals dictates that once a natural parent loses custody of their child in a guardianship proceeding, if the parent seeks to terminate the guardianship and regain custody, it is necessary that the parent seeking to terminate the guardianship must show a "substantial change in circumstances" in order to terminate the guardianship. 

To understand the significance of this ruling, it is important to understand the normal rule involved with guardianships where a natural parent is involved.  The normal rule in establishing a guardianship for a minor is that a natural parent, if qualified and suitable, shall be preferred over all others in an appointment as a guardian.  This strong legal presumption is a result of the strong societal desire to preserve the natural parent-child relationship.

The Iowa Court of Appeals stated that once the issue of the natural parent's ability is litigated in the establishment of a guardianship, the normal rule in favor of a natural parent doesn't apply in later proceedings to terminate the guardianship as it is not in the child's best interest.

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Intestate is the "estate plan" for everyone who dies without a will.  Intestate is a term which refers to the state statute that each state has which dictates who receives your assets upon your death, if you don't direct otherwise by a will.  A common misconception is that the state gets it all.  That isn't necessarily true.  In fact, that very rarely ever happens.

However, many people may be surprised what does happen in certain situations under application of the intestate statute.  For example, assume John Smith is married to Mary Smith for over 30 years and have four kids together, including two that are still minors.  It is the second marriage for John and he has one child from his prior marriage.  John dies without a will owning assets in his name.  Who receives those assets as an inheritance from John's estate?

ANSWER:  Mary Smith, as the surviving spouse, only gets some of the assets, even though it was a long marriage and they have several kids together.  In fact, Mary would only receive, generally speaking, one-half of the real property and one-half of the personal property.  See Iowa Code 633.212.  There is a minimum of $50,000 that the surviving spouse gets to keep, so she might get more than half, depending on the assets and their values.  But you can imagine the interesting situation where the child from the first marriage is entitled to one-half of the property.  John is lucky he is dead as Mary probably isn't really thrilled with his procrastination to see a lawyer about getting his will done.

Doesn't seem fair or right? Maybe it isn't, but every individual can avoid that scenario by executing their own estate plan and avoiding surprise endings.

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A common question that I get asked is about "breaking a trust".  By breaking a trust, someone typically means doing away with a trust for some reason or changing its terms.  Is it hard to do?  Can it be done?  Yes, it certainly can be done.  The difficulty of doing so depends on the circumstances.

Terminating or Modifying a Trust in Iowa

The general background is that a trust will run its course until its objectives are reached.  However, there are situations which may be applicable that affect the trust.  Under the Iowa Trust Code, which is still relatively new and untested in Iowa, there are several statutory options that are available for consideration.

Terminating a Small Trust in Iowa

If the amount of the trust is relatively low and incurring costs in its administration, it is possible to terminate the trust and distribute the assets to the beneficiaries, even if the trust terms provide for the trust to continue into the future.  A court would need to approve such a termination after either the trustee or a beneficiary request the court to terminate the trust.  Iowa Code sec. 633A.2205 (2007).  Whatever "low" value means depends on the costs involved, the argument presented to the court and the court's opinion as to what is "low enough".

Modifying a Trust in Iowa

it is possible to change an irrevocable trust.  If the settlor (the person who created the trust) is still alive, so long as they consent and all the beneficiaries consent, a trust could be modified or even terminated.  Court involvement is not necessary.  Iowa Code 633A.2202.  If the settlor is dead, there is a different procedure involved.  If ALL the beneficiaries are in agreement and it isn't necessary for the trust to carry on with the same terms, a court can permit the trust to be modified or even terminated.   The difficult component is getting the consent of each beneficiary.  The Iowa Trust Code does provide some relief when dealing with minor beneficiaries.  Iowa Code 633A.2203.

Replacing the Trustee of an Iowa Trust

This provision has some unresolved questions that may need to be clarified in the future through some legislative changes.  Historically, it was difficult to remove a trustee from a trust.  However, the relatively new (& untested) Iowa Trust code does provide some "gray area" that may be used to change the trustee.  There is also the possibility that a trust could be amended by insertion of a provision in a trust permitting a procedure to remove a trustee.  At least one court in Iowa has permitted this change.

 

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Besides taxes, the other sure thing in life is that it comes to an end eventually.  A common question becomes "what's next?"  (I'll skip the whole afterlife heaven and hell discourse and stick to the worldly issues.)  And of course you have the whole "what to do with the body issue".

Depending on the planning that was done beforehand will dictate a lot that will be done afterwards.  For example, if the decedent properly used a revocable trust, it may not be necessary to go through the probate process.  Good planning and organization prior to our "time" is important in helping to alleviate the work that our family and friends are forced to go through.

Transfer of Assets

If all of the assets were held jointly, it may not be necessary to go through the probate process, although there may be some other advantages with going through probate.  Also, if the asset has a named beneficiary (e.g. life insurance, IRA, etc.), that asset will pass automatically and not subject to any will, trust or other dispositive document.  Otherwise, other than joint assets or named beneficiaries, the estate plan of a will, trust, or the state's plan will determine where those assets go. (And it might not matter that you're the child from the first marriage or dad liked you the best.)

Payment of Bills/Claims

Depending on financial situation of the decedent, there may be certain bills and expenses that need to be paid.  Through certain publication processes in the probate process, all potential claims can be "pulled out of the woodwork" in order to determine how much should be paid and whether it is a valid debt or not.   Also, if the decedent was receiving certain public assistance benefits (e.g. Medicaid) during life, of if the decedent's predeceased spouse received such benefits, there may be a lien against any remaining assets that follows those assets.

