Death and Taxes Blog

What is it about founders of football teams and probate litigation?  The estate of Chicago Bears founder and owner George Halas gave rise to a huge probate case many years back, and now there's the case of Austin E. "Dutch" Knowlton, a founder of the Cincinnati Bengals.  This article has the details.  The case features...

[a]llegations of wrongdoing - including falsification of documents and forgery - ... from Austin E. "Dutch" Knowlton's adult children, who were left out of their father's will.

On one side are attorney Charles Lindberg, the Bengals and the family of Paul Brown, another Bengals founder.

On the other side are the children of Knowlton - a construction giant who also was one of the founders of the Bengals - and their prominent attorney, Stan Chesley.

At stake are 176 shares of the Cincinnati Bengals valued by experts at between $42 million and $350 million.

I've been trying to figure out what bothers me about this Bob Bruss column, in which he suggests (to a person trying to sell his house in a buyer's market) "increasing the sales commission to 7 percent with 4 percent going to the buyer's agent who produces an acceptable buyer."

There's always a conflict of interest involved with real estate brokers, especially with respect to buyer's agents.  A buyer's agent gets paid if (and only if) his or her client buys, and the amount of the agent's commission is dependent upon the price of the real estate purchased.  What if the buyer's agent pressures the buyer into purchasing a house the buyer doesn't really want (or a particularly high-priced house), simply because of the commission the agent will receive?

A similar problem exists if you increase the commission going to the buyer's agent.  (Mr. Bruss even suggests more direct -- or, if you prefer, more vulgar -- ways of appealing to buyer's agents. These include "offering buyer's agents incentives such as the home seller's car, a Hawaiian vacation, and various other special incentives to get a property sold.")

Mr. Bruss wouldn't consider offering these types of incentives unless he felt that buyer's agents can successfully persuade their clients to purchase house A instead of house B.  But what if house A and house B are identical in all respects other than the commission to be received by the buyer's agent?  Or, what if house B is actually a much nicer house than house A, but offers a lower commission?

By increasing the buyer's agent's commission, what you are really doing is hoping that some buyer's agent will behave unethically in steering his or her clients your way.  Isn't this just a bribe by another name? Is the real estate market so slow that it's really come to that? 

Want to know who will inherit your Illinois probate property if you die without a Will?  Now the answer to this question is a click away, thanks to Kurt R. Nilson's calculator, which can be found here.  Professor Beyer's write-up of Mr. Nilson's project (here) also lists a number of other states for which calculators are available.

I've already blogged once about a Will-related aspect of John Steinbeck's East of Eden, but it turns out that the book is full of references to Wills and inheritance.  I guess that makes sense, given that one of the book's main themes is the extent to which our actions and personalities are inherited from our parents.

SPOILER ALERT!

At one point, a prostitute (unduly?) influences her boss to make her the sole beneficiary under the boss's Will, and then poisons the boss to death.  Later on in the book, this same character executes her own holographic Will (that is, a hand-written Will with no witnesses), leaving all of her property to one of the sons she previously abandoned.  This character's husband also faces a dilemma when he learns that he and his wife are each 1/2 beneficiaries under his brother's Will.  Does he inform his brother's lawyers that his wife is still alive, even if this means his wife's identity -- as the owner of a brothel -- is revealed?

Whether or not you are interested in Wills and inheritance, I highly recommend East of Eden.

I'm a member of a transactional law e-mail group that is a part of ISBA (the Illinois State Bar Association).   Every few months or so, there is a round-robin discussion of attorney's fees among the group's residential real estate attorneys.  The general point tends to be that real estate attorneys feel like it's difficult to make a living doing this type of work because of the constant price pressure, which stems from two things:

-the presence of real estate attorneys who offer to handle closings at rock-bottom prices (like $200).  Presumably these attorneys are using non-attorneys to do most of their work (preparing documents, clearing title, etc.); and

-the influence of realtors, who may tell their clients that they shouldn't pay more than a minimal amount for a real estate attorney.

Illinois attorney TJ Thurston offers his take on the issue here.  I mostly agree with Mr. Thurston's assessment, with two exceptions:

1. Mr. Thurston states the following:

I have nothing against paralegals and secretaries performing the clerical and non-legal tasks in a transaction (such as calling the county assessor to determine if there are outstanding taxes due on the property). I DO have a problem with attorneys that allow paralegals or secretaries to perform the unauthorized practice of law (UPL), which is both illegal and an ethical violation.

