tenancy by entirety

When you create an estate plan one of the key benefits is that you’re dictating how you want your executor to distribute your assets when you pass away. An estate planning-related question I’ve gotten over the years is: “What about the house? Doesn’t my spouse just get the house straight away?” It’s true, many people do co-own real property (like a house) with their spouse. But, different types of concurrent estates (meaning co-ownership by two or more people) afford different rights to said co-owners.

So, the short answer to that commonly asked question about the house is: it depends.

house under tree

Tenancy by Entirety

One type of co-ownership is called tenancy by entirety. This type exists only between spouses, and they hold the property (like a house) as one legal entity. If one spouse passes away, the surviving spouse takes the whole–becomes the sole owner–of the property.

This means the property would pass outside of probate, making for a simpler answer to the aforementioned “what about our house?” question. So, if something different was written in the deceased spouse’s will, this tenancy by entirety situation “wins” out. The same goes for if the spouse died intestate (without a will) and there’s no messing with which of the heirs-at-law gets what.

Another benefit is that the property is usually exempt from one spouse’s individual debts and liabilities. This means that a creditor couldn’t seize the property from the innocent spouse who is not legally responsible for the other spouse’s sole debts.

However, while this “special” concurrent estate come with the benefit of right of survivorship, there are certain limitations that come with it as well.

Spouses can choose to sever, mortgage, transfer, or sell the tenancy by the entirety, but neither can do so acting alone; both have to be in agreement.

It should also be noted that divorce terminates the tenancy by entirety.

Not in Iowa

Iowa does NOT recognize tenancy by entirety, but these 26 other states do. So, if you’re sharing this info with loved ones or if you co-own property in one of those states, you’ll want to speak with an experienced estate planner about how this type of concurrent estate fits in with your estate planning goals.

What about other types of concurrent estates?

There’s much more that can be said on this phrase and I’d be happy to consult with you personally.

If this post wasn’t exciting enough for you and you want to learn even more about concurrent estates, you’re in luck! We’ll talk about tenancy in common and joint tenancy in the next couple posts.

Want to make certain your assets, including big ones like land or a house, pass how and to whom you choose? Schedule a free consult at your convenience and get started on my free, no-obligation estate plan questionnaire.

man reading newspaper

If spelling tests weren’t always your strong suit in school, fear not! Today’s legal word of the day is an easy one that’s having a momentary editorial heyday.

Ripped From the Headlines

As you probably heard, The New York Times took the highly unusual step of publishing an unsigned, anonymous op-ed entitled, “I am Part of the Resistance Inside the Trump Administration.” The person was identified only as follows:

“…. a senior official in the Trump administration whose identity is known to us and whose job would be jeopardized by its disclosure. We believe publishing this essay anonymously is the only way to deliver an important perspective to our readers.”

man with newspaper near train

Whodunnit?

The article led to a nationwide guessing game. Who is the senior official in the Trump administration who penned this “explosive” piece? Suspicion fell onto, of all people, Vice President Mike Pence. This is because the op-ed writer uses the word “lodestar,” and Pence has used this obscure word multiple times. (Pence vehemently denied he was the author, by the way.)

I don’t know who wrote the op-ed, and we may never know, but the real winner out of this news cycle is the word you never knew you needed in your vocabulary—lodestar!

So, What DOES Lodestar Mean?

Lodestar means “a star that leads or guides,” and is especially used in relation to the North Star.

timelapse of stars

Now, Let’s Talk About a Similar Kind of “Star”

At this point you’re like, “Gordon, this is a cool word I can def use in playing Scrabble, but what does it have to do with the law?”

Well, “lodestar” is a synonym and practically interchangeable with the word “polestar,” which is defined as a “directing principle; a guide.”

A court will use the term polestar like so: In this case, our polestar must be this principle . . .

Basically the court will use such-and-such as its guiding principle.

direction sign on a mountain

For example, in the law of wills, the Iowa Supreme Court stated In the Estate of Twedt that “the testator’s [maker of the will’s] intent is the polestar and if expressed must prevail.” You’ll see the same in the law of trusts, the intent of the settlor of a trust must be the polestar.

