Death and Taxes Blog

This Q&A in the Washington Post raises a key issue.  The question:

A few years ago, I inherited a building lot in Florida from my mother. Although I have always kept the taxes current, I have never transferred title to my name. I am thinking about selling and wonder whether I could do so with a quitclaim deed. Or do I have to go through the process of transferring title to my name? Although I have a brother, my mother's will left the lot to me.

The main reason why probate exists is to get title in a decedent's property from the decedent to his beneficiaries (or, if he didn't have a Will, to his intestate heirs).  You really have to think about matters from the perspective of a potential buyer of the property in question.  For instance, let's say that the above person (Daughter) wanted to sell her building lot.  A title search of the property would reveal that it is owned by Mom.  Yet the contract and closing documents (including the deed transferring the lot to the buyer) would be signed by Daughter.  That raises serious questions about how and why Daughter has authority to sell the lot. 

Those questions are answered by recording documentation showing the transfer of the lot from Mom's estate to Daughter.  In Illinois, that would need to be done via probate (I don't know about Florida's rules) -- a judge establishes that Mom's Will is valid, someone (presumably Daughter) is appointed as executor of Mom's estate, Daughter as executor handles any claims filed against the estate, and then Daughter prepares what's known as an Executor's Deed transferring the lot from her as executor to her as beneficiary under Mom's Will.  Now any potential buyer can clearly see the chain of events.

If the above procedure isn't followed, you could have what I call a "Brooklyn Bridge" scenario, where you buy a property from someone who doesn't have authority to sell it.  Given the cost of real estate these days, why would you want to do that?

According to this article, Hayley Kissel (wife of slain developer Andrew Kissel) is seeking what's referred to in Connecticut as an "allowance."  That's the same thing as what's known in Illinois as a spouse's award.  I previously blogged about Mr. and Mrs. Kissel here, and discussed spouse's awards here.

Maybe I'm being PC, but doesn't allowance sound like something a teenager gets?  Of course, you could criticize the Illinois term as well, since it sounds a little like you're being awarded a trophy for surviving your husband or wife.

In the Chicago area, there's always a rush to close real estate transactions on (or near) the last day of the month.  This rush is usually explained as resulting from the requirement that a buyer prepay interest for the month of closing.  At first glance, this makes sense -- isn't it better to close on the 31st of the month and pay one day of interest than to close on the 1st and pay thirty days of interest?  But let's look a little deeper. 

First, some background.

Mortgages are paid in arrears.  So, if you close on your new house on July 15, your first mortgage payment won't be due until September 1.  Your September 1 mortgage payment will include interest for the month of August.  Your October 1 mortgage payment will include interest for the month of September.  And so on.

"Prepaid interest" results from the fact that, under the above fact scenario, you haven't paid any interest for the period from July 15 to July 31.  You have to prepay that interest at the July 15 closing. 

However, what do you really lose by not closing at the end of a month?  Not much, really.  If you close on August 1 instead of July 31, you are paying your August interest on August 1 instead of on September 1.  There's a time value of money advantage to making this payment later, but it's fairly small -- what's the value of holding on to, say, $1,000 for an extra month?

Furthermore, consider that, if you close on August 1 instead of July 31, you won't have to make your first mortgage payment until October 1.  If your monthly payment is more than the amount of prepaid interest, it might make more financial sense to work it this way.

It's also important to think about what you gain (in a non-financial sense) by closing at some time other than the end of the month.  Most title companies are a madhouse at the end of the month -- your closing could very well be delayed.  By contrast, there tend to be very few closings scheduled at the beginning of the month, which makes for a far more pleasant experience for buyers (and their attorneys).

Thanks to the posters at the ISBA Transactional Law Discussion Group for bringing this issue to my attention.

When I was going through mediator training in January, one of my classmates talked about a group called Sorry Works!  The idea is that an honest apology by someone (like a doctor) who made a mistake can often prevent the filing of a lawsuit.  The apology would also include a full disclosure of what went wrong and an offer to settle the matter, which is why it's often referred to as "full disclosure/early offer."  Illinois recently set up a pilot program to see if this approach really works.  This article gives a good overview, along with some intriguing figures from the University of Michigan Health System, which started taking the "full disclosure/early offer" approach in 2002:

In August 2001, there were 262 total claims, ranging from presuit notices to active litigation; in August 2002, there were 220 total claims; 193 claims in August 2003; 155 claims in August 2004; 114 claims in August 2005; and since that time, the total number of claims has fallen to fewer than 100, Boothman said.

