Author: Erika Olson

In 2016, the South Dakota Legislature instituted training requirements for new guardian and conservators under SDCL 29A-5-119. The training is provided by the South Dakota State Bar and provides basic information about the role and obligations of a guardian and conservator, respectively. A guardian or conservator appointed after July 1, 2016, was previously required to complete the applicable online training curricula within four months of the date of the guardian or conservator’s appointment. Proof of completion of the training was then filed with the court where the guardianship or conservatorship was pending. Guardians and conservators who had been appointed prior to July 1, 2016, did not have to complete the training.

In 2021, through House Bill 1261, the Legislature extended the applicability of these training requirements to all court appointed guardians and conservators, whenever appointed. All guardians and conservators appointed prior to July 1, 2021, who have not previously completed the training or had the training requirement waived by the court, will now be required to complete the training and file a certificate of completion with the court prior to November 1, 2021.

In addition, for guardians and conservators appointed after July 1, 2021, this training must be completed and certificate(s) of completion filed with the court prior to appointment by the court. Also beginning July 1, 2021, guardians must include in their annual report to the court the date of completion of the training, unless the training requirement has been waived by the court. This requirement also applies to conservators who must include in their annual accounting to the court the date on which the training was completed unless the annual accounting has been waived or modified by the court, or the training requirement has been waived by the court.

The training requirement can be waived by the court for good cause shown. If the training requirement is not waived and the previously-appointed guardian or conservator does not complete the required training within the required timeframe, this failure can be cause for removal of the guardian or conservator. The training continues to be available at the South Dakota State Bar’s website: https://www.statebarofsouthdakota.com/p/cm/ld/fid=121

If you are guardian or conservator appointed in South Dakota, you should contact your attorney to make sure you are in compliance with these new requirements.

Thursday, 28 May 2020

In his poem “To a Mouse,” the great Scottish poet Robert Burns wrote:

which has commonly been paraphrased as: “the best-laid plans of mice and men often go astray.”

As a transactional attorney, I work to memorialize and help carry out the “best-laid plans” of my clients and attempt to prevent them from going astray. The first, and possibly most important part of that work, is getting the plans and agreements of the parties in writing.

The South Dakota Supreme Court recently handed down a decision in Huls v. Meyer (2020 S.D. 24) which highlights what can happen the plans go astray. Mark Huls, Steven and Catherine Peterson, and David Skoglund were South Dakota investors who joined David Meyer and Nancy Meyer (Meyers) to form several limited liability companies (LLCs). Under the parties’ proposed business plan, the LLCs would construct and operate hog confinement facilities in South Dakota. Each LLC would own one facility that would be leased to the Meyers who would operate it. The Meyers prepared business plans to present to the investors which included unsigned templates of buy-sell agreements for the LLC. The operating agreements for the LLCs also referenced the buy-sell agreements. The investors decided to invest in the LLCs, made capital contributions, and became members of the LLCs.

In a limited liability company, a buy-sell agreement controls the members’ of the company’s rights and obligations if a member wishes to sell their interest in the company. As a result, it is an important document in a limited liability company which intended as an investment structure for a business venture where some members will be active in the business and others will be “silent partners.”

Disagreements later arose between the Meyers and the investing members which ultimately led to a break down of the business relationship and litigation. While the South Dakota Supreme Court decision turns on procedural and jurisdictional questions regarding the parties’ rights to appeal, as a transactional attorney I was most interested in the fact that the parties could not find a signed copy of the buy-sell agreement.

Somewhere along the line someone, probably an attorney, had taken the time and care to draft buy-sell agreements for the companies which could have resolved some of the issues between the parties. This case highlighted for me the importance of working closely with clients to make sure they carry out and finish the plans which we have helped them develop. Take the time to consult and follow up with your attorney regarding all of the necessary steps for getting documents signed, properly filed and organized so they can be accessed later when needed. Carefully drafted documents do little good if they are not signed or cannot be found – the best laid plans of mice and men gone astray from the start.

In advising business clients, I find they often have “understandings” with people they do business with that are not completely or accurately documented in writing. The parties involved often “agree” to extend deadlines or change terms and never update (or document at all) these agreements, or sometimes they just don’t want to confront the other party when the terms of the agreement are not being met.

The South Dakota Supreme Court recently issued an opinion that highlights the importance of documenting business transactions and understandings. In Mealy v. Prins et al, 2019 S.D. 57, Loretta and Terrence Mealy and their corporation loaned nearly $1.2 million to Bruce and Corrine Prins for the operation of the Prinses’ guest and game ranch business. Over the course of nearly ten years, the Prinses executed 55 different promissory notes for the loans made by Mealys to Prinses. Some notes had due dates and some were due on demand; however the Prinses did not make payments on any of the notes and Mealys did not immediately attempt to enforce the debts.

