Commentary on estate planning, estate administration, and real estate issues from a Chicago-area attorney.
Blogging is probably going to be fairly light for the next couple of weeks, first because of the Memorial Day holiday and then because of some (hopefully) minor surgery. I hope to be up and posting again on June 6.
I've discussed disinheritance techniques in the past, most recently here. Professor Beyer has a link (here) to a recent Wall Street Journal article on how to disinherit "neatly." One of the suggestions of the article's author is to record the ceremony at which the Will is executed. The problem with doing so is that, if recording the ceremony isn't part of the attorney's usual practice, then it can raise serious questions after the testator's death. (Such as, "If John Smith was competent, then why did you film the execution of his Will? Was it because you had questions about his competence?")
There's also a danger if you use low-quality video, which can make even healthy-looking people look sickly and frail.
According to this article, Coretta Scott King's Will has been filed with the Fulton County Probate Court. I assume that a probate will soon be opened for Mrs. King's estate.
One thing in particular caught my eye in the above article:
King amended her will twice — on Dec. 20, 1978, and Aug. 29, 1984. The second amendment, which named [her daughter] Yolanda executor and trustee, has been lost, according to an affidavit signed April 26 by attorney Tyrone Bridges. A photocopy was filed with the court.
Wills and codicils sometimes get lost -- that's just the nature of life. And, while the loss of a Will always provides some headaches, it doesn't mean that the Will (or in this case, codicil) can't be admitted to probate as valid. Illinois law specifically talks about presenting evidence to prove that a Will is valid -- that evidence usually comes in the form of affidavits from (or depositions of) witnesses to the Will's signing. Of course, you also have to present evidence that the person who created the Will didn't destroy it. Presumably Mr. Bridges' affidavit addresses this point.
Choosing a guardian for minor children is often the most difficult decision faced in making a Will. Now imagine if that decision involved one husband and three wives! That was the situation on last night's episode of "Big Love", the HBO series about polygamists.
Actually, the Will/guardianship storyline began last week, when Barb Henrickson (wife #1) decided that her sister -- who disapproves of Barb's lifestyle -- should no longer be named as guardian of Barb's three children. This caused all three wives to consider updating their Wills, but with some twists:
Nicki (wife #2) was raised in a commune of polygamists, and doesn't want Barb to be named as guardian of her sons, since she doesn't know if Barb would raise them to "live the principle" of plural marriage. As a result, Nicki wants her father (Roman Grant, AKA the "Prophet," played by the always scary Harry Dean Stanton) and mother to raise her children.
Margene (wife #3) has told Nicki that she will name her as guardian of Margene's children, but decides that she instead wants to choose Barb for the job (Nicki isn't exactly a warm person -- or a good mom). When Margene goes to the family attorney to sign her new Will, she is given a copy of Nicki's Will by mistake, and learns Nicki's plan to name her parents as guardians.
Barb was planning to change her Will to name Nicki as guardian, but is now afraid that, if she predeceases Nicki, then Barb's three children will also have to go live with Nicki's parents.
The above situation, while exaggerated, actually raises some important points even for non-polygamists:
1. Think carefully about potential guardians, and about whether they truly share your values.
2. Don't be afraid to change your mind about guardians as the situation dictates.
3. Be honest with the people you've selected as guardians (and, if it's not too uncomfortable, with those you haven't).
Finally, a piece of practical advice: if you are a polygamist, don't keep all of your wives' Wills in a folder on your desk -- a snoopy employee might find them!
I recently read a fairly interesting book entitled FutureShop, by Daniel Nissanoff. The full title really tells the whole story: FutureShop: How the New Auction Culture Will Revolutionize the Way We Buy, Sell, and Get the Things We Really Want. The book isn't particularly well-written -- it sometimes seems like an advertisement for Mr. Nissanoff's business interests -- but it does present some thought-provoking ideas that could be applied to the estate and probate context. In particular, Mr. Nissanoff talks about the inefficiencies of garage sales and classified ads for selling the stuff you don't want. Of course, when someone dies, there tends to be a lot of this type of stuff. Most of it winds up in a number of different places:
1. In the home of a relative or friend who may or may not want it (or realize its true value).
2. Sold for pennies on the dollar in a garage or estate sale.
3. Given away to charity.
The problem with garage sales, estate sales, classified ads, etc. is that they often don't attract the interested, informed buyer who would pay top dollar for a given item. That's where the internet comes in. We've already seen the rise of businesses that will "sell your stuff on eBay" -- there's tremendous power in a vehicle that brings interested buyers to your door.