Within the same period, the university has cut its average claim-processing period from 20.3 months to 9.5 months, halving its average litigation costs. Also, its total reserves on medical malpractice claims dropped by more than two-thirds, he testified.

Andrew Sullivan provides this link to a legal deposition that has gone off the rails.  As Mr. Sullivan notes, the language gets a little raw.

I wonder how much more civil and efficient the legal process would become if parties and their attorneys assumed that all of their interactions would be videotaped and posted on YouTube.

For the past two years I have rented office space in Oak Park (at 1101 Lake Street).  However, my lease ends on July 31, which means that a move is in order.  After looking at a lot of other office space, and doing a lot of thinking about my needs and the needs of my clients, I've decided not to go with a formal office arrangement.  The reasons are fairly simple:

1. I don't have a lot of client visits.  I neither have nor seek walk-in traffic, and I interact with my clients a lot via e-mail and telephone.  It seems a little silly to maintain a permanent office when I probably have one client meeting per week.

2. I have always made "house calls," and I think that's one of the things clients -- especially elderly clients, and clients with small children -- like about me.  I'll continue to do that.

3. The rents for the office space I looked at were almost double what I am currently paying in rent.  I'm not willing to eat that increase myself, and I'm reluctant to pass it on to my clients by raising my rates.

4. I was able to work out a virtual office arrangement with a company called HQ.  This allows me to schedule client meetings at what will be my main office (One Westbrook Corporate Center, Suite 300, Westchester, Illinois 60154).  I can also schedule meetings at other Chicago-area HQ offices (and there are a lot of them).

My biggest concern in getting rid of my office is that it creates an unprofessional look for my practice.  I don't want to be perceived as "the lawyer who works out of the back of a van," or some such thing.  On the other hand, I'm not interested in spending "money for nothing" just so I can create a certain image for myself -- I'm more concerned about doing good legal work.

Just a reminder that this site exists to give general information about probate, estate planning, and real estate matters in Illinois.  Because of professional responsibility rules (and the time constraints that come with a busy practice), I can't give legal advice about any specific situations unless I am formally retained to do so.  In other words, please don't be offended if I don't respond to your e-mail requesting free legal advice and/or opinions. 

In addition, please note that I am only admitted to practice in Illinois, so I can't represent you if you are a resident of another state.

I'll be away from my office starting today.  Blogging should resume on Monday, July 24.

I was reviewing the Illinois Law Update section of this month's Illinois Bar Journal when I came across this classic case headline:

Campground operator has no duty to warn of naturally accumulating walnuts

The downside of working only in the estate planning and probate arenas is that I don't get to flex my knowledge about other areas of law.  (Actually, the downside is that I don't know anything about other areas of law.)  Now this problem is solved!

Christopher Yugo has a nice introduction to land trusts -- including advantages and disadvantages -- here.  Land trusts are only used in a few states (Illinois is one, and evidently Indiana is another), but as Mr. Yugo says, they can be useful in certain situations.  That being said, I still usually prefer to use living trusts.  Living trusts can hold real estate AND other assets, and since you are typically the initial trustee (with a spouse or other family member as successor), there's no issue of trustee fees.

Real estate writer Bob Bruss heads into JG Banks territory with this article, which discusses making a profit on probate properties.  I like the discussion of the risks of buying these properties, but have two criticisms:

1. Mr. Bruss states that "[f]inding probate properties isn't easy," but then goes on to detail some fairly easy steps you can take to locate these types of properties:

... [C]lip the daily newspaper obituary notices, look for published legal notices to creditors and notices of petition to administer estates, check probate court public files to determine if the deceased left real estate to be probated, and check with estate executors and administrators to learn if real estate will be sold.

2. Mr. Bruss says that investors should try to buy directly from executors and administrators, stating that "[b]ecause most executors and administrators are 'amateurs,' they usually want a quick, easy sale and are not motivated to get top dollar."  As I said before in this post about JG Banks probate seminars, "executors and administrators owe certain fiduciary duties to the beneficiaries of an estate, and... selling estate property at a discount would seem to me (absent other compelling facts) to be a violation of these duties."  I suppose you can just say "seller beware," but do you really want to profit by trying to convince executors and administrators to violate their fiduciary duties?  There have to be easier ways to make a buck.