The word is also used in the law of charitable giving. The intent of the donor is the polestar which courts must follow if there are any issues. For example, suppose a donor posthumously donates $100,000 to a nonprofit, but the nonprofit no longer exists. What was the donor’s intent? Is it stated anywhere what the donor wanted to happen to the charitable funds if the nonprofit was no more? If not written, did the donor discuss the matter with anyone? To resolve any dispute involving a charitable gift, the guiding principle–the polestar–must be the donor’s intent.

Practical application of the Word Polestar

A major reason to have an estate plan is that YOU get to control your own future, rather than being controlled by outside forces or outside events. Through proper estate planning, you can be in total control of the answers to the following questions:

And if there are any questions or issues regarding your estate plan, lawyers and judges looking at your estate plan will make decisions based on YOUR intent. Your intent will be the polestar!

Don’t delay any longer – thank your lucky (North) stars you still have time to make a proper estate plan. I’d be happy to talk with you about your estate plan any time, or you can get started on organizing your important info in my free Estate Plan Questionnaire. I can be reached via email (gordon@gordonfischerlawfirm.com) or by cell (515-371-6077). I’d truly love to hear from you.

magnifying glass over book

When most people use the word “property,” they typically mean real estate or land, such as: “She owns 50 acres of property in Harrison County.” But, for estate planners, the word property has a much broader meaning. For estate planners, property is what we lawyers call a “term of art.” A term of art is a word or phrase that has a specialized, specific meaning within a particular field (such as the legal profession). Terms of art are abundant in the law; other legal terms of art you may have heard of include “double jeopardy,” “burden of proof,” and “punitive damages.”

bookcase with ladder

Two Broad Classifications

There are two broad classifications of property—real property and personal property. Real property includes land and whatever is built on the land or attached to it. It includes buildings (like houses and grain silos), fences, tile lines, and mineral rights, for example.

Personal property is best described by what it is NOT. Anything and everything that is not real property, is then personal property. It can be easiest to think of this in terms of movability. Typically real property cannot be picked up and moved. Yes, you could dig up dirt from your plot of land and move it to your neighbor’s plot of land, but you cannot actually “move” the land.  And, sure, you could argue that you could move a shed from one corner of the yard to another, but not easily.

To drive this point home, let’s think about that shed. Let’s say I want to build a shed. The lumber, tools, and paint I brought to the site to build the shed are personal property; the shed itself is real property.

Intangible and Tangible Property

Personal property is broken down into tangible property and intangible property. Tangible personal property has physical substance and can be touched, held, and felt. Examples of tangible personal property are numerous, just a few examples are furniture, vehicles, baseball cards, cars, comic books, jewelry, and art.

Intangible personal property includes assets such as bank accounts, stocks, bonds, insurance policies, and retirement benefit accounts.

Pop Quiz!

Can you classify the following as real property, tangible personal property, or intangible personal property?

Your Twitter account.

This is intangible personal property. Yes, your social media presence and digital accounts are intangible property. (Don’t forget to account for this property in your estate plan!)

Your IRA.

Again, this is intangible property.

Farmland, including its silos and fences.

Real property.

Your comic book collection.

Tangible property!

MacBook Air laptop computer.

Your computer is tangible property. But, it may contain intangible property which could well have monetary value, such as a document containing a recipe you wrote on how to bake a better apple pie, or a software you programmed.

This quiz, and overall discussion about property, sparks a big question…

What Happens to Your Property When You Die?

When you die, what happens to your property depends in large part on whether you have a will (as a part of a complete estate plan) or not. If you have a will, then your property will pass to your beneficiaries just as you intended. An exception: some intangible personal property, such as retirement and bank accounts, have beneficiary designations. Such property will pass to its intended beneficiary without a will. (Don’t forget a beneficiary designation trumps what’s written in a will, if there is any discrepancy between the two.)