I think we're now going to start seeing these businesses cater to estates, with services such as:
-clean out of the decedent's home
-inventory, appraisal, and storage of the decedent's property
-sale of such property on eBay or a similar type of website
I think these businesses could unlock a lot of value for estates and their beneficiaries, and generate nice returns for their owners.
As long as people have been dying, people have been fighting over inheritances. This article in the Palladium-Item, a newspaper "serving the Greater Richmond, IN area," reminds us of this fact. As the article explains:
Former President Benjamin Harrison came to Richmond as a lawyer in the socially scandalous "Morrisson Will Case." It started on Jan. 2, 1895, and ended on May 17, making it the longest jury trial in the United States at the time.
The heirs of Richmond banker James L. Morrisson squabbled over his sizable estate of $626,840.
It seems like some things never change -- the lawyers wound up the big winners, and the parties eventually settled:
With the threat of legal action repeating and no end in legal sight, capitulation followed and both sides came to terms.
On May 17, a compromise was reached and the fortune was divided amicably between the two children of Morrisson's late son, and his daughter and her grandchildren.
The trial was estimated to cost between $75,000 and $100,000, a huge chunk of lost will revenue.
Harrison made $19,000 in the melee....
According to this site, $19,000 in 1895 is the equivalent of about $425,000 in 2004 dollars if we use the Consumer Price Index to make comparisons. Mr. Morrison's estate ($626,840 in 1895) would be worth about $14 million in 2004.
The title of the article (courtesy of Sploid) says it all:
"Granny Gets DNR tattoo on her chest"
I agree with Bob Cowie, chairman of the Iowa Bar Association's probate and trust law section, who is quoted as saying that "[t]here are easier ways to do it than that," such as signing a living will or authorizing a medical power of attorney.
Disputes over estate matters can get very ugly. Need evidence? Consider this article from law.com, where we learn the following:
A Manhattan judge has dismissed a New York attorney's lawsuit against his aunt and uncle [S. Robert Davidoff and Ila Davidoff-Feld], in which he alleged the Florida couple defaced his Web site by replacing all of his postings with a photograph of the lawyer labeled "Pig of the Year," in which he leans back in a chair and appears to say, "I'm going to eat everything in site."
...The Davidoff family dispute began with a watch, according to plaintiff Jonathan Davidoff, the principal of the three-attorney Davidoff Law Firm.
Following the death of his grandfather (defendant Robert's father), Jonathan initiated an action in Arizona that resulted in a Maricopa County court holding Robert in contempt and requiring him to return a Rolex to Jonathan's grandfather's estate and to pay Jonathan's travel expenses.
Hopefully I can stay in the good graces of my aunts and uncles and avoid this type of thing.
There are a lot of reasons NOT to give away your residence during your lifetime. Many of those reasons have to do with relationship issues -- if you give your house to your son and then have a fight with him, will he kick you out? -- but tax concerns also play a part. Here's a situation involving an acquaintance of mine -- the names and some details have been changed, but the main facts are accurate:
Joe Smith buys a house on the north side of Chicago in 1950 for $45,000. In 2000, Mr. Smith makes a gift of the house to his only child, Marge, who lives there with (and cares for) him. In 2005, Mr. Smith dies -- the house is appraised at $1.3 million.
If Mr. Smith had owned the house at his death, Marge would have inherited it with a ("stepped-up") basis equal to the house's value at his death. Marge then could have sold the house and paid no capital gains. However, when Mr. Smith gifted the house to Marge, Marge assumed Mr. Smith's basis in the house -- let's say that's $45,000 (although improvements to the house may have increased that number a bit). If Marge now wants to sell the house, she'll have a gain of around $1.2 million. Some ($250,000) of that gain is excluded from taxation, but Marge will still have to pay tax on almost $1 million of gain.
One final point: gifting the house might have made more sense (at least from a tax perspective) if Mr. Smith had a bigger estate, since the estate tax rates are higher than the capital gains rates. Excluding $1.3 million from your estate may be a good idea. However, Mr. Smith had very few assets other than the house -- about $100,000 -- so his estate wasn't subject to estate tax at all.
