Don’t Sign the New Best Interest Contract Exemption.

The Department of Labor has a new fiduciary rule that dictates that those giving you investment advice must manage and mitigate their conflicts of interest unless you sign off on the obligation. Every year you must sign a best interest contract stipulating that the advisor will provide advice that is in the best interest of you, the client, unless they get you to sign a best interest contract exemption. That piece of paper will acknowledge the fiduciary status, but they might disclose all material conflicts of interest only on their website or only upon your request. Don’t fall for it. Either request it annually or ask that it be handed to you in writing so that you don’t have to search the advisory firm’s website to find out what monies they are being paid by the mutual funds or annuity companies.

One financial planner told us recently that in the UK when this was adopted there was a significant number of advisors that quit or retired early. It is not certain whether or not that will happen in the United States. Just don’t waive your rights. These cautions are especially true when buying equity indexed annuities.

This blog post is meant for informational purposes only and is not meant to provide legal advice in any particular circumstance or factual situation. You should consult with an attorney prior to taking any action regarding the information contained herein. If you have questions concerning this post, please contact Dan Dykstra at Daniel.Dykstra@heidmanlaw.com

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A “Princely” Sum Goes to the IRS

When Prince, the iconic musician died recently, it was reported that he died without a Will, without a spouse, and without children.  There is no way to know for certain what his entire estate is worth but some guesses are somewhere between $250 and $300 million.  After the exemption of $5.45 million for federal estate tax purposes, roughly 40% will head to the IRS.  Anything over $1.6 million will be subject to the Minnesota estate tax.  That leaves over half the estate headed for taxes.  Not particularly good planning is it?  An artist who fought for his royalty rights throughout his career failed to plan for his death.  Wouldn’t it have been great if he had given money to his surviving siblings and then put the rest in a foundation that would help out charity?  Or promote music?  Instead, the State of Minnesota can fix their roads and the federal government will use it to pay interest on the debt.  A sad state of affairs that could have easily been eliminated with some planning.

This blog post is meant for informational purposes only and is not meant to provide legal advice in any particular circumstance or factual situation.  You should consult with an attorney prior to taking any action regarding the information contained herein.  If you have questions concerning this post, please contact Dan Dykstra at Daniel.Dykstra@heidmanlaw.com.

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Ag Law Terms 101: What is a Wetland Determination?

Farmers should be aware that there are two ways under federal law that wetlands are regulated.  First, the Clean Water Act regulates some wetlands if they fall within the definition of “waters of the United States” and prohibits persons from discharging pollutants, which includes fill material, into them without obtaining a permit.  (Currently, as most in the agricultural industry are aware, there is an ongoing fight between the EPA, Congress, environmental groups, and farm groups over the appropriate definition of “waters of the United States.”)  The Corp of Engineers makes wetland determinations for purposes of the Clean Water Act and determines whether the wetland falls within the “waters of the United States” definition.

Second, the Food Security Act generally prohibits farmers or landowners from converting wetlands into farmland.  The NRCS makes wetland determinations for purposes of the Food Security Act.  During these determinations, the NRCS classifies the property as a farmed wetland, prior converted cropland, or non-wetland.  The classification delineates how the farmer may change or use the property.

Wetlands can be difficult to identify.  Therefore, if you intend to clear or drain agricultural land, you should be aware of these laws and restrictions, as violations of the Clean Water Act can result in civil penalties and violation of the Farm Bill provisions can result in ineligibility for farm program payments.

This blog post is meant for informational purposes only and is not meant to provide legal advice in any particular circumstance or factual situation.  You should consult with an attorney prior to taking any action regarding the information contained herein.  If you have questions concerning this post, please contact Allyson Dirkson atAllyson.Dirksen@heidmanlaw.com.

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Ag Law Terms 101: What is a Partition Action?

Generally, if one or more of the co-owners of a piece of property want to divide the piece into separate pieces or sell the property, the co-owners can enter into an agreement to do so and accomplish those goals without the need for court intervention.  But when co-owners disagree about these issues, what happens?  A partition action may result.

A partition action is a special type of lawsuit where one or more of the co-owners of a piece of land ask the court to divide the land into separate interests.  Parties in a partition action can either seek a partition by sale – where the court will then order that the land be sold and that each owner receives his or her share of the sale proceeds – or a partition in kind – where the court orders that the land be divided into separate pieces and each co-owner then becomes the sole owner of his or her own piece.  However, a partition in kind will only be available when the court finds that the partition in kind is equitable and that the division of the land can be practically done.