If you die without a will, you are leaving it up to the Iowa intestacy laws to decide who will receive your property. Decisions as to who of your heirs at law receive your property will be made without any regard as to what you may have wanted, or may have not wanted, if you would have had a say in the matter. Long story short, it’s a good idea to put an end to the excuses and enlist a qualified estate planner to draft your personalized, quality estate plan.

Whether it’s real or personal, tangible, or intangible, act now to protect and prepare your property for the future. Get an estate plan. You can reach me most easily by email at gordon@gordonfischerlawfirm.com or call my cell, 515-371-6077. Don’t delay—write or call today.

The latest lawsuit to grip the U.S. news cycle has all the makings of an interesting drama complete with pseudonyms, an agreement to “hush,” a payment for $130,000, and an absent signature. That missing signature is, in part, what brings us to an adult film actress’ lawsuit that a 15-page agreement between “Peggy Peterson” and “David Dennison” concerning an alleged affair with the president is null and void. How? The actress/stripper/director, Stormy Daniels (legal name: Stephanie Clifford), and her attorney, Michael Avenatti, filed their complaint on the bases that that the contract is unconscionable (unreasonably excessive) and invalid since Trump never personally signed. There are also allegations of coercion and physical threats against the actress by the opposing party to stay silent about what she knew about Donald Trump.

If the agreement is found to be invalidated, that would fling open the door for Stormy Daniels to publicly share her story involving Donald Trump without having to pay any damages to Trump’s attorney, Michael Cohen, who brokered the deal.

Daniels requested declaratory relief from the agreement—which Trump’s representatives are intent on enforcing—and even offered to return the $130,000 payment she received.

Many words could be written on the potential legal avenues both sides of this suit could pursue. But, with a CBS “60 Minutes” interview with Daniels slated to air this month, let’s zoom in on one important aspect of the agreement in question: breach of contract.

Even if you’re not suing Trump, we all enter into contracts and agreements, large and small, as a part of living in a modern society. Knowing what breach of contract means could have implications on partnership agreements, residential leases, and employment contracts, among many, many other kinds of agreements.

Legal & Binding

Suit on stairs

Before we dig into how a party can breach a contract, let’s establish what a contract actually is. A contract simply refers to a promise between two or more parties that establishes binding legal duties on the parties, such that the contract can be enforced in a court if necessary. While there are still major differences between states regarding contract law (i.e. a contract valid in Iowa is not necessarily binding in California), under the legal framework of the Uniform Commercial Code and common law, there are necessary provisions for all legally enforceable contracts in the U.S. The major requirements include (but are not limited to): (1) offer; (2) acceptance; (3) legality of purpose; (4) intent; (5) “competent” parties; and (6) consideration. Let’s look at each of these requirements:

Offer

An offer must be made. Of course, you know what an offer is in general, but in the legal world a contract offer means it must include three parts-

  1. The offering party must make a statement of intent to enter into a contract.
  2. Terms must be specified with a specific proposal.
  3. The offer must identify the party who is receiving the offer. a communication that identifies the person to whom the offer is made.

If any of these elements are not present, an offer has not been made.

There’s no one proper way to make an offer; it could be made via email, letter, text message, telephone call, and even through behavior.

Acceptance

This requirement seems like common sense—the offer must be accepted by the other party. But, like the offer, there are certain aspects that must be present in the acceptance. For instance, an offer must be accepted in the way that the offering party authorizes. (Example: an offer you received by email could specify that acceptance means signing and mailing back to a specific postal address. Another example: a grocery store coupon in the newspaper must be used, or accepted, by a date certain or it expires.)

Plus, an offer can only be accepted by the party to whom the offer was made, unless there’s a power of attorney or other authorization of another agent to accept on the party’s behalf.

Let’s say you receive a job offer with a new employer. That’s exciting, but you’re going to want to give the offer in the form of an employment agreement a thorough review. If you review (and consult with your attorney) and decide there are terms you don’t agree with, you may suggest changes and send your counteroffer back to the prospective employer. The edited, updated version of the contract you suggested could be accepted or rejected by the employer. Without acceptance of the agreement from all parties, there is no agreement.