The Court found the six year statute of limitations on the enforcement of promissory notes with specific due dates (“time notes” under SDCL 57A-3-108(b)) was applicable. Thus, Mealys’ delay in attempting to collect on the notes, rendered 48 of the 55 promissory notes unenforceable, resulting in recovery by the Mealys of less than 20% of the amount originally loaned to the Prinses.

The Court’s opinion does not get into the details of the history of the relationship between the parties, but one might guess that the relationship did not immediately turn adversarial – the Mealys continued to make additional loans to the Prinses for several years, although no payments were being made. Perhaps the Mealys verbally “agreed” to extend the due dates or perhaps they simply failed to raise the issue with the Prinses, thinking they were protected by the previously-executed promissory notes. Once the due dates were reached on various promissory notes, the notes should and could have been reviewed. If the Mealys and Prinses were still on good terms, an agreement could have been entered into to protect the Mealys’ interests by agreeing to extend the due dates of the notes in exchange for the continued lending, thus protecting the Mealys’ interests in being able to collect on all of the notes. Without such an agreement documenting the extension of the loans, and by taking no action, the Mealys lost their rights to enforce many of the notes.

These are the types of transactions that are important to review with your attorney on a regular basis, in order to be sure that your “agreement” actually continues to be reflected in the written documents and so you understand your rights. Failure to do so can be expensive.

If you’ve lived in the West for very long, you’ve probably heard the saying “good fences make good neighbors.” However, this can only be true when the fences are based on a good survey. Folks often assume that the “natural” or “physical” boundaries of their property are the legal boundaries, e.g., that the existing fence lies on the lot line or that the old tree line is the edge of the property.

This summer a case before the South Dakota Supreme Court confirmed that those assumptions can be wrong. In Lammers v. S.D. Game, Fish & Parks, a property owner (Lammers) assumed that a fence and tree line was the legal boundary to his property and it had been treated as such for over 50 years. Lammers v. S.D. Game, Fish & Parks, 2019 S.D. 44, 932 N.W.2d 129. When his neighbor, which happened to be South Dakota Department of Game, Fish & Parks, surveyed the property as a part of a fence replacement project, both neighbors learned that the fence was in fact, in the middle, over 100 feet off the actual legal boundary line between the properties. While the corners of the fence were accurate, the “fence line” wasn’t straight – drifting to the east in the center – and the result was a difference in over three acres for this sizable property.

The end result in this case turned on the fact that the “neighbor” was a governmental entity, S.D. Dept. of Game, Fish & Parks, and the South Dakota Constitution provides that public land cannot be adversely possessed:
Article VIII, section 10 of the South Dakota Constitution provides that “[n]o claim to any public lands by any trespasser thereon by reason of occupancy, cultivation or improvement thereof, shall ever be recognized; nor shall compensation ever be made on account of any improvements made by such trespasser.” Based on a plain reading of this constitutional provision, a citizen may not take land from the State through adverse possession.

Lammers, 2019 S.D. 44, ¶20. The fence line was moved to the legal boundary and Lammers’ claim against his neighbor was unsuccessful. If the neighbor had been a private party, the case could have had a different result, but would likely have involved lengthy and fact-intensive litigation over the historic use of the property to determine if a claim of adverse possession could prevail.

For purchasers of real property, the takeaway is – get a survey before you buy! Confirm where the legal boundaries are and where the improvements on the property lie in relation to those boundaries before the purchase is closed by having a survey done by a competent licensed surveyor. The investment in the cost of the survey is worth the peace of mind and certainly costs less than drawn-out litigation with your neighbor.

About once a month I get a call from an individual who, for various reasons, wants to either add a child or multiple children to the deed to their home or deed the home entirely to a child or children. Often this is an attempt to avoid the need for probate once the parent is gone. While the intent may be good, I rarely recommend that they do so, for several reasons.

1. Adding someone to the title to your home makes them an owner. This means if you want to sell the home, all owners must agree and sign documents to complete the sale. I have run into the circumstance where a child was added to the deed as a joint owner with right of survivorship with the intent by the parent that it would avoid the need for probate. Unfortunately, when the parent later needed to sell the home, the child refused to sell, resulting in the need for expensive litigation in order to force the home to be sold. In addition, when someone is an owner, the property is considered an asset of all of the co-owners. This means that creditors of the child may have a claim against the property, and judgment liens against the child can attach to the property.

