employees as a desk

An employee handbook is just an employee handbook…or so you may think. But, what happens when it doesn’t have an appropriate “disclaimer?”

An employee handbook can actually be considered an employment contract! If you think about it, an employee handbook has all the elements of a contract—it’s written, it’s specific, it “promises” certain things will (or won’t) happen. It’s even “signed” by the nonprofit/company.

So, an employee handbook could actually be considered a unilateral employment contract unless the employer includes an appropriate disclaimer, with wording like this:

“The policies, procedures and standard practices described in this manual are not conditions of employment.  This manual does not create an express or implied contract between the Nonprofit/Company and employees.  Nonprofit/Company reserves the right to terminate any employee, at any time, with or without notice or procedure, for any reason deemed by the Nonprofit/Company to be in the best interests of the Nonprofit/Company.”

There are many reasons why an employment handbook should be just that and not also serve as an employment contract. I would be happy to review the employment documents you currently have in place, or outline what documents your business/nonprofit needs, to ensure you have the best possible set-up for legal compliance. Shoot me an email (gordon@gordonfischerlawfirm.com) or give me a call (515-371-6077) and we’ll get your free (no-obligation) one-hour consultation scheduled.

A will may provide for disposition of the testator’s assets at the time the will is executed, but of course it may be many years—many decades, even—between the will’s execution and the testator’s death. What if between the execution of the will and the testator’s death, there are changes in circumstances (such as the death of beneficiary) which make it impossible for the executor to follow the dispositive provisions of the will? That’s where estate planning gets complicated and can open the door to litigation.

Changed Circumstances = Default

Of course, we would first look to the language of the will. But, what if the will fails to address the changed circumstances? In such cases, Iowa law provides default rules. Obviously, it is much preferable for the estate planner to raise the possibility of changed circumstances with the testator during the drafting process, and address them accordingly with clear language in the will. (Yet, another reason to use a lawyer to draw up your estate plan.) And, yes, you should keep your will (and overall estate plan) updated.

Death of a Beneficiary

If Grace provides in her will, “I give Lawrence $10,000,” and Lawrence dies before Grace, the will can’t be followed exactly as written. Of course, this situation can and should be avoided by careful drafting – the estate planner asking what the testator wants if a beneficiary should predecease the testator. If, continuing this example, Grace wants the bequest to pass to Lawrence’s estate or Lawrence’s children if Lawrence predeceases her, Grace should so specify in her will. If instead Grace wants the bequest to go to other beneficiaries, the will should spell that out, too.

The Doctrine of Lapse

Let’s take our example and apply the doctrine of lapse. Under the common law, a bequest would fail, or lapse, if the beneficiary predeceased the testator. The bequest would simply fall back to the estate.

Iowa’s Anti-Lapse Statute   

Iowa is among the majority of states which have adopted anti-lapse statutes. Iowa Code Section 633.273 provides that if a beneficiary (actually, the statute uses the legal term devisee) dies before the testator, leaving children who survive the testator, the devisee’s children inherit the property devised, unless the terms of the decedent’s will is clear and explicit to the contrary.

Real Life Case

Clyde Guthrie executed a will in 2002 and died in 2006. His wife predeceased him, and so did two of his five children. Both of the predeceased children died before Guthrie executed his will. That turned out to be a key fact. Guthrie’s will left his entire estate equally to his five children except “in the event any of my children should predecease me leaving issue who survive me, then the share of such predeceased child shall go in equal shares to his or her issue who survive me . . .” His three surviving children claimed that the will language meant to include only them—the decedent’s children that survived him, and not the grandchildren of one of their deceased siblings. That predeceased sibling only had one child, and that child also predeceased the decedent, but left two surviving children–great-grandchildren of the decedent. (The other predeceased child died without having had children).

old hand and baby hand

Application of Facts to Iowa Code Section 633.273

On first glance Guthrie’s will appeared to be clear. Again, his will stated that if children predeceased him, “the share of such predeceased child shall go in equal shares to his or her issue who survive me.” However, the Iowa anti-lapse statute defines “devisee” as a person who dies after execution of the decedent’s will unless the will clearly specifies otherwise. Here the pre-deceased child that left surviving issue died long before the decedent executed his will. So, the anti-lapse statute didn’t apply, and the great-grandchildren were not beneficiaries of their great-grandfather’s estate.