This is one of the elements Daniels is asserting in her lawsuit against Trump—that the existing agreement is not valid and enforceable since one of the parties, David Dennison (AKA Donald Trump), never signed the written contract.

Legality

For an agreement to be enforceable, it must be made for a legal purpose. In other words, a contract’s subject matter cannot violate public policy or be deemed illegal. For example, a “contract” involving the sale of heroin would not be enforceable. If some parts of a contract violated either a state or federal statute, while the other parts were legal, and the two could be reasonably separated, only the aspects of the contract that were lawful could be enforced.

Intent

Sometimes referred to as “mutuality of obligation,” this necessary provision means that both parties to a contract must have a similar intent for the contract. So, if one party to a contract had been shown to purposefully misled or defraud the other party on the terms of the contract, then the contract could be nullified. Basically, everyone involved needs to enter into the contract honestly.

If you were to take a contract to court with the allegation that there was a lack of mutuality of obligation, the court would likely review records and communications that were used in creating the contract. This would provide evidence and a basis for the court to determine if an agreement on intent was actually absent at the time of drafting and execution. For that reason, I typically recommended my clients keep records of communications regarding contracts for a reasonable amount of time.

To go back to our Trump lawsuit example, intent also comes into play. Daniels has asserted that she was coerced into signing the agreement, and therefore there’s a lack of intent since, if this was the case, she wouldn’t have entered into the contract entirely freely. If proof can be found of blackmail or other types of intimidation, a court will rule the contract lacking in validity and thus unenforceable.

Man looking at grey building

Competency

Parties that enter into a legal contract must have the competency and capacity to do so. People who are limited in their ability to enter into a contract include persons who have been deemed mentally incompetent, or temporarily incapacitated in the case of being under the influence of drugs or alcohol, and minors (unless they have been legally emancipated). This requirement ultimately provides protection for both parties.

Consideration

This essential part to a valid, enforceable contract is actually quite different than it sounds. Instead of simply “considering” the agreement, this means that both parties need to provide something of value. Consideration could be a good, service, money, or even benefits. What if there isn’t consideration on both sides? Then the agreement creates the situation for a gift instead of a contract.

To use our previous employment example, the consideration in most employment contracts is the exchange of a service (the work) for money (such as a salary or wage).

All or Nothing

It’s not good enough if just two or three of the elements are present—all aforementioned requirements must be met if a court is to find a contract legally enforceable and binding. 

Breach of Contract Video

Click the image to watch an easy-to-understand video on “breach of contract”

Does a Contract Have to be in Writing?

A question I receive often is if every contract must be in writing. The short answer is no, but it’s a good idea whenever possible, especially in any business contract. Plus, under the intimidating-sounding Statute of Frauds, written contracts can be necessary for certain agreements to be enforceable like those involving real estate transactions, marriage, and long-term contracts (where duties cannot or will not be performed with one year of execution). That being said, if all the required elements are present in an oral agreement (and could be backed-up if necessary) a valid, enforceable exists.

Statute of Frauds mnemonic device

Breach of Contract

Now that we’ve established what a contract is, what’s a violation or breach of a contract mean? A breach of contract occurs when either party in the legal, enforceable agreement fails to perform their duties as outlined in the contract. When a breach of contract occurs, the other (injured) party can be entitled to a remedy, typically monetary damages. In theory the monetary remedy is to be an adequate substitute for the contracted duty and that it will set-up the injured party to be in the same position had the contract never been breached.

breach of contract definition

This makes a lot of sense when you consider real-world scenarios where the monetary remedy could be used to enlist a substitute. Let’s say you’re remodeling your house and you contracted with ABC Construction to redo your kitchen. You contracted with ABC Construction based on the fact they quoted you a lower cost for the remodeling services than XYZ Construction, the only other company that performs similar services in the local area. For whatever reason, the company refuses to complete their end of the contract; they fail to show-up multiple times and you can’t get in contact with them. If the contract were legal, you could sue ABC Construction for breach of contract, and ask for monetary damages (likely equal to the higher cost of services from XYZ Construction), since ABC failed to complete their end of contracted duties. As you can see, the money remedy “restores” your economic position to that as if ABC never breached.

