Saving for retirement

IRS announced on October 19 various pension and retirement plan contribution limits for 2018. The announcement (IR-2017-177) affecting many is this:

  • “The contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $18,000 to $18,500.”
  • “The limit on annual contributions to an IRA remains unchanged at $5,500. The additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000.”
  • “The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans and the federal government’s Thrift Savings Plan remains unchanged at $6,000.”

I do not usually use this space and this forum to stray too deeply into politics, but on this one I am going to stray into the political realm briefly, so if your interest is solely in the tax tid bits, you can stop reading here.

We have been hearing a lot of news about changing the 401(k) plan (and probably all of the other retirement savings vehicles) in the name of tax simplification and paying for the big budget deficits generated by huge tax cuts. If the leaks about the tax bill being written in the deep dark recesses of Washington are correct, a lot of people will lose the much needed and well liked method of tax-deferred retirement savings, and it will amount to a huge and immediate tax increase on the middle income Americans. That would be a terrible deal.

For years and years, politicians of every stripe have told the hard-working citizens of this country (both rich and not so rich) that they should not rely solely on Social Security for retirement. Indeed, the basic Social Security payment is not adequate to meet the basic needs for most retirees. For years and years, politicians (but particularly those of the conservative stripe) have been trying to get the government out of the pension business and helping to get business out of the pension business. too. The push has been to put retirement saving into the category of “personal responsibility” and to get people to take their retirement savings and invest in the markets. Well, here we are at the end of 2017, and much of the country has turned away from the old fashioned pension and toward the vaunted personal responsibility of deferring current earnings into 401(k), 403(b), and 457 plans.

Hey, you convinced us. Millions use these accounts for needed retirement income and passing wealth to their children and grandchildren  Millions have invested billions in the markets  Now, you are going to yank the rug out from under them?

As a tax preparer and estate planner, I see every day that these retirement plans are a huge benefit to all kinds of people. Many modest middle and middle-upper income folks are (or are well headed toward being) retirement plan millionaires. These plans work for all the right reasons. While I have my doubts about whether any big changes to retirement plans will survive the lobbying efforts of the big Wall Street investment houses, anyone who plans on retirement ever should add their voice to shout down this terrible idea.

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An Open Letter To the Iowa Secretary of State

TO THE IOWA SECRETARY OF STATE:

Dear Mr. Pate:

You have terrible customer service. Your business services division is horrible. It has not improved one iota since you took office–and your predecessor left you nowhere to go but up. Your failure to correct the bureaucratic officiousness and utter lack of common sense is an abominable failure. Perhaps your attention is elsewhere than to promote the formation of Iowa businesses?

Iowa deserves better customer service than this. Your nit-picky bureaucrats constantly create problems by their refusal to actually read the documents submitted to them or to exercise the least bit of common sense or discretion. You know, maybe I am just spoiled by good local officials who actually help get things done, but maybe a phone call or an email would be in order to clear up basic questions or encourage resubmissions, if needed.

Your business services office causes all kinds of heartburn and difficulty to Iowa businesses and especially the people trying to help get them set up. Anyone practicing business law has to spend weeks worrying about whether a document may get bounced by the business services office because one of your administrators will find a period out of place. The ONLY way to prevent the wait is to drive to Des Moines and ask for counter service. You should really take a lesson from the Iowa County Recorders Association, which gets documents processed timely through its e-submission service on iowalandrecords.com.

Does all of this complaining sound familiar? Perhaps you have forgotten. I complained about this before: I sent you a certificate of organization for a limited liability company. The name chosen by the client had no punctuation is the company abbreviation: “LLC” — and so the heading reflected that fact, it was:  “ABC LLC” — but in the body of the text at the end of a sentence there was a period after the name as in: “The name of the company is ABC LLC.” (Did you note the proper period at the end of the sentence previous?) And, so your lovely processors sent the document back to me unprocessed a month later because the name in the heading and the name in the body of the document did not match. Do you remember that one? I don’t use headers any more. I don’t use puctuation in the body of the certificate any more.

Now, today — nearly a month after submitting a certificate for processing — I get another good one from you. I gave you a street address and a mailing address for a registered agent — both clearly labeled as such. The statute says we have to give you a street address. Street addresses don’t always get mail, you know. It is probably good for you and the public to know where to send mail. Your website even includes a second line for a mailing address. And, yet, you bounce another certificate of organization? Good grief. This is moronic.

And, who has time for this nonsense? We practitioners (at least this one) uses electronic submission to get documents to you as quickly as possible in the mad hope that your backward system might one day find its stride and provide good customer service and a quick turn-around.

Please fix this BROKEN system. You pay plenty of lipservice to making Iowa a great place for new businesses — it is time to put your money where your mouth is.

Thanks for listening.

/s/ Frustrated.

2014 Legislative Update Part 4

The 2014 session of the Iowa General Assembly brought a few changes to the real estate practice in Iowa. This series of posts will focus on the bills that passed and a few that did not.