Guthrie of course knew that two of his children had already died. The language of the Guthrie’s will, the Iowa Court of Appeals reasoned, could only possibly refer to the possibility of any or all of the three remaining children dying before he did – and the decedent’s will did not clearly state that issue of an already pre-deceased child should be included. (Review the case: Estate of Guthrie v. Busch, No. 8-093/07-1427 (Iowa Ct. App. May 14, 2008).

Back to the Basics: Let’s Review

With that example in mind, let’s review again the basics of the doctrine of lapse. Under the common law, if a beneficiary dies before the testator, the bequest lapses, i.e., goes back to the estate.

Iowa changed this rule by adopting an anti-lapse statute. Under current Iowa law, if the beneficiary dies before the testator, but leaves children who survive the testator, the beneficiary’s children inherit the property devised, unless the terms of the decedent’s will are clear and explicit to the contrary.

Of course, the problem of lapse/anti-lapse can be avoided through careful drafting by a trained professional, as well as annual reviews to see if your estate plan needs updating.


Have questions about your own estate plan that may be in need of revisions after learning about lapse? Contact me and we can talk about what changes would be wise for you to incorporate into your estate plan.

fiduciary

A fiduciary role is one of the highest, strongest relationships between people. It is a role involving the highest care and the greatest importance. The people you choose to fulfill these roles should be carefully considered; they should be those whom you have the utmost confidence in.

Examples of common fiduciary roles include the executor of your will, trustees of your trusts, guardianships of your children, and agents for your financial and healthcare power of attorney. Other fiduciary roles include attorney, accountant, banker and/or credit union manager.

Often times, people choose corporate executors to remove some of the liability and risk, since corporate executors are familiar with the estate planning process. A corporate executor is going to know the drill. With a corporate executor, you have a true estate planning professional that knows and understands

If you DO choose to name a private individual to a fiduciary role, you need to ensure they are trustworthy, organized, and reliable.

The American Bar Association has comprehensively defined the different fiduciary duties as:

  • Duty of care;
  • Duty of loyalty;
  • Duty to account;
  • Duty of confidentiality;
  • Duty of full disclosure;
  • Duty to act fairly; and
  • Duty of good faith and fair dealing.

Understanding fiduciary duties and selecting the right individuals will help you feel content, secure and satisfied with your estate plan.

Have questions? Need more information?

I would love to discuss your estate plan with you. You can contact me by email at Gordon@gordonfischerlawfirm.com or give me a call at 515-371-6077. Don’t have an estate plan? The best place to start is the Estate Plan Questionnaire.

Woman with laptop reading GoFisch

Let’s be honest a newsletter from your local law firm doesn’t sound like it should be the top must-read on your list. But, GoFisch is different. It’s easy to read, interesting (or so I’ve been told), and a concise, helpful run down on topical news and my recent blog postsGive GoFisch a readsubscribe, and share it with your friends & colleagues. (If you missed the previous edition of GoFisch, you can read it here.)

Stacked books and notebook

What’s It All For?

In Hamilton: An American Musical, a perplexed Alexander Hamilton asks Aaron Burr, “What was it all for?” Regarding trusts, we know that all the work is for the beneficiary.

Classic Definition of “Trust” and “Beneficiary”

A trust is created when a property owner transfers property to a person with the intent that the recipient hold the property for the benefit of someone else. There are three parties to a trust: (1) the settlor (also called donor or grantor); (2) the trustee; and (3) the beneficiary. Every trust must have at least one beneficiary – a person for whose benefit the trust property is being held and who therefore has legal rights to enforce the trust.

Beneficiaries Must Be Sufficiently Definite

 

two people standing against white wall laughing

The beneficiaries must be described with sufficient detail that their identities can be determined. If the description of the beneficiaries is too vague or indefinite, then the trust will fail and the property will be returned to either the settlor or the settlor’s estate.

Let’s take two simple examples.

  • Alan establishes a trust for the benefit of his then-living children. The beneficiaries are sufficiently definite.
  • Sara establishes a trust for the benefit of all her friends. The beneficiaries are insufficiently definite.

Easy, right?

Exception: Charitable Trusts

There is one narrow, but critically important exception to the rule beneficiaries of a trust must be sufficiently definite. Charitable trusts–trusts established to fulfill a recognized charitable purpose – can be for the benefit of an indefinite group. For example, a charitable trust set up to provide scholarships to disadvantaged youth will be held valid.