The problem is that attorneys alone are in charge of deciding what constitutes UPL, and attorneys have abused this power in the past.  Does a given type of work appear lucrative and challenging?  It's deemed "legal work."  Is a given type of work mind-numbingly boring?  Sounds like something a secretary can do.

There's legal ethics (as defined by the Illinois Rules of Professional Conduct) and there's real world ethics.  Having a non-attorney perform legal work may be a problem from a legal ethics perspective, but from a real world ethics perspective, the more important issues are (a) does the person I hire know how to do this job, (b) am I aware of this person's qualifications, and (c) is this person charging a fair price for this work.  There are plenty of non-lawyers who have the competence to handle the legal work involved in real estate transactions, and there are plenty of lawyers who are not competent to perform this work.

2. Mr. Thurston also suggests that there is an insurance element to hiring (and compensating well) a real estate attorney:

Sure, you may be saving some money [if you hire a low-cost attorney], but you are running the risk of serious mistakes; mistakes that might cost you thousands of dollars. If the transaction goes bad, what are you going to do?

That may be the case, but where are the figures to back it up?  How often does a real estate deal go bad?  Is the rate 1 in 2? 1 in 50? 1 in 100? 1 in 1,000?  My sense is that real estate attorney's fees are where they are because the market/public has assessed the risk of a deal gone bad, and found that it isn't significant.

On a personal note, my experience has been this: I liked doing real estate transactions, and thought I did a good job (I did all of my own work, and was constantly available to my clients by phone and e-mail).  My experience is that most realtors are overpaid and most attorneys are underpaid.  The market doesn't agree with my experience, and votes with its collective wallet.  I therefore found it difficult to make money as a real estate attorney, and as a result have pretty much stopped practicing in this area of law.

The Illinois Probate Act says that, if you die unmarried and without a Will, all of your probate assets pass to your descendants.  But what happens if you were never married?  How does a child born to unmarried parents prove heirship?

That's obviously pretty easy if the child is trying to inherit from his or her mother, since a birth certificate would show the relationship.  It gets trickier when the child is trying to inherit from his or her father.  Illinois law (§2-2 of the Probate Act) sets forth the applicable standards -- basically the rule is that a child born out of wedlock "is heir of his father and of any paternal ancestor and of any person  from whom his father might have inherited, if living" if...

1. the decedent has acknowledged paternity of the child OR

2. during his lifetime or after his death the decedent was adjudged to be the father of the child.

The standard of proof here is "clear and convincing evidence," except in cases where there was an adjudication of parentage during the decedent's lifetime -- in that case, all that's needed is an authenticated copy of that judgment.

Apportionment relates to how (or from which property) estate taxes are paid.  A person with a taxable estate may die with property in various forms -- in her own name (that's probate property), in trust (non-probate), with beneficiary designations (non-probate), etc.

The question then becomes, how do we figure out which assets are used to pay the tax? The answer to this question may have a great impact on what the beneficiaries receive.  If all taxes are paid only from probate property, then beneficiaries under my Will wind up paying my estate tax (and having their bequests reduced).  That's why the general rule in Illinois is for courts to apply the concept of "equitable apportionment," which permits taxes to be apportioned among probate AND non-probate assets.  That strikes me as fair.

That being said, a testator is free to override the concept of equitable apportionment in his or her estate planning documents.  For instance, a Will might say something like this:

All estate and succession taxes, including interest and penalties payable by reason of my death, shall be paid out of and be charged against the principal of my residuary estate, without reimbursement from any person.

That language clearly indicates that estate taxes are paid from probate assets (and from the residue of the probate estate) only. 

I see two problems raised by the above language:

1. Why would you want to do this?

2. What if the estate taxes exceed the value of the residue?

The recent case of Estate of Williams (from the 3rd District Court of Appeals) tries to address question #2.  In that case, the court found as follows:

... [W]here a testator directs through her will that all obligations be paid from the residue yet the will is silent as to the source of funds in the case that the residue is insufficient to cover such liabilities, equitable apportionment must be applied if it is later discovered that the residue is in fact insufficient.  In such a case, the testator has failed to clearly express her intent as to who should be responsible for the additional payments and the will is ambiguous on this issue.  The application of the doctrine of equitable apportionment is therefore proper.

According to this note at imdb, Marshall Mathers (aka "Eminem") and his on-again, off-again wife Kimberly will have their divorce handled by a mediator in Macomb County, Michigan.  This nice article (from something called Selfhelp Magazine) gives 10 reasons why mediation in divorce might be a good idea.  Number 9 ("It's confidential") is probably of utmost importance to Mr. Mathers.

Professor Beyer talks here about a recent Wall Street Journal article that discusses "contracts between parents and children or other family members for care of an elderly or disabled parent or relative."