HF 2327/SSB 3175: An Act requiring recording of claims involving mineral rights in real estate owned by another person and providing for loss of mineral rights if a claim is not timely recorded

Status: Withdrawn. The full text of the bill is here.

This was part of The Iowa State Bar Association’s affirmative legislative agenda. There is a concern among some in the Iowa real estate bar that there are around the state many “ancient” reservations of mineral interests that are fouling title to real property. These are often reservations of mineral interests made by now-defunct railway corporations. Some will argue that these interests are subject to the marketable title act and could potentially be scrubbed off allowing the surface and subsurface rights to be reunited. Others argue (or at least have some concern) that the act is not terribly specific in its reach and that it is difficult to possess the subsurface rights in a meaningful way. There is the further concern that exploration for subsurface hydrocarbons will spread from neighboring areas, and there needs to be some way to deal with these reservations.

The bill attempted to set up a system whereby for interest in minerals created 20 years before enactment, one would have a year to file a verified claim and within 21 years from the recording of the instrument creating all other interests, unless the interest was separately assessed.

2014 Legislative Update Part 3

The 2014 session of the Iowa General Assembly brought a few changes to the real estate practice in Iowa. This series of posts will focus on the bills that passed and a few that did not.

Senate File 2091 “Relating to common forms of co-ownership of real property and including effective date and applicability provisions”

Status: Passed both houses; signed by Governor, 4/3/14; effective 1/1/15. The full text of the bill is here. The enrolled version is here.

This was part of The Iowa State Bar Association’s affirmative legislative agenda. The general purposes of this bill were (a) to simplify the language required to create a joint tenancy with a right of survivorship; (b) to add a presumption for a right of survivorship when there is a statement that two are married to each other; and (c) create a presumption of severance of the joint tenancy with a right of survivorship upon a dissolution, annulment, or separate maintenance.

The bill was not intended to and does not change the basic presumption of a tenancy in common. The bill adds an exception for a presumption of a right of survivorship in spouses, simplified forms of “joint tenancy” and “survivorship.” Adds to section 557.15 a paragraph that creates a presumption that an order of dissolution, annulment, or separate maintenance is intended to sever any joint tenancy with right of survivorship into a tenancy in common, unless otherwise ordered. Applies to instruments and orders dated on and after January 1, 2015.

The revised text of statute reads:

   557.15  Common forms of co-ownership of real property.
1.  A conveyance of real property to two or more grantees each in their own right creates a tenancy in common, unless a contrary intent is expressed in the conveyance instrument or as provided in subsection 2.
2.  A conveyance of real property to two or more grantees in a conveyance instrument in any of the following circumstances creates a presumption of joint tenancy with rights of survivorship unless a contrary intent is expressed in the instrument and subject to subsection 3:
a.  The instrument identifies two grantees as married to each other at the time the instrument is executed.
b.  The instrument describes the conveyance to the grantees with the phrase “joint tenants”, “joint tenancy”, or words of similar import.
c.  The instrument describes the conveyance to the grantees with the phrase “or their survivor” with reference to the grantees, or words of similar import.
3.  An order of annulment, dissolution, or separate maintenance entered pursuant to section 598.21 is a muniment of title to the real property described, and severs a joint tenancy with rights of survivorship and creates a tenancy in common in equal shares, unless otherwise provided in the order.

2014 Legislative Update Part 2

The 2014 session of the Iowa General Assembly brought a few changes to the real estate practice in Iowa. This series of posts will focus on the bills that passed and a few that did not.

Senate File 2312 “Relating to the continued effect of terms, conditions, covenants, and provisions contained in documents and instruments creating or regulating multiple housing cooperatives and horizontal property regimes, by allowing limited liability companies to form multiple housing cooperatives, and including applicability provisions”

Status: Passed both houses; signed by Governor, 4/17/14; effective 7/1/14. The full text of the bill is here. The enrolled version is here.

This was part of The Iowa State Bar Association’s affirmative legislative agenda. The purpose of this bill was to respond to a decision in Chipman’s Subdivision Homeowners Association, Inc. v. Carney, 814 N.W.2d 622 (Iowa Ct. App. 2012) in which a homeowners association designed in part to maintain private amenities and created by covenants was declared invalidated after 21 years under section 614.24 of the Code of Iowa.

The primary purpose of this legislation was to eliminate the possibility that housing cooperatives or condominiums regimes would be affected by the stale uses and rule against perpetuities statutes. In addition, Sec. 1 of the bill adds limited liability company to the list of permitted owners in chapter 499A cooperatives.

Sec. 2 adds new section 499A.23 providing that articles, bylaws, proprietary leases, rules, etc. define the length of existence of the coop and that these are not affected by sections 558.68 or 614.24.

Sec. 3 adds new section 499B.21 providing that declaration, articles, bylaws, rules, etc., define the define the length of existence of the condo and that these are not affected by sections 558.68 or 614.24.