Multiple Beneficiaries: Concurrent Interests or Successive Interests

Trusts can have more than one beneficiary and they commonly do. In cases of multiple beneficiaries, the beneficiaries may hold concurrent interests or successive interests. An example of concurrent interests is a group of beneficiaries identified as grandchildren of the settlor, who all receive distributions after their grandparents’ deaths. An example of successive interests is a trust in which one beneficiary has an interest for a term of years, and the other beneficiary holds a future interest, to become possessory only after the present interest terminates.

 

dad swinging children on beach

Special Remedies for Beneficiaries

There are several remedies available to an aggrieved beneficiary in the event of a breach of trust by a trustee. Such remedies include claims for damages, injunction to restrain a breach, tracing and/or recovery of trust property, among others. A beneficiary may be able to recoup damages, perhaps even from the trustee’s personal assets. If the trustee wrongfully disposes of trust property, the beneficiaries may be able to reclaim the property from a third party. Again, legal remedies for a breach of trust by a trustee are broad.

Let’s Talk More About Trust Beneficiaries

Interested in establishing a trust or having difficulty deciding on beneficiaries? Don’t hesitate to reach out; email me at gordon@gordonfischerlawfirm.com. I offer a free one-hour consultation to everyone, without any obligation. I’d be happy to talk to you any time.

question mark cards

Similar to the bad joke, “When is a door not a door? When it’s a jar!” Ha! Similarly, but not as punny, we might well say, “When is a trust not a trust? When it’s a Totten trust!”

A Totten trust, also known as a savings account trust or a poor man’s will, is not a trust at all. Rather a Totten trust is simply a name given to a type of savings account. In this savings account, the depositor opens an account with her name designated “as trustee for” someone else. In a Totten trust, there is nothing stopping the depositor from withdrawing the funds for her own use, at any time during her life. Upon her death, any funds remaining are distributed to the so-called “beneficiary.”

Despite the confusing terms, no trust exists. The so-called “trustee” is not obligated to hold the property for the benefit of anyone, including the so-called beneficiary. Rather, the depositor can withdraw funds for her own use at any time during her life.

A Bit of History

The name—Totten trust—came from a New York case where their legality was tested, called In re Totten. The court ruled it was fine for one to open a banking account as a trustee for another person, who had not right to the funds until the account owner passed away. Previously courts had not allowed this under the objection that the situation could take the place of a will, which required more formality than this bank account scenario. To legally maneuver around this the Totten court called the account a “tentative trust” in which the account owner acts as trustee of the funds that will someday go to the trust’s beneficiary. After this decision other state legislatures authorized and regulated such accounts. Often they were referred to payable-on-death accounts in lieu of the term Totten trusts, but regardless of name, the result is the same.

Iowa & Totten Trusts

In states like Iowa, where Totten trusts are recognized, the proceeds for the account pass to the named beneficiary outside of the probate process. The treatment is just like a POD (“payable on death”) account or TOD (“transfer on death”) account.

Iowa recognizes Totten trusts generally, but specifically excludes them from the Iowa Trust Code. Iowa law describes legal trusts as follows:

Trust’ means an express trust, charitable or noncharitable, with additions thereto, wherever and however created, including a trust created or determined by a judgment or decree under which the trust is to be administered in the manner of an express trust. ‘Trust’ does not include [a] Totten trust account. Iowa Code 633A.1102(18)(a) (emphasis added).

When is a trust not a trust? Hopefully, thanks to this blog post, you now know that Totten trusts are not true trusts. I’ve written quite a bit on real trusts and would be happy to talk with you about what sort of trust may be right for you. Give me a call at or shoot me an email.

Headphones

Podcasts undoubtedly are a component of the upper echelons of the Interwebs—one of the aspects of digital content that actually help us be more knowledgeable, interesting people. Unlike cute animal videos on Reddit, the time suck that is Twitter scrolling, or the easily enabled spending sprees on Amazon Prime, podcasts open our eyes to stories that capture our minds. They give us tidbits to discuss with our dinner companions, can help us forget we’re cleaning the house, and make driving through the long swaths of nothing-but-cornfields in the Midwest that much more manageable. Podcasts give us a chance to enrich and enhance our personal and professional lives in an accessible way.