In Illinois, we have statutory custodial claims, which I discussed in two in-depth posts:

Post #1: An Introduction

Post #2: Problems

Statutory custodial claims can be useful in protecting a caregiver's rights, but they are an imperfect solution.  A contract between the caregiver/child and the parent, clearly spelling out how the relationship is going to work (especially in terms of remuneration), is the best solution.  Unfortunately, many people don't view elderly parent and caregiver/child scenarios as requiring any sort of formal documentation.

I've spoken in the past (here) about the importance of a "bye-bye" file.  If you have older people in your life (parents, friends, even a spouse), it's also a good idea if you have a list of what needs to be done when someone passes away.  The Wall Street Journal explains more in this nice article (registration required).

There may be some duplication on the lists, but at least nothing will slip through the cracks.

The painter Georgia O'Keeffe is famous in estate planning/probate/estate tax circles for the "blockage" discount taken by her estate after her death.  (You can read more about this issue here.) 

There's now a new controversy surrounding a gift of artwork made by Ms. O'Keeffe during her life to Fisk University, which is discussed in this article.  Actually, Ms. O'Keefe made two gifts to the University:

Gift #1: "97 works of art owned by O’Keeffe’s husband, Alfred Stieglitz, and donated by his widow to Fisk University in 1949 at the suggestion of a friend."  As the article states:

When the gift was delivered to Fisk in June 1949, O’Keeffe included a letter of transfer confirming the university would not sell the artworks. Charles S. Johnson, who was then the president of Fisk, replied saying Fisk “will not at any time sell or exchange any objects in the Stieglitz Collection.”

Gift #2: "[F]our paintings from O’Keeffe’s personal collection that she initially loaned to Fisk and later donated to the university in the 1950s."  This includes a painting entitled Radiator Building - Night, New York, which Fisk University would like to sell (possibly for $10 million).

Is the Radiator Building painting subject to the same conditions as the paintings comprising Gift #1? Does it matter that the then-President of Fisk may have agreed never to sell the painting?  If Fisk is acting inappropriately, is there anyone with standing to stop them?

These are all interesting questions.  My own take on this situation is that donors should build a little flexibility into their gifts.  Telling a charity that they may never sell a donated item can place a tremendous burden on the charity.

I recently did a two-part post on Oak Park's Kelo problem (post #1 and post #2).  Part of the problem involves the "vision thing" that all Oak Parkers are seemingly born with -- or acquire when they move here.  Everyone seems to have an opinion about what businesses should and shouldn't be here.  For example, in this week's Wednesday Journal, we have...

1. Dennis Murphy's vision of Oak Park, online here.  (Mr. Murphy owns the popular Poor Phil's restaurant -- try the oysters.)

2. Features Editor Ken Trainor's vision of Oak Park, as set forth in his article (here) entitled "Why doesn't Oak Park actively recruit interesting retail?"  Mr. Trainor's article makes little sense to me.  He begins by complaining about empty storefronts, which I understand -- there are so many in Oak Park that an artistically-inclined friend of mine wants to make a poster (similar to those "Doors of Ireland" ones) showing "Vacant Storefronts of Oak Park."  But Mr. Trainor then goes on to say:

Just around the corner, through the Metra overpass, Bill Sullivan has opened a real estate/legal office, filling one of the more prominent storefronts on the Marion Street mall. Bill's a terrific guy and community pillar. His business is an excellent addition to the downtown Oak Park mix, but should it be taking up a prominent ground-floor storefront? Seems to me that should be reserved for retail.

This is Oak Park's problem in a nutshell.  Mr. Sullivan -- an acquaintance who used to have his office next to mine -- takes a chance on downtown Oak Park, purchasing and moving into a prominent storefront.  The thanks he gets? Being told that he shouldn't be there.  Welcome to Oak Park, Bill.

Interestingly enough, The Wednesday Journal's offices are on an underdeveloped street in Oak Park, one that could be turned into a promising retail area.  Maybe if enough of us tell the Journal we don't want them there, they'll leave and a Restoration Hardware will move in!  What's that? You don't want a Restoration Hardware?  Well, I do, so there.

Last week I blogged about The Wire, and called it "the best show currently on TV, maybe one of the best TV shows ever."  Jacob Weisberg goes a step further in this Slate article, describing The Wire as "the best TV show ever broadcast in America."  He continues:

...[n]o other program has ever done anything remotely like what this one does, namely to portray the social, political, and economic life of an American city with the scope, observational precision, and moral vision of great literature.