2. Transfers of property during life may cause gift tax or basis issues. When a child is added to the title to real property with no consideration paid, this is presumed to be a gift. When property is gifted, the party receiving the property (the child) takes the transferring party’s (the parent’s) basis in the property; whereas, if the property is transferred only at the time of death, the transferee (the child) will receive a step-up in basis to the fair market value as of the date of death. This can be very important in terms of tax consequences when the property is later sold by the child. A lifetime gift can also trigger requirements for filing a gift tax return if the value of the gift is over the annual gift tax exemption amount and should also be tracked for purposes of determining the parent’s lifetime gift tax exclusion amount.

3. A transfer of property for less than fair market value can trigger a period of ineligibility under Medicaid rules for long term nursing home care. Adding someone to the deed to your home without having that person pay fair market value for that share of the property is presumed to be such a transfer.

If probate avoidance is the main goal, there are other tools that your advisors can talk with you about that can help you achieve your goals, without these risks and issues, such as living trusts or revocable transfer on death deeds. It is important to talk with an attorney and your tax advisor before making this type of change so that you understand the effects it may have on your future life plans and how it fits with your complete estate plan.

It’s that time of year: meeting with your CPA to do your taxes. She probably had some suggestions for you about how to better track your expenses, and if you are a business owner, may have suggested that you set up an entity to own the business, such as a limited liability company or a corporation. For certain businesses, there can be tax benefits to doing so. I leave that specific advice to your CPA.

As you wade into this subject, the terminology can be confusing. It is important to understand that legal entities are formed under state law, and then depending on the characteristics of the entity, may qualify for treatment as a certain type of entity under the rules and regulations of the Internal Revenue Service. There is some overlap in terminology that can lead to confusion.

Under South Dakota state law, we assist clients with forming corporations, limited liability companies, and partnerships. We work with clients’ tax advisors to choose an entity that not only fits the client’s needs for maximizing tax benefits, but also creates the structure of ownership and management for the business. It is important to understand that a corporation created under South Dakota law can elect with the IRS to be taxed either as a C-corporation (a “C-corp” – so-called because it falls under subchapter C of the Internal Revenue Code) or as an S-corporation (an “S-corp” – so-called because it is formed under subchapter S of the Code). But a limited liability company (“LLC”) formed under South Dakota state laws can also elect to be treated as an S-corp. For state law purposes, it is an LLC, but for IRS purposes it is a corporation. However, as a default rule with the IRS, an LLC will be taxed either as a partnership or a sole-proprietorship depending on the number of member owners. The entity must make a special election within a limited period of time with the IRS in order to be an LLC taxed as an S-corp.

If your accountant has told you that you should set up an entity for your business, come talk to the attorneys at Lynn Jackson. We work with your tax advisors to set up an entity under South Dakota laws to meet your business planning and tax needs, and we provide the on-going advice and planning to keep your entity in good standing and working for you for the long term. Just let your accountant finish up with tax season first.

When Should I Update My Estate Plan?

It’s a good feeling – finishing up something important that you have been meaning to do for years. That’s how our clients often feel after we finish signing their estate planning documents, whether it is a last will and testament and powers of attorney or a trust agreement and various trust funding documents. At the end of that meeting, clients sometimes ask me “how do I know when I should update my estate plan?” How do you know? Can’t you just stash those documents away for years to come?

I advise my client to review their estate planning in the following situations:

1. A “major life event” occurs

If there is a major change in your life, you may need to update your estate plan. When being blunt, I describe a “major life event” as when someone you love gets married, divorced, is born or dies. While it includes much more than this, it gives you an idea of what type of events to consider.

2. A big purchase or sale or other major asset change

If you have moved to a new state, you may need to update your estate planning documents to comply with the laws of the new state or to take advantage of differences in law. If you have a trust, you may also need to be sure title your new residence is in the name of your trust. If you have a will, you may want to consider a trust if you now own real property in more than one state. For business owners, a sale or change of control of the business may affect your estate plan. If you sell real estate and move the proceeds into investment accounts, beneficiary designations may impact what passes through your estate. This is just a short list. If you buy or sell something of significant value or change the status or nature of an investment, review of your estate plan is a good idea.

3. If it’s been more than five years

Time goes by faster than any of us care to admit. It is good to review your estate plan on a periodic basis. You would be surprised by the number of clients I hear say “I forgot my will said that …” or come to me with a will that was executed when their children were babies and now they have grandkids. In addition, financial institutions and investment brokerages are becoming stricter about how long they will recognize powers of attorney or certificates of trust. While the documents are legally still effective, the internal policies at some of these entities may require newer documents. Even if you don’t need to make changes, re-executing some documents may be a good idea.

The estate planning attorneys at Lynn Jackson are happy to sit down with you to discuss whether you need to make some changes to your existing estate planning documents or if you are still “good to go.” We look forward to hearing from you.