In almost all cases money damages are the go-to remedy for contractual performance, but there are few exceptions. Specific performance of the contracted duties can be required in unique situations where cash is not sufficient to adequately compensate the non-breaching party. Real estate offers a common example where specific performance is often required. Let’s say a valid, enforceable written contract is executed for Alan to sell Bert his house at a certain rate, but then Alan later decides he doesn’t want to sell at all. Because there is no property just like Alan’s house, Bert may be entitled to specific performance of Alan going through with the sale.

The injured party can also be entitled to contractual performance if a total value of damages cannot be calculated.

Other remedies an aggrieved party can pursue in a breach of contract include recession from the contract (terminating the contract); quantum meruit (a fancy latin way of saying “what one has earned” meaning in contract law a recovery of the value of labor and materials); and injunction (a court order for a party to do, or cease, specific acts).

Breached Mnemonic Device

Let’s take it back to the 2016 nondisclosure agreement between Daniels and Trump (or, rather, Trump’s attorney Michael Cohen). The agreement asserts that if Daniels breaches the contract (meaning she discusses information about Trump in relation to the alleged affair) the remedy will be $1 million for each violation on top of any compensation Daniels earns from disclosing information about Trump. At this time, Cohen filed papers in a federal court reportedly seeking $20 million in damages from Daniels for 20 supposed breaches of the agreement. Which circles back to Daniels’ legal argument that she is not required to pay any damages; no breach of contract occurred as there was no valid contract to begin with.

On top of all this, the clause for $1 million in liquidated damages per breach is debatably a penalty clause. “Because penalty clauses are generally not enforceable under contract law, a court will construe an excessive liquidated damages clause as a penalty clause and will simply not enforce it.” (Note that liquidated damages are defined as specific sum of money parties agreed to and wrote into the contract. This is the amount the injured party should be paid if the other party breaches certain aspects of the contract.) Then, there is the question if the agreement and payment of $130,000 violated campaign finance laws.

So, needless to say, the Stephanie Clifford a.k.a. Stormy Daniels a.k.a. Peggy Peterson vs. Donald J. Trump a.k.a David Dennison and Essential Consultants, LLC. lawsuit seems to be getting increasingly complex with news of Cohen’s lawsuit against Buzzfeed. It’s also likely that we’re going to see other conversations surrounding Trump and breach of contracts considering the nondisclosure agreements he had White House staffers sign. The agreements supposedly have economic penalties for “unauthorized disclosures” not just during Trump’s term in the White House, but even after he’s out of office.

All of this is to say before you sign a contract, be it for some aspect of nonprofit operations, a personal property transaction, or employment agreement, you’ll need to spend ample time reviewing all the fine print. If at all possible you will also want to run the agreement by a skilled attorney, so they can help catch any obscure legalese or one-sided loopholes.

Questions about “breach of contract?” Need advice on a pending agreement? Want to know if a contract has all the required elements? Don’t hesitate to contact me via email or by phone (515-371-6077).

subpoena and pen

The language in which much of the law is written and conducted in can be downright confusing…it’s not called legalese for nothing! Even basic words, like property and trust, can take on varied and more specific meanings than their normal everyday meanings. But other words and phrases are a part of most adult Iowan’s peripheral lexicons if even from watching shows like The Good Wife or the nightly news Certain events or people can also spark an interest in legal-based terminology. For instance, many more people have now heard of the legal term “inclusion rider” thanks to Frances Dormand’s Best Actress acceptance speech at the recent Academy Awards. We’ve seen plenty of headlines featuring the word “subpoena” in the news cycle recently particularly in relation to a former outspoken Trump aide. It’s one of those words you kind of know, or think you may know, but again aren’t for sure. In order to better understand what’s going on with special counsel Robert Mueller’s investigation on Russia’s interference in the 2016 elections, let’s review what the legal term “subpoena” really means and if you can simply ignore it or refuse to cooperate if you want to…looking at you, Sam Nunberg.

What Does Subpoena Mean?