This blog post is meant for informational purposes only and is not meant to provide legal advice in any particular circumstance or factual situation.  You should consult with an attorney prior to taking any action regarding the information contained herein.  If you have questions concerning this post, please contact Allyson Dirkson atAllyson.Dirksen@heidmanlaw.com.

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Ag Law Terms 101: What is an Agricultural Lien?

An agricultural lien is defined as “an interest other than a security interest, in farm products which secures payment or performance of an obligation for goods or services furnished in connection with a debtor’s farming operation or rent on real property leased by a debtor in connection with its farming operation.”  Iowa Code s. 554.9102.  Agricultural liens arise by statute.  Therefore, the debtor does not have to agree to allow the creditor to have a lien.  Instead, the creditor must simply meet all of the conditions in the statute.

There are many types of agricultural liens.  The types and requirements for agricultural liens vary by state.  In Iowa, a few of the main agricultural liens are:  landlord liens, agricultural supply dealer liens, harvestor liens, veterinarian liens, custom cattle feedlot liens, and commodity production contract liens.  If you are a creditor of a farming operation, you should find out if there are any applicable agricultural liens that can help you secure obligations owed to you.

This blog post is meant for informational purposes only and is not meant to provide legal advice in any particular circumstance or factual situation.  You should consult with an attorney prior to taking any action regarding the information contained herein.  If you have questions concerning this post, please contact Allyson Dirkson at Allyson.Dirksen@heidmanlaw.com.

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Iowa Mechanic’s Liens – Subcontractor Requirements

Beginning on January 1, 2013, all Mechanic’s Lien documents in Iowa are now required to be posted on the state construction registry, which is an online database administered by the Iowa Secretary of State. For residential construction, a subcontractor is required to post a preliminary notice on the registry website that includes the name of the owner, the state construction registry number, and the address and contact information for the subcontractor. The notice must also include the name of the person who contracted with them, the name of the general contractor or owner-builder, the address or description of the property, the legal description, the date materials were first furnished or labor first performed, and the tax parcel ID number. If the general contractor has not posted a commencement of work notice, a subcontractor may do so before posting the preliminary notice.

If the subcontractor’s preliminary notice is posted before the owner pays the balance due to the general contractor, it is effective as to all labor, service, equipment, or material furnished subsequent to the posting of the notice of commencement of work. Subcontractors that fail to post the notice are not entitled to a lien.

If the subcontractor posts a proper mechanic’s lien within 90 days after the last of the materials were furnished or labor performed, the owner is liable to the subcontractor for the full value of the materials or labor even if the owner makes payment to the general contractor or owner-builder.

This blog is intended only to outline some of the rules applicable to subcontractors in residential construction. The rules regarding notice and posting documents differ for commercial construction.

This blog post is meant for informational purposes only and is not meant to provide legal advice in any particular circumstance or factual situation.  You should consult with an attorney prior to taking any action regarding the information contained herein.  If you have questions concerning this post, please contact Jake Natwick at Jacob.Natwick@heidmanlaw.com.

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Choice of Entity – S Corporations

As noted in a prior blog entry, an individual or group of individuals that are starting a new business should consider forming a legal entity to protect them from most personal liability for business obligations and debts. An S Corporation is a popular entity choice as it offers pass-through income tax treatment for shareholders in addition to personal liability protection.

An S Corporation is formed as an ordinary for-profit corporation by filing Articles of Incorporation with the secretary of state in the state where the entity has its principal place of business. Then, an IRS Form 2553 must be filed to elect S Corporation status for tax purposes.

An S Corporation will also need adopt Bylaws, which sets forth the rules governing the management and operation of the S corporation. An S Corporation can have between 1 and 100 shareholders, but none of the shareholders can be corporations or partnerships.

There are some advantages offered by S Corporations that differ from other types of business entities. Shareholders that will be employed by the business might consider forming an S Corporation rather than an LLC or other type of entity as it may offer employment tax benefits. For an overview of the other benefits of this type of entity, you should consult an attorney.

This blog post is meant for informational purposes only and is not meant to provide legal advice in any particular circumstance or factual situation.  You should consult with an attorney prior to taking any action regarding the information contained herein.  If you have questions concerning this post, please contact Jake Natwick at Jacob.Natwick@heidmanlaw.com.

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