I was recently contacted by a writer for a national magazine. The writer is working on a story about family property disputes, like the ones I sometimes discuss here. As he puts it:
It could be children fighting over what to do with the family home after their parents die, or about cousins arguing about a summer-home compound. Or something else. But the idea would be to get at the different meanings we endow a house, or property, with, and how those meanings play out in the emotions of a family.
If you are a part of (or know of) such a dispute and would be willing to discuss your situation, you can contact the writer via e-mail here.
Once or twice a year LifeSpan Services asks me to assist them with the financial planning seminars they give to federal government employees. These seminars cover an impressively broad range of topics -- I handle the estate planning part of the program, which usually lasts about an hour. Yesterday I spoke to employees of the U.S. Department of Health and Human Services. My talk was entitled "Estate Planning 101," and focused on a general introduction to estate planning and probate. A 5-page pdf version of the handout that accompanied my talk can be found here:
Please note that this handout is geared toward residents of Illinois.
Many people are understandably anxious when someone close to them passes away. "Is there something I should be doing?" is a question I hear quite often. Another is, "Do you need the Will right away!?"
"Right away" might be pushing it, but I think that finding the decedent's Will is a good place to start. For one thing, the Will might -- shouldn't, but might -- contain burial instructions. For another, there's §6-1(a) of the Illinois Probate Act, which says that "[i]mmediately upon the death of the testator any person who has the testator's will in his possession shall file it with the clerk of the court of the proper county." While this section does say "immediately," it's really only invoked when a person in possession of a decedent's Will refuses to turn it over. Section 6-1(b) speaks directly to these types of shenanigans, discussing criminal penalties for a person who "wilfully alters or destroys a will without the direction of the testator or wilfully secretes it for a period of 30 days after the death of the testator."
Note the reference to A Will, which may or may not be THE Will. A decedent can have more than one Will, and it's up to the court -- not the person in possession of a Will of the decedent -- to decide which is the valid one. If John Smith dies and you have a copy of his Will in your possession, you need to file it in the appropriate county, even if you know that John Smith had another Will that invalidates the Will in your possession.
I've blogged about the Rosa Parks guardianship and probate litigation on a number of occasions, most recently here. According to this story, the parties have agreed to mediation of the dispute -- that's good news. Unfortunately, the mediator is retired Judge Adam Shakoor, who is one of Mrs. Parks' executors and is accused of acting inappropriately with respect to Mrs. Parks' affairs during her life. One of the attorneys for Mrs. Parks' heirs says that he believes Judge Shakoor "will be fair" -- if that's the case, then why does this dispute even exist in the first place?
Since I talked about ashes and disposing of remains last week, I'd be remiss if I didn't mention "From Here To Eternity," a gallery show that (according to a press release I just received) features "artful objects which can be enjoyed now but also serve a dual purpose as vessels to preserve those we cherish. When Fido, Aunt Tillie or Grandpa Ned pass on and all that remains are their ashes, this is the artful alternative to a funeral home offering. Included works are by clay artists Natalie Blake (Vermont), and Michael and Christine Adcock (California) along with a sampling of work by Dana Major (Chicago) and Mark Orr (Michigan)."
The show (at an unfortunately-named place called At the Gallery, 135 North Oak Park Avenue in Oak Park) runs through June 17.
As I noted here, last week's episode of The Office focused on conflict resolution. Here's a partial transcript of a scene that should be near and dear to any ADR professional. The participants are Michael (the office manager) and two employees in the accounting department, Angela and Oscar, who are fighting over whether Angela should be able to display her poster of babies -- in diapers, hats and sunglasses -- playing saxophones. (I wish I could find a picture of the poster, but I can't seem to locate one online).
Michael holds a 3-ring binder with the title "A Mediators Toolchest."
Michael: "A Mediators Toolchest." OK. Well, before we get started, you should know that there are five different styles of conflict. [In kung fu-ish voice] My Shaolin Temple Style defeats your Monkey Style.
Angela: Can we go? I have a lot of work to do.
Michael: No. This is important. OK. The first style is lose-lose.
Oscar: What's the next one?
Michael: Just hold... on... please. OK. If we do lose-lose, neither of you gets what you want. Do you understand? You would both... lose. Now I need to ask you -- do you want to pursue a lose-lose negotiation?