A major sector of my practice is dedicated to working with nonprofits and the donors who support them. Be it writing and filing organizing documents, offering valuable training for nonprofit boards and staff members, handling compliance issues, or coordinating complex charitable gifts, I love working with Iowa nonprofits. In order to do my best work in the intersection between nonprofit operations and law, I try to stay on top of news and best practices in the industry. One way to do that? Podcasts—they’re like free professional development. If you work for a nonprofit, serve on a board, or are simply an interested donor, here are four top-notch podcasts related to nonprofits.

Business of Giving

Business of Giving

Hosted by Denver Frederick, who can boast 40 years of valuable experience “in the world of philanthropy and social good,” the Business of Giving explores topics and solutions to complicated social issues. In the past, the program has explored topics such as affordable housing, education, access to clean water, and global poverty. Based out of New York City, a new episode is released on Sundays, 6-7 p.m. The best place to listen is on Soundcloud. Recent episodes of the show (of the over 300 tracks available to listen to) include interviews with Dan Cardinali, President and CEO of The Independent Sector, Megan O’Neil, Staff Writer for The Chronicle of Philanthropy, and Adarsh Alphons, Founder and Executive Director of ProjectArt.

Nonprofit Leadership Podcast: Making Your World Better

Nonprofit Leadership Podcast

This is a great listen for nonprofit leaders (like the name of the show says) as each episode covers opportunities, trends, and problems applicable to leadership in the sector. First hand advice from other leaders can be invaluable in helping others apply the same practices in their own respective organizations. Dr. Rob Harter hosts the show and brings with him more than two decades of work in “leading and building non-profit organizations, leveraging resources, communication and personal development.” The episodes (available in iTunes) give advice and tell stories to help you ultimately be more efficient and effective in your leadership. I liked one of the recent episodes from June that featured the “Fundraising Coach,” AKA Marc A. Pitman, on how to lead with less stress.

Tiny Spark

Tiny Spark Podcast

Not only does Tiny Spark have a cool owl logo, it also has pretty fantastic episodes that dig in deep on “philanthropy, nonprofits and international aid.” Founder and managing editor, Amy Costello, is a rock star reporter who has an impressive reporting resume including PBS, BBC, and NPR; she was nominated for an Emmy Award on her reporting on Dafur, Sudan. Subscribe on iTunes for episodes such as the recent ones on “The Rise of Philanthropy’s ‘Shadow Giving System’,” and “Why Big Philanthropy Needs Scrutiny Not Gratitude.”

Nonprofit Ally

NonProfit Ally

The Nonprofit Ally podcast wraps essential topics like “social media strategies, capacity building, board of director development, fundraising and budgeting,” into conversations with nonprofit leaders. Episodes are under an hour and after tangible advice you can with you into your nonprofit role, such as how to have better board meetings with Roberts Rules, how to fundraise over email, and tips of the trade from a professional grant writer. The podcast is hosted by Steve Vick of the podcast’s associated website, nonprofitally.com. You can listen on the website or subscribe on Android and Apple platforms.


What nonprofit-related podcasts would you add to my listening library? Share below in the comments. (On a related note, I also wrote about how the podcast S-Town made a strong case for the need and power of estate planning.)

If you want to discuss the issues your nonprofit is facing, don’t hesitate to reach out via email or phone, at 515-371-6077. I’m more than happy to offer a free consultation.

hammers and tools hanging in garage

Three Parties

I’ve previously written about the three parties necessary for every trust: (1) the settlor (sometimes called the donor or grantor); (2) the trustee; and (3) the beneficiary.

Two Other Elements

Besides three parties, at least two other elements are necessary for a valid trust.

  1. The trust instrument is the document that sets forth the terms of the trust.
  2. The other necessary element is property. After all, the trustee must be holding something for the benefit of the beneficiary.

Property of the Trust

When laypersons use the word “property,” I believe they usually mean real estate. But, lawyers use the term “property” much, much more broadly, to mean literally any transferable interest. Sometimes trust property is also referred to as the res or corpus or assets of the trust. (Bonus words!)

Any property can be held in trust. Seriously, check out this list of 101 assets which would fit in a trust. You could likely think of literally hundreds more types or categories of property to place in your own individual trust.

Pour Over Trust

How about an unfunded trust that will receive property at some point in the future? Can you even do that?

Yes, that can certainly be done. This is usually called a pour over trust. (More bonus words!) The pour over trust deserves its own blog post. Briefly, a pour over trust is usually set up by language in a will. A will may validly devise property to a trust, established during the testator’s lifetime, and then funded at her death.