Taxes

In Iowa, if the only beneficiaries are a surviving spouse, children, grandchildren, parents or other lineal descendant or ascendant, there is no Iowa Inheritance tax and no need to file an  Iowa inheritance tax return.  There are some issues if there have been certain gifts within the past three years which should also be examined.

Federal estate taxes are normally not applicable for estates less than $2,000,000 (for 2008).  If the estate is below that figure, typically it is not necessary to file a federal estate tax return.  Again, gifts during life of the decedent are important to review also.

Summary

This list is not meant to be exhaustive, but mainly as a guide of some items to consider when it becomes necessary, and hopefully help you choose to do some proper planning ahead of time.  You should consult with an experienced attorney when it becomes necessary to sort through all of these items.

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According to an article in the Des Moines Register the Iowa State Association of Counties has proposed legislation insulating “counties and cities from liability for injuries or damages resulting from bike accidents on their roads unless it is shown that government officials were notified of a road deficiency before an accident and that road crews neglected to take action.” The proposed legislation was a result of a $350,000 settlement paid by Crawford County to the widow of Kirk Ullrich who died in a 2004 RAGBRAI accident.

The need for the legislation is questionable. The current law governing county tort liability contains a laundry list of exemptions from liability for counties. Since the case was settled prior to any judicial determination we don’t know whether any of these exemptions would have applied. I would even suggest that the standard for county liability suggested in the proposed legislation is similar to the standard that a court may have imposed.   What is obvious, however, is that the county thought it had enough exposure to cause it to settle the case. 

Crawford County has since banned all RAGBRAI and similar events from occurring on its county roads. Perhaps the legislation was proposed to prevent additional counties from banning RAGBRAI from its roads. An influx of “RAGBRAI bans” could possibly prevent the event from occurring in the future which would be a detriment to the state.

photo on flickr by sandcastlematt

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We all know that sometimes HOW you say something is more important that WHAT you say or WHY you say it. This is especially true when it comes to terminating employees. In “Halloween” from Season 2 of The Office, Michael Scott provides one way to go about terminating an employee. (You can purchase this episode at iTunes or Amazon). However, I would suggest reading today’s posting on the Pennsylvania Employment Law Blog for excellent tips to use if you have to terminate an employee. It stresses the importance of focusing on HOW you terminate an employee rather than WHY you are terminating an employee. Focusing on the HOW may reduce the blow of WHAT you are saying.

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Employee retirement plans, including 401(k)s and pensions plans, are benefits offered by many businesses.  It's important if your business offers such a benefit that the plan comply with all the laws governing the plan.  However, mistakes can be made, therefore the IRS has published a 401(k) fix-it guide.  Although named a 401(k) fix-it guide, many of the corrections are applicable to other types of employee benefit plans.  The guide lists the eleven most common mistakes made by businesses and then offers tips on finding the mistake, fixing the mistake, and avoiding the mistake in the future.  Most errors can be self-corrected.  If you have questions consult with your plan administrator or attorney.

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Home builders in Iowa recently received a ruling from the Iowa Supreme Court that significantly expands their liability.  The Court ruled in the case of Speight v. Walters Development Company, Ltd. that a home builder can be held responsible under a theory of implied warranty of workmanship construction to third party purchasers.

What does that mean?  It used to be the law in Iowa of caveat emptor, or "buyer beware".  That meant that a home buyer should thoroughly inspect the house they were buying and find any defects, because after they bought it, it was too bad if there was something wrong with it.  Eventually, in 1985, the Iowa Supreme Court expanded builder liability by requiring that a building be constructed in a reasonably good workmanlike manner and reasonably fit for the intended purpose.  This "implied warranty" was only applied to the first owner of the house.  Thus, if a house was defectively built, only the person buying it from the builder could bring a lawsuit against the builder.

This February 1, 2008 ruling takes the next step and holds a builder responsible to subsequent owners for defective conditions.  In Speight, the house was built in 1995 by Walters Development and sold to Roche, who then sold it Rogers, who then sold it to the Speights on August 1, 2000.  After purchasing the house, the Speights noticed water damage and mold that were a result of a defectively constructed roof and defective rain gutters.  Speights brought suit against Walters, lost at the trial court level and lost on appeal to the Iowa Court of Appeals until the Iowa Supreme Court reversed the ruling and changed Iowa law.

The Court noted that pubic policy justifications support further erosion of the doctrine of caveat emptor.  The purpose of the rule is to ensure that innocent home buyers are protected from latent defects.  Subsequent purchasers are in no better position to discover those defects than the original purchaser.  "Builders should be accountable for their work" quoted the court.

While whether this will crowd the courthouse with lawsuits on defective houses is yet to be seen, it certainly expands a builder's liability for the houses they build.

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The Family Medical Leave Act (FMLA), enacted in 1993, was amended January 28, 2008.  Prior to the amendment eligible employees were able to take up to 12 workweeks of unpaid leave in four circumstances. The amendment expands the FMLA to include leave related to family members of military service people. Read President Signs FMLA Expansion for Military Families for a synopsis of the amended law. As the article points out the expansion will obviously create more questions surrounding the FMLA.  Hopefully, the amended law helps military families rather than burdens them with additional hoops to jump.  I would urge all employers and employees affected by the amendment to educate themselves about the changes. Also, as an employer, remember to notify employees about the changes.

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