A subpoena is a formal court-ordered command to do something specific. There are two main, different kinds of subpoenas. (Quick phonetics lesson: the “b” is silent and the “poe” makes a long “e” sound.”) We’ll use the former Trump campaign aide (and defendant in a Trump lawsuit) Sam Nunberg as an example throughout.

Subpoena duces tecum

One type, subpoena duces tecum, demands you present a kind of tangible evidence like a physical item or document. For instance, a subpoena could request letters, photographs, emails, audio recordings, video footage, and text messages related to the case. (In fact, as a practical matter, a subpoena duces tecum will generally request all these items).

In the case of Sam Nunberg, the subpoena requested documents and communications dating back to November 2015 with people related to the scope of the investigation such as Donald Trump, former campaign advisor Roger Stone, Trump’s lawyer Michael Cohen, and former chief strategist Steve Bannon, among others. The subpoena was issued by a grand jury. (Grand jury reminder: a prosecutor establishes a grand jury to determine if there is enough probable cause, or evidence, to pursue a criminal case.) Earlier this week, Nunberg said in an interview he “objected to the subpoena because it asks for information about people whom he either never talked to or with whom he had close relationships.” Nunberg also asserted that it wasn’t fair for the investigation to demand his personal communications and that his emails weren’t relevant to the investigation.

subpoena nunberg

An excerpt from Nunberg’s subpoena | The New York Times

Subpoena ad testificandum

The other type of subpoena is ad testificandum, which compels a person to give their oral testimony at a specific time before an authorized legal body, such as a court, congressional/legislative body, grand jury, or government administrative agency. Before such a subpoena is issued, the person or group seeking information will typically first seek testimony on a voluntary basis. (For example, Trump’s White House attorneys have provided the investigation team with voluntary testimony.)

In the two-page subpoena, Nunberg was also requested to appear before a federal grand jury testimony and deliver oral testimony this Friday, March 9.

Subpoenas & Enforcement

Quite literally the word subpoena is derived from the similar Latin term sub poena which means “under penalty.” This makes it pretty obvious that there are penalties involved if you don’t do whatever is requested without a valid reason. If you receive a subpoena and you don’t cooperate with the (presumptively reasonable) request, you could be held in contempt of court and/or hit with time in jail and/or a fine.

Relating this back to our infamous subpoenaed headliner—when Nunberg was asked by MSNBC if he was worried about being arrested for defying the subpoena, he didn’t seemed concerned and said, “I think it would be really, really funny if they wanted to arrest me because I don’t want to spend 80 hours going over emails I had with Steve Bannon and Roger Stone.”

If no proper legal reason was asserted by Nunberg’s attorneys, and he failed to testify in front of the federal grand jury, prosecutors could ask a judge to grant a bench warrant for Nunberg’s arrest.

supreme court building

Can You Refuse a Subpoena at all?

Some scenarios allow you to present a valid legal defense against complying with the subpoena. You can claim the subpoena’s request(s) is overly taxing or too expansive in scope. You could also refuse if the material(s), info, or data requested is eternally lost, or is privileged in nature. (Think attorney-client, executive, or physician-patient privilege.) Another avoidance tactic for a subpoena in criminal cases is asserting it violates your Fifth Amendment right not to incriminate yourself. (This, however, would still require you to show up, you just wouldn’t have to answer questions). Of course, these efforts aren’t always successful, and the subpoena could still be enforced.

In short, Nunberg’s defense of “screw that” without anything to back it up, is not a proper excuse.

In the latest reporting on Nunberg, apparently he’s indicated he will now cooperate with Mueller and comply with the subpoena.

Subpoenas are serious legal documents and always require serious legal advice. It’s important to seek counsel from a trusted attorney if you get served with a subpoena, most especially if you want to deny a subpoena request.

chess board

Applicability of this Knowledge to Nonprofits

You may be thinking, “wow, this is all really interesting, and thanks so much, but what the heck does this have to do with nonprofits?”

It’s true that the mission of Gordon Fischer Law Firm is to promote and maximize charitable giving in Iowa.

