Death and Taxes Blog

BusinessWeek online has a nice story (here) about the risks of acting as executor.  As the article puts it,

If asked to be an executor, you may feel flattered, or loath to turn down a loved one. But think carefully before accepting. Executors are entitled by law to be paid, but the work is generally tedious and time-consuming, even if you farm some of it out to professionals. Moreover, if you make mistakes, you may damage relationships with other heirs or even be held personally liable.

There are usually three hot-button areas that can cause you trouble as executor:

1. Doing your job.  This is obvious, a no-brainer.

2. Doing things in a timely manner.  I'm working on an estate matter right now where the decedents, a married couple who owned a condo in downtown Chicago, died in 2002 and 2003.  The executor just recently put their condo on the market -- it's been sitting vacant for more than three years (the executor didn't bother trying to rent it out, either).  Big mistake.

3. Keep the beneficiaries informed and up to date.  Think of yourself as working for the beneficiaries of the estate.  Give them updates at regular intervals -- ask them WHEN (and how) they want to be updated.  This is especially important if you are thinking of taking an executor's fee -- you'll need to produce timesheets showing exactly what you did to benefit the estate.

In the past, I've blogged about Oak Park's ban on "for sale" signs (here). 

I've recently spoken with two Oak Park realtors about the ban.  Both of them informed me that the realtor community in Oak Park works very hard to made sure that the ban is kept in effect.  One local realtor told me last week that, when she started working in Oak Park, she had a client (seller) who wished to display a "for sale" sign.  She was told by another realtor that she shouldn't allow such a display, because it would give her a bad reputation in the community, and other realtors might not want to work with her.  As a result, the realtor convinced her client not to display a "for sale" sign.

I find the above very troubling.  One of the reasons why the ban is still in effect, even though clearly unconstitutional, is because the individuals most active in selling Oak Park real estate have a vested interested in retaining it.  A "for sale" sign is one cheap method of advertising real estate for sale that doesn't require the services of a realtor.  If you eliminate the ability to display a "for sale" sign, you are making it more difficult to be a FSBO ("For Sale By Owner") seller.  That means more business for the realtors, and no incentive to push for a ban, even though it seems like "for sale" signs = more potential buyers becoming aware that a given property is for sale = a net plus for sellers of Oak Park real estate.

One of my favorite parts of the New York Times magazine is Randy Cohen's column entitled "The Ethicist."  This week Mr. Cohen tackles a question about a decedent's debts (registration may be required).  As Mr. Cohen puts it, "The law requires your late sister’s estate to meet her business obligations; ethics urges you as an individual to respond to her personal obligations." His full answer is very interesting, and well worth reading.

Last week I talked about Oak Park's Kelo problem.  You may say to yourself, "I understand that Oak Park likes to restrict the ability of owners of real estate to use their property, but so what?"  To my mind, there are two negative consequences to Oak Park residents:

1. Businesses have started to leave Oak Park for other localities that are more business-friendly.  If you're looking for proof of this fact, look no further than Madison Street.  If you drive through Oak Park on this street (going West from Austin to Harlem) you'll see a pretty blighted area.  But if you continue West on Madison into Forest Park, things change -- you'll see a vibrant area full of funky shops, nice restaurants, etc.  Businesses have lots of choices in where to locate -- why put up with the hassles of Oak Park when you can go to a nearby village that actually wants to help you succeed?

2. Real estate taxes in Oak Park have skyrocketed, making it hard for some residents to continue living here.  I spoke last week about the real estate owned by the village (and therefore not on the tax rolls).  This fact -- along with rampant government spending -- has created a totally expected result: skyrocketing real estate taxes.  My real estate taxes went up "only" 10%, but other residents report increases of 40% or 50%.  Or even more -- here are the property tax numbers for an Oak Park property my client sold on Thursday:

2005, 1st installment: $563.91
2005, 2nd installment: $1,976.26

In Cook County, the 1st installment always equals 1/2 of the previous year's taxes, so we know that the 2004 taxes for this property were $1,127.82.  That makes for an increase of more than 225%(!) from 2004 to 2005.  Yikes!

Oak Park has always prided itself on its (ethnic) diversity, but the net effect of its restrictions on property will quite obviously lead to a reduction in the village's (economic) diversity.  And, as this editorial makes it clear, Oak Parkers have no one but themselves to blame for this predicament.

Oak Park, Illinois, where I live, has had what I call a "Kelo" problem for quite some time.  And now its residents are finally being forced to come to grips with it.