This interesting article pinpoints some of the problems and conflicts that arise when a person dies and there's the potential for a wrongful death action.  George A. Smith IV mysteriously disappeared while he was on a honeymoon cruise with his wife, Jennifer Hagel-Smith.  According to the article:

Smith, a 26-year-old..., disappeared off a Mediterranean cruise last July 5. He left behind bloodstains and questions about what he and four other passengers who were last seen together were doing early that morning. At the time he vanished, Hagel-Smith was found passed out drunk in a hallway on the other side of the ship. She said she has no recollection of what happened. Smith's body was never found, and the FBI is still investigating.

Ms. Hagel-Smith, acting as administrator of her husband's estate, has reached a settlement agreement with the cruise line, Royal Caribbean International.  The settlement is in lieu of the filing of a wrongful death action against the cruise line.  However, Mr. Smith's family -- which has filed its own suit against Royal Caribbean -- may object to the settlement, which must be approved by the probate court.

I think Ms. Hagel-Smith is in a very tough spot here.  She believes that other passengers may have done something to her husband, and "Royal Caribbean has promised in its settlement to give her unfettered access to information, such as vessel logs, video and passenger statements of what they heard, saw and did during the hours of Smith's disappearance."  If she's right, then the settlement gives the estate some money up front, and the ability to pursue the other passengers.  If she's wrong, and Royal Caribbean was in some way responsible for her husband's death, she may have settled for less money than she needed to.

If you're an estate planning attorney looking to avoid malpractice claims and other problems, it's a good idea to meet with and/or talk to your client before preparing a Will for him.  Seems like common sense, doesn't it?  Apparently not to Ohio attorney Steve M. Soltis -- according to this article, Mr. Soltis prepared a Will and other estate planning documents for a man named Calvert M. Porter.  But Mr. Soltis never met or even talked to Mr. Porter; instead, he spoke only to Mr. Porter's girlfriend.  Needless to say, Mr. Soltis was asked to (and did) prepare a Will naming the girlfriend (Imogene Crouch) as Mr. Porter's sole beneficiary. 

One stunning fact:

The Columbus Bar Association filed disciplinary charges against Soltis, saying that, had he met with Porter, none of the current litigation would exist. Soltis was cleared of ethical charges in May.

To my mind, the above fact pattern reveals some serious professional responsibility issues, involving conflict of interest (was Mr. Soltis really representing Mr. Porter's interests?) and basic competence.  How can you prepare a Will for a client when you don't know whether or not the client is competent, and don't know the client's wishes?  You can't.

The National Law Journal recently had an article (here) about posthumous divorce (AKA "divorce after death"). 

The concern stems from changes to certain provisions in the Uniform Probate Code (UPC), which has been adopted in a number of states.  These provisions relate to intestacy (that is, cases where a person dies without a Will).  The previous version of the UPC divided the property of a person dying without a Will between the person's spouse and the person's descendants. 

Evidently the new version of the UPC gives all of an intestate decedent's probate property to the surviving spouse if the decedent's only descendants are also the spouse's descendants.  If that previous sentence was too confusing, consider an example:

John Smith dies.  He and his wife (Mary) have two children (Jack and Betty -- yes, I'm feeling retro).  John Smith has no other children.  If John died intestate under the previous version of the UPC, then Mary, Jack, and Betty would each inherit a portion of John's probate assets.  But under the new version of the UPC (for instance, under Montana's intestacy statute), Mary would inherit all of John's probate assets.

The new version of the UPC makes a ton of sense -- most married people I know want their husband or wife to inherit all of their property at death, and to use that property to care for the children.  The previous version of the UPC was nonsensical, and also created estate tax problems (gifts at death to a surviving spouse may not be subject to estate tax; gifts at death to children will be subject to the tax).

Back to the divorce issue.  According to the above article, people who want to divorce their spouse but don't get around to it before they die are putting themselves at risk, since "intestacy laws could allow one spouse to inherit another's entire estate, including assets that the other person didn't want the spouse to have."  As a result, lawyers are trying to get courts to allow their deceased clients to get divorced, with the goal of preventing property from passing to the deceased client's spouse via intestacy.

Of course, we don't need new caselaw or legal theories to solve this "problem."  We just need people to get their "stuff" together.  If you want to divorce your spouse, do it.  And if you don't have a Will, get one.   

Marlon Brando lived a messy, complicated life -- should we surprised that his estate has turned into a bit of a mess as well? This article from the BBC discusses the latest charges -- including that Mr. Brando's signature on his latest codicil was forged -- and also discusses some of the other issues relating to the estate.