Realize that nonprofits can receive subpoenas, too! And they do!

Remember, as was stated earlier, subpoenas can be issued not only by grand juries, but also by government agencies. So, if a disgruntled ex-employee complains, you might receive a subpoena from, say, OSHA, or the Department of Labor, or the Iowa Civil Rights Commission. It’s critically important that if this happens to you, or your fave nonprofit, you understand all the legal rights and responsibilities by contacting appropriate counsel.

Questions? Thoughts? Tell me in the comments section below or contact me via email or phone (515-371-6077).

No sooner had I written a blog post on how the Academy Awards relate to estate planning, did one of the award recipients bring up another legal topic that needed to be covered!

Best Actress winner Frances McDormand gave a powerful speech about gender equality in Hollywood. Her words seemed a fitting continuation of the #MeToo movement and Time’s Up initiatives that had a clear presence (both spoken and unspoken) in Los Angelas’ Dolby Theatre. At the conclusion, Ms. McDormand said, “I have two words for you: inclusion rider.”

https://www.facebook.com/ABCNetwork/videos/1880602121983915/

What is a Rider?

You may already know that a “rider” is an addition or extra to the main contract. Riders have special meaning when it comes to the entertainment world.

Perks!

Riders can be used to grant certain perks to an artist (like all of the actors and actresses present at last night’s Academy Awards).

Does a principal dancer want a certain kind of water available backstage? Is the guitarist picky about what foods will be available in the green room before and after a concert? If you’re an entertainer (dancer, comic, actor, musician, speaker, etc.) with a reasonable amount of bargaining power (i.e. star power!), you would want to be sure that your contracts include all your favorite little extras. These extras, or demands, should be placed in writing in each legal contract so that they must be honored by the other party such as a film production company, concert promotor, performance venue, and the like.

guitarist on stage

Finance

Riders can also cover specific financial elements. If a pop star, for example, wants a percentage of a concert’s profits, she might request this through a rider. A television actor could attempt to request something similar from online streaming sales.

Inclusion Rider 

Tack the specific word “inclusion” onto rider and you have a contractual clause that actresses/actors can insist be inserted in contracts that requires cast and crew on a film to meet a certain level of diversity (both racial and gendered).

The concept was explored in a TED talk in 2016 by Stacy Smith. Smith, director of USC Annenberg’s Media, Diversity & Social Change Initiative, believes that inclusion riders (also called an “equity clause”) could be part of the solution for the lack of diversity in films. In a 2014 piece she penned for The Hollywood Reporter, she wrote:

What if A-list actors amended every contract with an equity rider? The clause would state that tertiary speaking characters should match the gender distribution of the setting for the film, as long as it’s sensible for the plot. If notable actors working across 25 top films in 2013 had made this change to their contracts, the proportion of balanced films (about half-female) would have jumped from 16 percent to 41 percent. Imagine the possibilities if a few actors exercised their power contractually on behalf of women and girls. It wouldn’t necessarily mean more lead roles for females, but it would create a diverse onscreen demography reflecting a population comprised of 50 percent women and girls.

Smith asserts that there’s no reason why the majority of the minor roles (on average, 30-ish or so roles) cannot reflect the demographics of the realistic environment where a story is taking place. An A-list actor or actress can use their contract to stipulate that the supporting roles in the film (or show) reflect equitable diversity in terms of both race and gender.

Smith said she’s worked with attorneys in the past to craft specific language for the provisions where if the other party failed to meet the inclusion rider requirements, they would need to pay a penalty to a fund or charitable cause that supports underrepresented persons in the industry.

It’s a smart, common sense move that could mean a big change in countering the bias (both conscious and unconscious) in auditions and casting. The intended result is for greater representation and opportunities for women, persons of color, the LGBT community, and persons with disabilities in entertainment. Plus, as actress and comedian Whitney Cummings said, this increased pressure for inclusivity “will make movies better.