What's a "Kelo" problem?  The name comes from the (in)famous U.S. Supreme Court opinion in Kelo v. City of New London (125 S. Ct. 2655 (2005)).  Kelo involved an attempt by the city of New London, Connecticut to condemn ("take") privately owned real estate so that the property could be redeveloped.  The Supreme Court ruled -- to the dismay of lots of people -- that New London's actions did not violate the Fifth Amendment to the Constitution, which states in relevant part that private property shall not "be taken for public use, without just compensation."  The question in Kelo was whether the planned development of the property -- to create things like a resort hotel, conference center, office space, and residences -- really was for public (as opposed to private) use.

The Supreme Court's decision in Kelo -- that the development was for public use -- strikes me as wrongheaded on a number of levels, but I'm more interested in (and troubled by) Kelo as an example of the overexaggerated role of government in the development of real estate.  The idea behind New London's actions in the Kelo case is that government should be actively controlling and planning the usage of the property within its boundaries.  This is certainly a belief shared by the village of Oak Park -- and many of residents.  Consider the following:

1. Oak Park's village code attempts to ban "for sale" signs from appearing on private property.  I say "attempts" because, as I discussed here, this provision is clearly unconstitutional.  That being said, the provision is still on the books and (more importantly) still adhered to by Oak Park residents and realtors -- there are no "for sale" signs on private property in Oak Park.

2. Oak Park recently banned smoking in all restaurants.

3. The village of Oak Park often seeks to control which businesses come in to Oak Park.  The most recent example involved Oak Park telling Lane Bryant that it is a "niche" business, one that doesn't fit the "kind and quality" of shops desired for the building it wanted to occupy.  This story was picked up nationally and proved quite embarrassing, as some folks saw it as evidence that Oak Park hates fat people (see this blog, for instance). 

4. The village of Oak Park owns a LOT of real estate, and its portfolio continues to grow.  The village has just purchased the Colt Building at 1125-33 Lake Street, and may also purchase the building at 1145 Westgate.  The price tag?  Just under $5 million for the Colt Building alone.  The reason given by the village for the purchases?  According to its press release (pdf here), the purchases "could mean more flexibility in determining how downtown will look in the future."

5. The village appears to use its zoning powers as a sword rather as a shield.  Consider this language from the village's website on planned developments:

A Planned Development (PD) is a special process for approval of larger developments within the Village. An applicant for a PD typically is seeking relief from some aspect of the Zoning Ordinance such as height or set back requirements. The applicant must demonstrate that the Village will receive compensating benefits in return for zoning relief.

(Emphasis in the original) 

According to this article, Constance Oxley died of a gunshot wound on July 10. Ms. Oxley's husband, Stephen Bolesky, is now acting as the executor of her estate, but there are whispers that Mr. Bolesky will be charged with his wife's murder.  As a result, Ms. Oxley's family wants Mr. Bolesky removed as executor.

In Illinois, I'm not sure if that would be possible.  As I described in this post, there are a number of reasons why an executor can be removed.  One of those reasons is "the executor has been convicted of a felony," but that hasn't happened yet in this case (Mr. Bolesky is only rumored to be the subject of a grand jury investigation).

One possibly successful argument relates to a catch-all provision in the Illinois statute, that an executor can be removed because he "is incapable of or unsuitable for the discharge" of his duties.  The basis in this case could be either that (1) according to the attorney for Ms. Oxley's family, Mr. Bolesky is being treated at a Rutland psychiatric facility, or (2) the possibility that Mr. Bolesky will be charged with his wife's murder makes him unsuitable to act as executor. 

If I was acting as the judge in this case, I'd still be uncomfortable with removing Mr. Bolesky at this time.  Right now, he is under suspicion, nothing more.  If Mr. Bolesky is actually charged with a crime, then I could understand his removal (presumably he would be so busy with his own case that he wouldn't have time for handling his wife's estate), but until that happens, I think Mr. Bolesky should be allowed to stay on the job. 

Ronald Lipman is a Houston-based attorney who writes a column for the Houston Chronicle.  Yesterday's column contained the following question from a reader:

Q: We have three children. Our oldest child is in college and will be 21 years old this year. The second child will turn 18 in the next year and will soon be going to college. Our youngest child is 13.

If my wife and I die, there are plenty of assets to care for them and see to their college educations.

How do we ensure that our estate stays intact until our youngest completes her education? At some point after she does complete her education, distribution of the assets to each of them would be appropriate.