Example

Let’s take a very simple example. Kate has a lawyer write her will, including language that at her death all her Monster Truck memorabilia be placed in a trust for the benefit of her nieces and nephews. Only at Kate’s death will the property be transferred into the trust, not before.

monster truck as a type of property

Take Aways

The important points are that property is necessary, at some point, to make a trust valid, and that literally any transferable interest in property – anything! – can be held in a trust.

Let’s Talk Trusts

It can be difficult to determine on your own if a trust may be right for your personal situation. It certainly doesn’t hurt to take me up on my offer for a free one-hour consultation. Give me a call at 515-371-6077 or shoot me an email at gordon@gordonfischerlawfirm.com.

A trust really isn’t as complicated as it first may seem. After all, there are only three parties to a trust.

A Settlor, Trustee, & Beneficiary

A trust is created when a property owner transfers the property to a person with the intent that the recipient holds the property for the benefit of someone else. So, there are three parties to a trust: (1) the owner who transfers the property (the settlor, or sometimes called the donor or grantor); (2) the person receiving the property (the trustee); and (3) the person for whose benefit the property is being held (the beneficiary).

Three men walking down the street

Note that although a trust involves three parties, it does not require three persons. One person can play multiple roles. For example, in a typical revocable inter vivos trust, it is quite common for the person establishing the trust to be the initial trustee and the principal beneficiary. In this situation, one person is all three parties – they are the settlor, the trustee, and the beneficiary.

What a Merger Means

There is one limitation to the rule of one person wearing multiple hats. The same person cannot be the sole trustee and the sole beneficiary of the trust. In such an event, it is said merger occurs, and the trust is terminated. Why so? The essence of a trust is that it divides legal title from beneficial ownership, and merger ends this division.

In practical terms, however, merger is rarely an issue. “Wait!” you shout. You just said that in a typical revocable inter vivos trust, the person establishing the trust can be trustee and beneficiary. Yes, in this situation one person is all three parties – she is the settlor, the trustee, and the beneficiary. But, in almost all situations, one person isn’t the sole beneficiary. Such a trust will designate other beneficiaries who will benefit from the property after the settlor’s death. So, one person can indeed wear three hats.

Woman with hat

Let’s Talk More About Trusts

Trusts aren’t that difficult to understand and also can provide so many helpful benefits. Want to learn more? Email me at gordon@gordonfischerlawfirm.com. I offer a free one-hour consultation to everyone, without any obligation. I’d be happy to talk to you any time.

Settlor (or Donor or Grantor)

The person who creates a trust is called the settlor (sometimes called the donor or grantor). It is the settlor’s intent which is of paramount importance. It is the intent of the settlor that determines whether a trust has been created.

Here’s a great read with a rundown on the basics of what a trust is:

Intent Is Everything

If a settlor transfers property to a recipient with the intent that the recipient hold the property for someone else, then a trust has indeed been created. If the settlor transfers property with the intent that the recipient use the property for her own benefit, then NO trust has been created.

BONUS WORD! Precatory Trust

What if a settlor transfers property to a recipient with just a wish that the recipient use the property for the benefit of someone else, but does not impose any legal obligation? In such a situation, no legal trust is created. Instead, this is called a precatory trust, but is not a trust at all, because the settlor placed no legal responsibilities on the recipient. A precatory trust is, again, not a trust and is not governed by the law of trusts.

Three Easy Hypotheticals

  • Let’s look at three quick examples to make this clear. Mackensie gives stock to Julie. Mackensie intends that stock be for Julie’s own use. Mackensie is NOT the settlor of a trust, because no trust has been created.

Stock market sheet

  • Mackensie gives a vacation house to Maddie, intending that Maddie hold the house for the benefit of Zach. Mackensie is the settlor of a trust. If a settlor transfers property to a recipient with the intent the recipient hold the property for the benefit of someone else, then a trust is created.

Vacation home in Santorini Greece

  • Mackensie gives a coin collection to Parker, just wishing that Parker would hold the coins for Tom. This is a mere precatory trust, not a trust at all, because the settlor is not imposing any legal responsibilities on the recipient.

coin collection

Questions? Let’s Talk.

This hopefully clarified the important role of settlor to assist your estate planning decisions, but you may have questions…which is great! Contact me to discuss further the status of your estate plan and decisions regarding your trust. Reach me by email at gordon@gordonfischerlawfirm.com or phone at 515-371-6077.