McDormand on Inclusion Riders

Backstage after the Oscars ceremony, McDormand said of inclusion riders, “I just found out about this last week. There has always been available to all, everybody who does a negotiation on a film, which means you can ask for or demand at least 50 percent diversity in not only the casting and the crew. The fact that I just learned that after 35 years in the film business – we aren’t going back.”

Inclusion Riders & You

While you may not be nominated for an Academy Award anytime soon, the takeaway is twofold.

First: if you support increased representation of different genders and races in movies you can support the films that respect inclusion riders with your money. You can also spread the word with the tag #EquityRider when tweeting to actors and actresses asking for them to support the concept through their own contract.

Second: this goes to show the power of the contact and negotiation process. Because the contract can dictate how the relationship between employer and employee (or production company and talent, for instance) run, it’s important to hire an attorney to help you stand up for your wants and needs in respect to the relationship.

To this point, if you’re a nonprofit organization looking to make some new hires or an employee wondering if the contract you’re about to sign will actually be in your best interest, don’t hesitate to contact me.

Heirs at law on beach

Before I explain the concept of “heirs at law,” you might be thinking, why even bring this up? Of what relevance is this “Ye Olde Sounding Phraise” in today’s modern world?

It’s important for me to share the concept of “heirs at law” with you, dear GoFisch blog Reader, for three reasons.

  1. It helps explain why I, and other estate planners, ask so many darn questions. We need lots of info.
  2. The concept of “heirs at law” shows that you need to be open and honest and forthcoming with me, or any estate planner. Without complete transparency and truth, the estate plan runs the risk of being useless (the idea of “garbage in, garbage out” applies here).
  3. “Heirs at law” is yet another reason that a DIY will, or using an online service to produce your will, is just a terrible idea. You need an estate plan crafted by a trusted professional, unique to your special needs. Every family is different, so there can be no “one-size-fits-all” estate plan, and there are many moving parts to a comprehensive estate plan.

With that established, what does the term “heirs at law” actually mean?

girl drawing heart in sand

Heirs at law are those folks who would inherit your property in the event you died without a will, which is called intestacy1. It is critically important to determine who the heirs at law are, even for people not subject to the laws of intestacy (i.e., folks who have a will) for two big reasons.

  1. Heirs at law must be notified of the probate process.
  2. Heirs at law are allowed to challenge the Will in probate court.

As I already stated, you must provide all the information your estate planner requests. As a practical matter, the extent of information you’ll need to provide your estate planner regarding heirs at law depends of the nature of your family and relatives. For instance, in the case of two people, married only to each other, with children only from that one marriage—then the spouse and children (and perhaps grandchildren) will be the obvious heirs at law.

In another example, a family could also constitute a remarriage with each spouse having children from previous relationships. In this case, the stepchildren would need to be adopted by the applicable stepparent to be considered an heir at law.

In other situations, the client relatives may be much more distant, requiring more fact investigation. For example, take the case of a client who is unmarried and without children. In such a situation, the estate planner will need to pay close attention to identifying other relatives.

Family walking down road hand-in-hand

Of course, you can bequeath your estate to whomever you choose. You don’t have to give anything to any of your obvious or non-obvious heirs at law or any other relative for that matter. (In colloquial terms we could call this “stiffing your relatives.”)

This point reiterates why the estate planner should know and have updated contact information of who are the heirs at law. Again, it’s required that heirs at law be notified of probate process and these heirs (unlike a non-relative work colleague or neighbor) also have the legal standing to contest the will in court.

Another reason the estate planner must have knowledge of the heirs at law is to ward off fraudulent claims, if need be. This reason is particularly important if the heirs at law are distant relatives. (An unfortunate real world example of this involves Prince and the complicated intestate process following the singer’s passing without an estate plan.)

Bottom line: heirs at law are important when it comes to the distribution of your estate (with or without a Will). Of course, dying intestate is NOT optimal and you DO need a Will for a number of important reasons. I’d love to discuss the topic over the phone (515-371-6077) or via email. Don’t hesitate to contact me at any time!


[1] Bonus word! If an Iowan dies without a will, they die “intestate” and the laws of “intestate” succession are used to determine who will inherit the estate.

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.

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.

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.