I addressed a similar issue -- making fair distributions to children with a large range in ages -- in a post last year about Rupert Murdoch.  The key is to keep all assets "under one roof" (in a single pot trust, or what Mr. Lipman calls a pooled trust) until the last child finishes his or her education.

Nothing gets administrators, executors, and trustees in more trouble than not responding to legitimate requests for information -- about their actions, trust or estate assets, expenses paid, etc.  This case -- involving a court-appointed attorney acting as administrator of the estates of a husband and wife who died in a murder-suicide -- is, from an administration perspective, par for the course.  My advice to fiduciaries is, BE OPEN.  If beneficiaries have questions, answer them.  Even if beneficiaries don't have questions, go out of your way to keep everyone "in the loop."  Provide what the law requires in terms of inventory and accountings, and then provide more. 

This law.com article discusses an attempt by the estate of Enron founder Kenneth Lay to wipe clean Mr. Lay's criminal record.  The estate's lawyers...

cited a 2004 ruling from the 5th U.S. Circuit Court of Appeals that found that a defendant's death pending appeal extinguished his entire case because he hadn't had a full opportunity to challenge the conviction and the government shouldn't be able to punish a dead defendant or his estate.

The last three words of the above passage -- "or his estate" -- don't really make sense to me from a probate perspective.  As the article notes, the government plans to try and collect $43.5 million from Mr. Lay's estate as part of the estate claims process.  And I can't see any reason why they shouldn't be entitled to do so. 

The bigger issue is that, as the article puts it, "[t]he government... would have to compete with other litigants, if any, also pursuing Lay's estate."  How does that work?

I talked a little about the claims process in Illinois in this article.  To update what I said there:

Section 18-10 [of the Illinois Probate Act] sets forth a classification system for claims, from first class through seventh class.  First class claims have the highest priority -- this class includes funeral and burial expenses, expenses of administration, and statutory custodial claims.  "Debts due the United States" are third class claims in Illinois.

Two concepts are at work here: (1) all claims of a given class must be paid before moving to the next class of claims and (2) if the amount of property available to pay claims of a given class cannot pay all such claims in full, then the claims will be paid on a pro rata basis.  To illustrate, if Mr. Lay were an Illinois resident with an estate of $200,000, and the first class claims total $200,000, then only those claims would be paid (claimants with second class or lower claims -- like the U.S. Government -- wouldn't get paid at all).  If we change the above hypothetical so that the estate contains $500,000, then all first class claims would be paid, and $300,000 would remain for second class claims (which are surviving spouse and child's awards, discussed here).  If those claims are also satisfied and money remains in the estate, then -- and only then -- could the government get paid as a third class claimant (after proving its case, of course).

This is a nice article about a man named Jess Doll and his "Bye-Bye" file, which contains information his survivors will need upon his death.  I think this is a good idea, and something you can do without hiring an attorney.  I'd suggest that the file contain, at a bare minimum:

-your estate planning documents (originals or copies; if copies, you should leave a note about where your originals are kept)

-a somewhat current list (updated once or twice a year?) of your assets, including things like retirement benefits and life insurance

-contact numbers -- who should be informed of your death?

-documents (formal or informal) setting forth burial and funeral instructions

-if you feel so inclined, a "letter of affirmation, or blessing," as mentioned in the article

Do any readers have other ideas about what such a file should contain?

Illinois law allows a Will to be revoked in a number of different ways (see 755 ILCS 5/4-7):

1. "by burning, cancelling, tearing or obliterating it" -- this can be done by the person who executed the Will (aka the testator), or by some person doing it in the testator's presence and by his or her direction and consent;

2. by executing a later Will that says -- as most Wills do -- something like "all prior Wills of mine are hereby revoked";

3. by executing a later Will that is inconsistent with the prior Will; or

4. by executing a revocation document using the same formalities required for an Illinois Will (witnesses, etc.)

Of the above four methods for revoking a Will, my preference is for #2. 

Method #1, while fun in a dramatic way, is also risky -- what if you destroy the Will, but forget to tell someone holding a copy of the Will that you've done so?  That person could then seek to have the copy of the revoked Will admitted to probate upon your death.

Method #3 is a bit messy.  Even if you clearly distinguish the property to be given in each Will, then upon your death, every Will still in effect will need to be admitted to probate (that is, held to be a valid Will by a probate court judge).  It's much easier to consolidate your plan in one new, clean document.

