Assisting Clients in Avoiding Potential Creditors, What Actions Can an Attorney Take?

By Mary E. Vandenack, Tax Attorney at Parsonage Vandenack Williams LLC, Omaha, Nebraska

The Iowa Supreme Court recently ruled that an attorney did not commit an ethical violation in assisting a client with transactions that were determined by a court to be fraudulent transfers. The opinion of the Iowa Supreme Court offers significant guidance to attorneys who assist clients with asset protection planning.

Mason James Ouderkirk, a longtime Iowa attorney, assisted Rodney Heemstra with a variety of legal matters. In January, 2003, Rodney Heemstra shot and killed his neighbor, Tommy Lyon. Heemstra was ultimately convicted of manslaughter. Lyon’s widow and Lyon’s estate obtained a significant judgment against Heemstra in a civil wrongful death action.

After the shooting and prior to conviction in the criminal proceeding and judgment in the civil proceeding, Heemstra and his spouse made a variety of asset transfers to revocable trusts and an irrevocable trust. After the transfers were held to be fraudulent transfers by a district court, Lyon’s widow filed an ethical complaint against Ouderkirk. The Iowa Supreme Court Disciplinary Board filed a complaint against Ouderkirk for assistance to the Heemstra’s alleging violations of four different provisions of the Iowa Rules of Professional Responsibility.

 In ultimately dismissing all of the complaint made against Ouderkirk, the Court noted that knowingly assisting a client with fraud would violate the ethical rule. In the case of Ouderkirk’s assistance to the Heemstra’s, the Court concluded that the Heemstra’s had made misrepresentations to Ouderkirk and that Ouderkirk had reasonably believed such representations and concluded that the Heemstra’s had a basis on which to proceed with the transfers that were made.

© 2014 Parsonage Vandenack Williams LLC

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