If there were any doubt left by Sec. 2 or 3, the bill also contains in Sec. 4 and 5 language added to section 558.68 and section 614.24, respectively, limiting their effectiveness as to chapters 499A and 499B.

 

2014 Legislative Update Part 1

The 2014 session of the Iowa General Assembly brought a few changes to the real estate practice in Iowa. This series of posts will focus on the bills that passed and a few that did not.

Senate File 2315: Stale Uses and Reversions/Use Restrictions on Land

Status: Passed both houses; signed by Governor, 4/3/14; effective 7/1/14. The full-text of the bill is here. The enrolled version is here.

This was part of The Iowa State Bar Association’s affirmative legislative agenda. The purpose of this bill was to respond to a decision in Chipman’s Subdivision Homeowners Association, Inc. v. Carney, 814 N.W.2d 622 (Iowa Ct. App. 2012) in which a homeowners association designed in part to maintain private amenities and created by covenants was declared invalidated after 21 years under section 614.24 of the Code of Iowa.

The bill amends section 614.24, Code of Iowa, the “Stale Uses and Reversions Statute,” to define various sets of uses that are not barred after 21 years, and that are not subject to renewal by verified claim. The statute had never defined the term “use restriction.” SF 2315 is intended to provide some definition of the term “use restriction” both of what a “use restriction” was and was not with some substance. Part of the intent was to avoid simply labeling a document to affect whether section 614.24 applies.

The new subsection 4 defines “use restriction” as a real substantive limitation on the property owner’s rights and gives a non-exhaustive list of examples. The legislative committee also thought that it was important to list some things that a “use restriction” is not with some specifics: (a) easements granting affirmative rights; (b) cost sharing agreements; and (c) joint use and maintenance. It is not expected that this legislation ex post facto revives covenants that otherwise terminated under prior law.

As defined in the bill, “‘use restrictions’ means a limitation or prohibition on the rights of a landowner to make use of the landowner’s real estate, including but not limited to limitations or prohibitions on commercial uses, rental use, parking and storage of recreational vehicles and their attachments, ownership of pets, outdoor domestic uses, construction and use of accessory structures, building dimensions and colors, building construction materials, and landscaping.”

The term “use restrictions” does not include any of the following:

“a. An easement granting a person an affirmative right to use land in the possession of another person including but not limited to an easement for pedestrian or vehicular access, reasonable ingress and egress, solar access, utilities, supporting utilities, parking areas, bicycle paths, and water flow.”
“b. An agreement between two or more parcel owners providing for the sharing of costs and other obligations for real estate taxes, insurance premiums, and for maintenance, repair, improvements, services, or other costs related to two or more parcels of real estate regardless of whether the parties to the agreement are owners of individual lots or incorporated or unincorporated lots or have ownership interests in common areas in a horizontal property regime or residential housing development.”
“c. An agreement between two or more parcel owners for the joint use and maintenance of driveways, party walls, landscaping, fences, wells, roads, common areas, waterways, or bodies of water.”

References: Amana Society v. Colony Inn, Inc., 315 N.W.2d 101 (Iowa 1982) (“use restriction” applicable to “negative” easements not “affirmative” easements). Fjords North, Inc. v. Hahn, 710 N.W.2d 731, 735 (Iowa 2006) (“Restrictive covenants are contracts. … Consequently, they are covered by section 614.24.”). Compiano v. Jones, 269 N.W.2d 459 (Iowa 1978), Compiano v. Kuntz, 226 N.W.2d 245 (Iowa 1975), Presbytery of S.E. Iowa v. Harris, 226 N.W.2d 232 (Iowa 1975).

Real estate and municipal decisions handed down

The Iowa Supreme Court issued a couple of decisions affecting both real estate and municipal law on Friday, June 13, 2014:

Split #IowaSupremeCourt affirms w/o precedent city ordinance requiring improvements before cooperative declarations http://ow.ly/xYvbx

In POLK COUNTY BOARD OF REVIEW vs. VILLAGE GREEN CO-OP, INC. (No. 13–1205), with six justices voting and one not participating, the court affirmed by operation of law a decision involving a Des Moines ordinance and a cooperative conversion. The ordinance requires cooperatives to conform to current building codes. Buildings not brought into conformance were required to remain classified as commercial (that is, taxed more) rather than residential. The order directs that the decision not be published, and it will have no precedential value.

City’s claim against State as abutting owner for sidewalk liability to be allowed at trial #IowaSupremeCourt ow.ly/xYtFu

In BETH A. MADDEN vs. CITY OF IOWA CITY (No. 13–0673), the Iowa Supreme Court rejected the State’s assertion that it should not be brought into a sidewalk liability case between a city and a bicyclist. This case is interesting because of the summary of sidewalk liability law. Its importance, however, relates to how the State may have responsibilities as a property owner and the interplay between city ordinances and the state tort claims act.