Angela: Can we just skip to whatever number five is? Win-win or whatever?
Michael: Win-win is number four, and number five is win-win-win. The important difference here is, with win-win-win, we ALL win. Me too. I win for having successfully mediated a conflict at work.
Michael, Angela, Oscar, and Pam (the office receptionist) then go to look at the offending poster.
Michael: Let's see if we can't just brainstorm and find some creative alternatives that are win-win.
Pam: win.
Michael: Yes. Thank you, Pam. How about Angela makes the poster into a t-shirt which Oscar wears. That way he can never see it and whenever she looks at Oscar, she CAN see it. Win-win-win.
Oscar: No.
Angela: That's -- no.
Michael: OK. Well, brainstorm. Own the solution.
Angela: How about I leave it up?
Oscar: How about she takes it down?
Pam: How about Angela can keep it up on Tuesdays and Thursdays?
Michael: OK, that is called a compromise and it is style three. And it is not ideal. To sum up --
win-win: make the poster into a t-shirt
win-lose: take the poster down
compromise: Tuesdays and Thursdaysand the answer is [holding his head like he is deep in thought] ... make the poster into a t-shirt. Win-win.
Pam: win.
Oscar: Fine.
Angela: But...
Michael: It is done.
This is a pretty funny scene (maybe funnier on TV than on paper), but it also contains a lesson for mediators about what NOT to do. Michael as mediator injects himself into the mediation twice, first by insisting on win-win-win negotiation (where he also gains something), and then by switching his role from mediator to arbitrator, and announcing his solution to the conflict.
There are 33 people who subscribe to this blog via Bloglet, which is supposed to send out daily e-mail updates. Unfortunately Bloglet doesn't work very often, so the e-mailed updated haven't been sent out for some time. I'd like to suggest that my subscribers switch over to FeedBlitz, and have added a FeedBlitz link on the right side of this page to allow you to do this -- it only takes a minute, and seems much more reliable than Bloglet.
The May edition of Patricia Brosterhous' excellent Estate & Probate Flash Points e-mail newsletter brought to my attention the case of Estate of Lis, which can be found online here. Lis is a First Division appeals court case -- the appeal came from Cook County.
The case involves the question of whether the administrator of the Estate of Shirley A. Lis -- and/or her attorneys -- breached a duty to the heirs of the Estate in their actions relating to a profit sharing plan owned by Ms. Lis at her death. Ms. Lis had named beneficiaries for the plan, but these named beneficiaries predeceased her. Harris Bank, which was Ms. Lis's employer during her life and which held the plan assets, distributed these assets to one of Ms. Lis's heirs, Kenneth Rudnick. Mrs. Lis's other heirs were none to happy about this development, and blamed the administrator of Mrs. Lis's estate, Sharon Rudnick, whose attorneys had advised Harris Bank to distribute the plan assets to Mr. Rudnick.
The court in Lis found that the plan assets could never have been distributed to Ms. Lis's estate -- in other words, the plan assets were non-probate assets. As a result, Ms. Rudnick and her attorneys owed no fiduciary duties to the other beneficiaries vis a vis the plan assets. And, to state the obvious, where there's no duty owed, there can be no breach.
I understand this decision, but I still don't know why Ms. Rudnick felt that she needed to involve herself in the distribution of non-probate assets. My advice to executors and administrators is this: if you are appointed as executor or administrator of a probate estate, confine your work to probate assets only.
Baseball Hall of Famer Kirby Puckett died in March at the age of 45. After Mr. Puckett's career in the majors reached an end, he found himself embroiled in controversy over allegations that he had sexually assaulted a woman. His death has created a new controvery: who should receive his ashes? This article has the details of the dispute between Mr. Puckett's estate and his fiancée. (I blogged about a similar dispute last May.)
The question is whether Mr. Puckett's fiancée (Jodi Olson) should receive his ashes, or whether the ashes should be given to Mr. Puckett's children, who are the primary beneficiaries of his Will. At the present time, this dispute hasn't made it to court -- the parties are trying to work out a settlement. The mediator in me thinks that dividing Mr. Puckett's ashes makes a lot of sense, regardless of the strength -- or weakness -- of Ms. Olson's legal argument.
