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In Iowa, courts handling divorce matters must make an “equitable division” of the marital property. Ultimately, equitable division is to be evaluated on a case-by-case basis in accordance with the special circumstances of the marriage. Iowa Code §598.21(5) lists the factors for the equitable division of inherited or gifted property. Those principles can be difficult to apply in the context of a farming business. The division of inherited and gifted property in a divorce was the major issue in this case.
Here, a mother and son bought a residential property in 1990 and held the property as “joint tenants with right of survivorship.” At various times, the mother resided with her son in the house or lived with other relatives. From 2005 to 2007, the son claimed his mother as a dependent on his income tax returns. In 2003, the property was refinanced and re-titled. However, the new deed indicated that the mother and son were “tenants-in-common.”
The decedent in this case died in 2009 and was survived by three adult children. She was preceded in death by her husband. Before her death, she served as the executor of her husband’s estate and was unhappy with the lack of help given her by the co-executor, a local bank. She expressed an interest in changing the executor designation in her own will before her death, but died before making any change. Upon her death, but before the estate was opened, the bank made several payments from an “estate account” before being formally appointed as co-executor.
In this case, mom’s only child, a daughter was given a general power of attorney (POA) in 2001. The POA specifically provided that the daughter could not use the POA to make gifts to herself. Mom owned 120 acres of farm ground, including a homestead where she had lived for nearly 50 years. In 2004, mom personally guaranteed a loan in favor of her daughter and delivered to the bank a signed a mortgage agreement securing a note for $170,000 for her daughter. The farmland was listed as collateral.
The plaintiff sued, alleging he had properly exercised an option to purchase Nebraska real estate, but that the title holder refused to honor the option. The fair market value was substantially more than the option price of $5,700,000. The plaintiff asked the court to order specific performance on the option contract. Before the matter was resolved, the plaintiff died. The administrators of the estate continued the litigation with the same law firm. In 2008, the bank filed a claim against the estate based upon an unsatisfied judgment they had obtained against the estate.
Iowa law provides for the reopening of an estate in circumstances. For example, Section 633.489 of the Iowa Code provides:
This case involved the distribution of an Iowa estate’s assets to the surviving spouse, adult children, and minors following the lump settlement of a wrongful death case filed in Nebraska. On appeal, the court was asked to determine choice of law for the distribution and the equitable distribution of the settlement proceeds.
At the upcoming Agricultural Law seminar on September 12, 2013 one of the topics to be discussed will involve self-defense issues and liability issues with respect to firearms. That has become a big issue recently.
The importance of ensuring the intentions of the parties is clearly spelled out in a prenuptial agreement and subsequent estate planning documents cannot be stressed enough. In the following case, the parties spent years fighting over a decedent’s estate because of unclear language.
In 1987, a trust was created upon the death of the plaintiff’s grandfather. At the time of his death, the grandfather’s wife received one-half of the real estate owned by the grandfather directly and the other half was conveyed into a trust. The wife received the income from the trust during her life with the grandfather’s daughters as residual beneficiaries upon her death.
(Note: On August 8, 2012, the Iowa Court of Appeals revised their earlier opinion regarding the amount of the inheritance tax reimbursement. The earlier opinion was vacated and the August 8, 2012 opinion replaces it.)
In Iowa, marital property is to be equitably distributed upon the dissolution of a marriage. Inherited property, however, is normally awarded to the individual spouse who owns the property and distributed to the individual independent from the equitable distribution process. But, under Iowa law, the court does have the power to require distribution of inherited property if equity demands it in light of the particular circumstances of the spouse or children. Several factors are considered, including the following:
Installment sale contracts are a popular method to sell real estate, especially farmland. One popular feature is that the downpayment is usually low, quite often less than 20 percent of the purchase price. Beginning farmers and others with minimal amounts of cash like that. But, to be a valid contract all the requirements to have a binding contract must be satisfied - including the requirement that the seller has the authority to convey the real estate. That was the issue in this case.
Many lawsuits have been filed over land deals that have gone bad. A lot of those involve buyers that get cold feet and renege on the deal. But, what if the seller tries to back out after agreeing verbally to a particular party’s offer to purchase the property? That’s what happened in this case, and it illustrates a fundamental rule of contract law - contracts for the sale of real estate must be in writing to be enforceable. That’s known as the Statute of Frauds. It’s an old rule that date backs to 1677 in England.
It’s always a good idea to reduce farm leases to writing. Unfortunately, most farm leases in Iowa (and elsewhere) are oral. But, even if the lease is in writing it is critical to make sure that the lease terms are clear and that both the landlord and the tenant have a common understanding of what the lease terms mean. This case drives those points home.
Oral farm leases present many problems, not the least of which is the question of what happens when either the landlord or the tenant dies during the term of the lease. This is another reason why it’s always best to get the terms of a farm lease in writing. But, that didn’t happen here and the landlord died during the lease term. A lawsuit among family members was filed to sort out the mess – with a very predictable outcome.
In Iowa, if an agreement is said to be signed by an adverse party in a legal proceeding, that signature is deemed to be genuine unless the adverse party can support their denial of the signature’s authenticity with credible evidence. In that event, the burden shifts to the party claiming the signature is a fake to demonstrate its validity. In the event that a handwriting expert is called in to examine the signature, it is up to the trial court to determine their credibility. This analysis is particularly important in the case of a promissory note or check.
In many cases involving breach of contract where the amount of damages is an issue, courts seek an outcome that will put the contracting parties in the position they would have been in had the contract been performed according to its terms. Reaching that outcome often requires a thorough examination of the evidence.
A key element of contract law is that the terms in a written agreement control. While limited situations can arise that allow for equitable arguments to be made that might allow conduct contrary to written contract terms, that’s the clear minority of situations. Those principles were involved in this case.
The Center for Agricultural Law and Taxation does not provide legal advice. Any information provided on this website is not intended to be a substitute for legal services from a competent professional. The Center's work is supported by fee-based seminars and generous private gifts. Any opinions, findings, conclusions or recommendations expressed in the material contained on this website do not necessarily reflect the views of Iowa State University.