Slate is also running a TV Club discussion of the show each Monday (see this), with Oak Park's own Alex Kotlowitz among the participants.

Maybe all of the positive press the show has received is finally starting to translate into viewers -- the show was (according to this article) just renewed for a fifth season.

I've spoken a little about this before (here), but entities with claims against a decedent's estate have their backs against the wall from a leverage perspective.  During your life, you may pay off your credit card bills ASAP because of the fear that your credit rating will be harmed by doing otherwise.  But dead men neither tell tales nor have credit ratings.

In order to collect on a debt owed by a decedent, a credit card company or other creditor will have to hire attorneys to monitor the probate, file a claim, make court appearances, negotiate a settlement, etc.  That takes up a lot of time, energy, and money.

In my experience, businesses (especially big businesses) trying to collect on a debt owed by a decedent are willing to negotiate a reduction in their claim in return for immediate payment.  For instance, today I negotiated a reduction in a credit card debt, from $33,000 to under $25,000.  Everybody wins:

1. The credit card company gets paid ASAP.

2. The estate saves some money.  However, note that the savings are offset by the fact that the difference between the debt owed and the debt paid is income to the decedent's estate.  Even so,...

3. I as the attorney can feel good about having saved the estate $5,000 or so.

The moral of the story for executors is: don't be shy about negotiating with the estate's creditors.  You have nothing to lose but the decedent's debts!

I previously blogged about litigation in the estate of Buddha-bellied Hall of Famer Kirby Puckett here.  According to this article, Mr. Puckett's ex-wife (Tonya Puckett) is now attempting to have the executor of Mr. Puckett's estate, Brian Woods, removed from his post.  Ms. Puckett claims that Mr. Woods "is no longer qualified to manage the estate because he has a 'significant and irreconcilable conflict of interest' stemming from his role in the money transfer and statements he made about taking care of Puckett's fiancee, Jodi Olson."

She alleged that Woods told her in the hours before Kirby Puckett died that Olson was not named in the will and that she needed to "be taken care of, and that $1 million to $1.5 million needed to be given to her."

...

The petition also alleges that on the day Puckett died, his longtime agent, Ron Shapiro, acting under a power of attorney, transferred money from Puckett's account to Olson's.

The petition said the "gift" was "a clear violation" of Arizona law. Woods "was effectively an accomplice," it said, because he was aware of the transfer and did nothing to stop it or, later, recover the money.

[Mrs. Puckett's attorney] said Tuesday that the transfer was made even though William Brody, a Minneapolis attorney representing Woods, advised Shapiro before the transfer that such a transaction was not authorized by the power of attorney agreement.

The question of whether an agent under a power of attorney can make gifts on behalf of the principal -- either directly or by changing the principal's estate plan -- has always been an important one. 

In Illinois, the statutory form for a power of attorney for property includes a long list of powers granted to the agent, but doesn't include the power to make gifts.  I typically include such a power if my client wants it. 

The above article mentions Arizona law -- I assume that Mr. Puckett executed an Arizona power of attorney for property.  However, it doesn't appear to me that Arizona has a statutory form for this document, so the question of whether the gift was a "clear violation" of Arizona law depends on the specific language of the power of attorney Mr. Puckett executed.   

This MarketWatch article gives a nice overview of the issues involved in selecting a corporate trustee to handle your affairs (after your death or incapacity). 

I think a lot of people get scared by the idea of using a corporate trustee (or executor) because of fee concerns -- most corporate fiduciaries will charge annual fees of at least 1% of the value of assets under management, whereas family members acting as trustee or executor may not take a fee at all.  Of course, the old maxim that "you get what you pay for" might be applicable here. 

If you don't have any close family members who can handle the various tasks required of a fiduciary, or if your affairs (either assets or family relationships) are complicated, a corporation may be the way to go.

If you are interested in a corporate trustee or executor, I'd start by interviewing two or three different institutions, to get a sense of fees, procedures and the like.

I've spoken on occasion (here and here) about whether you should accept an appointment as executor of another's estate.  I have suggested that there are situations in which you may not want to act in this capacity.  In Persuasion, Jane Austen talks about a situation where a person (Mr. Elliot) declines to act as executor of the estate of a friend (Mr. Smith).  Ms. Austen takes a notably dim view of this declination to act (See Chapter 21 -- it's page 215 of my Penguin edition):

[Mr Smith] had died just in time to be spared the full knowledge of [his debts].... With a confidence in Mr Elliot's regard, more creditable to his feelings than his judgment, Mr Smith had appointed him the executor of his will; but Mr Elliot would not act, and the difficulties and distresses which this refusal had heaped on [Mrs. Smith], in addition to the inevitable sufferings of her situation, had been such as could not be related without anguish of spirit, or listened to without corresponding indignation.