To try and deal with these types of disputes, Illinois recently adopted the Disposition of Remains Act, which I discussed here. The Act sets up a priority system for who gets to decide on the disposition of a decedent's remains.
Disclaimers are one of my favorite estate planning tools, mostly because they can be used after someone dies to "fix" their estate. I've discussed them previously here (briefly) and here (in more detail).
Investors.com (the website for Investor's Business Daily) recently published a nice article about the use of disclaimers, entitled "Build Disclaimers Into An Estate Plan." The article can be found here. There are two points in the article that deserve some attention:
1. Because disclaimers are a great way to deal with uncertainty, they are especially important in these days, when no one knows what will happen with the estate tax.
2. Disclaimers can be executed with respect to inherited property even if a Will or trust doesn't mention them, but the key is making everyone (beneficiaries and family members) aware of the possibility. As I said in my July 24, 2005 post:
... [T]he biggest impediment to a successful disclaimer is "grabby hands." In Illinois, you can't disclaim property after you have accepted it. So, for instance, if you are a surviving spouse, and immediately start making withdrawals from your deceased wife or husband's bank accounts after her or his death, you will probably be barred if you subsequently try to disclaim these accounts.
Disclaimers can do a lot of great things, but a lot of people foul them up -- they have grabby hands, or they (or their advisors) don't know what disclaimers can do and the requirements for a valid disclaimer under state and federal law.
I don't know what consumeraffairs.com is, but yesterday they put up an interesting post about Pennsylvania's attempt to crack down on living trust schemes (it's available here). These schemes often involve attempts to sell (most older) people high-priced estate planning documents and annuity products. (Unfortunately, consumeraffairs.com's affiliation with Google means that the page on which this article appears features ads from... people selling living trust schemes. Ouch!)
The sales pitches for these schemes usually involve a lot of wild comments about the evils of probate, and how it must be avoided at all costs. Unfortunately, as Deirdre R. Wheatley-Liss reports today on her You and Yours Blawg, myths about probate aren't limited to scammers -- even mainstream newspapers sometimes get into the act.
Living trusts can do a lot of nice things, but they are not for everyone. What I try to do here and when I meet with clients is to discuss thoroughly the positives and negatives of living trusts and simple Wills.
A couple of weeks ago I talked about dealing with tangible personal property, and mentioned the problem of "looters" -- family members who decide they are entitled to some/most/all of the decedent's tangible personal property. Perhaps I shouldn't have used the word "decedent," because Amy Dickinson's "Ask Amy" column in this morning's Chicago Tribune (available here, but registration is required) addresses a similar (and perhaps even more horrifying) situation involving looters:
Dear Amy:
My 90-year-old grandparents are moving into an assisted-living facility this spring. For the last 14 years, they've lived in a small town about 3 minutes from my parents' house, so that my parents can help take care of them.
My aunt (my father's sister) lives in another state and almost never visits -- until now.
For the past two weekends (when my parents were out of town on vacation), my aunt came and carted almost everything out of my grandparents' house. Antiques, furniture, jewelry -- you name it.
...[M]y aunt basically came in and took it all while my parents were gone. In addition, now that she has everything, she says she's too busy to come to help put them in assisted living!
My grandparents are afraid of her because she has been prone to fly into rages.
...
My father confronted her. She said that she "paid" for these items, but no check or record has been introduced.
Ms. Dickinson advises the writer that "[u]nless they believe it would cause an unhealthy amount of stress for your grandparents, your parents should consider getting the police involved." I guess I can agree with that advice, but the problem is that the grandparents are necessarily going to have to be very involved in any case against the aunt. This is where things get tricky.
If the grandparents lack capacity, then the answer is simple -- someone must act for them (and should probably seek to become their guardian, to ensure that actions can be taken on the grandparents' behalf). Similarly, if the grandparents have full capacity, then they -- not the parents -- need to decide what to do about the aunt's conduct.
But what if the grandparents are in that grey area, competent to make some decisions but not others? And what if the situation wound up being much more subtle than the one described above? For instance, what if the aunt:
-verbally harassed the grandparents into gifting (or selling at a deep discount) these items to her?
-told the grandparents she would never speak to them again unless they gave the items to her?
-told the grandparents she was in financial trouble and asked if she could have the items, with the grandparents feeling that they couldn't say no?
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