Method #4 seems incomplete.  The revocation document would obviously be effective, but don't you want to replace your old Will with a new Will?  By revoking your old Will, you're saying (for example) that "I don't want my property to go to John Doe."  But you aren't saying where you DO want your property to go.

New York magazine has a little blurb about two cats who, by virtue of being the beneficiaries of their owners' Wills, essentially became landlords -- the article is here.

Apparently, two sisters, who lived together and died within months of each other in late 1999, left their two-story, 1,400-square-foot home on 47th Avenue in Queens to their kitties. (The will appointed a female executor whose sole purpose was to tend the cats and the house. Essentially, she was there at their behest.)

It sounds like leaving property to animals is becoming more and more popular, especially in families where there's a lot of infighting:

Corcoran broker Wendy Sarasohn’s 85-year-old client threw down the gauntlet recently: If her warring children didn’t find a way to get along, she said, she’d bequeath her Fifth Avenue apartment to her beloved pets.

For whatever reason, there aren't very many Illinois lawyers who blog.  Perhaps that's starting to change, though -- the Illinois Real Estate Blog is relatively new and has a lot of nice resources for people interesting in buying or selling real estate in Illinois.  And I don't say that just because the blog's author, TJ Thurston, has linked to one of my articles!

Jazz clarinetist and bandleader Artie Shaw died on December 30, 2004.  Mr. Shaw was married eight times -- his last marriage (to the actress Evelyn Keyes, who played Suellen O'Hara in "Gone wiht the Wind") ended in divorce in 1985.  However, according to this article, Ms. Keyes has been successful in her attempt to inherit a portion of Mr. Shaw's estate.  The basis for her claim is that "[l]ong after they separated but while they were still married, Shaw wrote a two-page contract in which they promised each other half of their estates."  I discussed these types of agreements -- mutual and reciprocal Wills - here.

Philip M. Bernstein at the New York Probate & Estate Litigation Blog has an interesting post (here) about socialite Brooke Astor and her attorney, Francis Morrissey.  According to Mr. Bernstein, Mr. Morrissey "is evidently no stranger to controversy  concerning the elderly persons and the estates which he has represented. He has been named as a beneficiary on several occasions and has inherited such valuable goodies as Manhattan apartments and valuable works of art including at least one Renoir and a Diego Rivera drawing as well as substantial sums of cash. Claims of undue influence have been leveled against Morrissey in more than one instance."

Yikes!  In my opinion, an attorney should never draft estate planning documents with himself as a beneficiary unless (A) it's for a close family member (like a parent) and (B) the attorney is receiving the same amount as other members of his class.  For instance, if the attorney has one sibling, it might be appropriate for the attorney to draft his father's Will if the Will leaves 1/2 to the attorney and 1/2 to the sibling.  (It wouldn't be appropriate for the attorney to be the draftsperson if the father wanted to disinherit the sibling and leave everything to the attorney.)

Mr. Bernstein goes on to state the following as a solution to overreaching attorneys:

... I cannot stress enough the need for vigilance . Be involved in the financial affairs of your loved ones. Even if your aunt Matilda is tempted to make her attorney or financial advisor a beneficiary, you can stop this if you are the one who takes her to her appointments and reviews the materials she is given with her. Don't be afraid to suggest that she goes for a second opinion. After all, she understands that she should see more than one doctor for a medical problem.

Review the paperwork. Ask for explanations and copies of records. Those of us who try to to a good job for our clients understand the need to be accountable and will not be offended by those who ask for details.

Unfortunately, I don't think it's that simple.  A lot of my older clients have "help" from a friend or family member.  Maybe the helper calls and sets up the appointment.  Maybe the helper actually wants to attend the appointment.  Sometimes the helper tries to suggest changes to the client's estate plan.  All of this may be appropriate or inappropriate, depending on context.  I've had situations where I felt it was necessary and positive for the helper to be involved -- the client wanted it, and I saw no overreaching by the helper.  I've also had situations where the helper acted in an extremely inappropriate, self-serving manner, and was clearly trying to exert undue influence on the client.  There's no bright-line rule here, but I can think of a number of cases where I have chosen not to be accountable just because they say they are trying to help my client.

This law.com article discusses machinations surrounding the trust of a woman named Eleanor Spector.  Mrs. Spector created a trust with her two daughters (Linda J. Spector and Barbara Berlin) as beneficiaries and co-trustees.  Following Mrs. Spector's death, attorney Joel Sankel was supposed to become an additional trustee.  However, Ms. Spector apparently tried to get Mr. Sankel to decline the appointment so that her then-fiance (and now-husband), Albert Jacobs, an attorney with the law firm of Greenberg Traurig, could instead be appointed. 

A couple of things strike me as odd here:

1. Ms. Spector's plan may have been to disinherit Ms. Berlin, as the trust apparently allowed the trustees to make unequal distributions to the beneficiaries.  (If Ms. Spector and Mr. Jacobs were both acting as trustees, they would essentially control trust decision-making.)  But I don't know why a trust -- particularly a trust for adults who are also named as trustees and may not get along -- would allow this.  Why not simply divide the trust assets between the two daughters upon Mrs. Spector's death?

2. A question exists whether Mr. Sankel indicated verbally that he was stepping aside as trustee.  In documents I draft, I always set forth a clear method for declining to act, involving a written document signed by the trustee who is resigning and submitted to the other trustees. 

By the way, many large law firms prohibit their attorneys from acting as fiduciaries.  Most firms don't want to run into cases where they can be sued because of actions taken by their attorneys in a fiduciary capacity.  There's also the negative PR issue in cases like this. 

If you do a search for "real estate" or "[name of city] real estate" on Google, you now get as one of your top results something that says "Refine your search for [name of city] real estate." By clicking on the link, you can search local real estate -- for sale or rent -- and see results on Google maps.

For instance, if your Google search is "Chicago real estate," you can get to this results page, which can be personalized.  (For instance, you can search only homes for sale within five miles of your zipcode.)   

This tool looks like it's still in its infancy -- the list of real estate seems far from exhaustive -- but it's worth remembering as another on-line option.

In case you missed it, the You and Yours Blawg recently posted about a nice Washington Post opinion piece called "Tax Inheritance, Not Death."   

Like Deirdre R. Wheatley-Liss, who runs the You and Yours Blawg, I take issue with the authors' statement that "opponents of estate tax repeal have fallen back on a divisive class-warfare approach. The estate tax affects fewer than two percent of the richest Americans. Thus, they argue, the other ninety-eight percent of the population should oppose repeal." 

I'm sure some anti-repeal folks might be trying the class-warfare approach, but others are surely responding to the lies of the pro-repealers, who often try to convince Joe and Jane Middle Class America that their estates will be subject to estate tax.  If individuals in favor of repeal want to write articles with titles like "Estate tax hurts black Americans," then they shouldn't take offense when people opposed to repeal calculate (in this article) that the actual number of black Americans hurt by the estate tax this year is... 59 (dropping to 33 in 2009).

Every litigator worth his or her salt should provide litigation clients with an assessment of risks and rewards.  For instance, today I met with a client who was considering litigation against his father's second wife.  The client's father had executed a Will in 1994, leaving all of his property to his wife, and the son suspected that his father's wife had used undue influence in getting the Will signed.  Son only learned of this Will after his father's death, in 2002.

The client and I talked about issues such as:

-the strength of his case -- did he have any evidence to support a claim of undue influence?

-Illinois law -- what are your chances for success based on the above?

-a roadmap for how to proceed, involving...

a petition for formal proof of Will
a Will contest (on grounds of undue influence)
a citation proceeding

-my fees -- what will all of the above cost?

-practical issues, such as the potential payoff (in terms of money).  One thing my research turned up was a deed by which the client's father transferred his house to himself and his wife as joint tenants, meaning that the house isn't subject to probate.  In other words, even if the father's Will is found to be invalid, the son won't receive any portion of the house.

As I explained in this post from about a year ago, disclaimers can be very useful tool, but "the biggest impediment to a successful disclaimer is 'grabby hands.' In Illinois, you can't disclaim property after you have accepted it."  This point was reinforced for me by a recent situation that crossed my desk:

Dad died in January of 2006.  Mom inherited most property from Dad as surviving joint tenant, including a huge chunk of stock in X Corporation.  Upon receiving the X Corporation stock from Dad's estate, Mom immediately reregistered it in the name of her and her Son (and only heir) as joint tenants.  Mom then died in July of 2006.

Upon Mom's death, Son realizes Mom's estate will owe an estate tax.  Son also learns about how a disclaimer could potentially allow Son (as administrator of Mom's estate) to disclaim assets from Dad's estate. 

Unfortunately, Son also learns that Mom's reregistration of X Corporation stock makes a disclaimer of this asset impossible.  If Mom had seen an estate planning attorney right after Dad died, she could have saved her Son a LOT of money.