I think it's worth noting that Ms. Austen's dim view of Mr. Elliot's actions (or inactions) is based on two factors:

1. Mr. Elliot was wealthier than Mr. Smith, and had led Mr. Smith "into expenses much beyond his fortune."  Sound like any credit card companies you know?

2. Certain property owned by Mr. Smith in the West Indies "might be recoverable by proper measures; and this property, though not large, would be enough to make [Mrs. Smith] comparatively rich.  But there was nobody to stir in it.  Mr. Elliot would do nothing, and she could do nothing herself," because of health and financial issues.  I'm sure there's an element of chivalry that comes into play here, of not assisting a woman in her time of distress.

OK, this doesn't have anything to do with estate planning or probate, but "The Wire" starts its fourth season on HBO this Sunday (check local listings).  As critic Diane Werts once put it, "Most TV crime series aspire to John Grisham's level.  'The Wire' aspires to Dostoyevsky's."  I think this is the best show currently on TV, maybe one of the best TV shows ever, with its complex depiction of the interplay between police, drug dealers, politicians, and -- this year -- the educational system.  It looks like this season will be just as good as the last three.  Here's Maureen Ryan in this morning's Chicago Tribune:

If you have only one hour a week for television, give it to "The Wire."

Even if you think you don't have time for television, find an hour a week to watch the fourth season of "The Wire."  It's a masterpiece.

I'm reading John Steinbeck's East of Eden right now, and stumbled across the following passage, in Chapter 7 (page 60 in my Viking Press edition).  The passage discusses the aftermath of the death of Cyrus Trask:

The attorneys... were sorry -- offered their condolences.  And they were pretty excited too.  When they had made Trask's will they thought he might have a few hundred dollars to leave his sons.  That is what he looked to be worth.  When they inspected his bankbooks they found that he had over ninety three thousand dollars in the bank and ten thousand dollars in good securities.  They felt very different about Mr. Trask then.... It was enough to start a dynasty. The lawyers congratulated [Cyrus' sons] Charles and his brother Adam. Under the will, they said, it was to be shared equally.

The only problem with this windfall is that, to Charles at least, it seems like a bit too much of a windfall.  Did their father -- who had lied about his stint in the military -- steal the money, or otherwise come by it dishonestly?  And, if so, how should the brothers rectify the situation?  Those are the questions Charles and Adam try to resolve later in the chapter.

I am occasionally asked to act as executor or trustee for my clients.  I'm somewhat reluctant to do so, but in some cases it's a necessity -- some of my clients simply don't have anyone else in their lives who can do the job.

In these cases, I have to go through a fairly extensive disclosure of all of the reasons why you might not want your attorney to act as fiduciary, including but not limited to the conflicts of interest that arise...

-due to the fact that I will be executor/trustee and the attorney for the executor/trustee; and

-as a result of the standard exculpatory language I include in my estate planning documents.

I then have my client sign the disclosure and consent to my acting as fiduciary.

A lot of clients want to name co-fiduciaries in their estate planning documents -- co-executors in their Will, co-trustees in the trust, co-agents in their powers of attorney.  There is a very good reason why this isn't always a good idea -- columnist Bruce Williams talks about it in this article.

The Illinois statutory forms for powers of attorney do not allow co-agents, and with good reason.  Co-executors or co-trustees can be used with success, but you need to have the right people for the job.  And I don't think I'd ever recommend having more than two executors or trustees -- that seems way too unwieldy.

A few months ago I posted a review of Charles Dickens' Bleak House (here).  If you don't want to buy the book or check it out from the library, you now have another alternative: reading the entire book via Google.

1. Go to Google Book Search.

2. Type in "Bleak House."

3. Click on "full view books."

4. Click on "Search Books."

5. You'll get a list of the different versions of Bleak House you can read online.  What's nice is that you can read the actual pages, instead of just a text file.  Take a look at a random page from Bleak House, here.

Obviously there are lots of other classic public domain books available.

Every time I take part in a real estate closing, I'm reminded of why I rarely work in this area anymore.  Yesterday was no exception. 

An estate I represent was selling a residence in Chicago.  The closing was scheduled to begin at 1:00 p.m.  The closing ended at about 5:30 p.m.  The reason why nine people -- three attorneys, three clients, two realtors, a closing agent from First American Title -- got to spend their afternoon at a title company? The lender (Countrywide Home Loans). 

Countrywide sent a packet of loan documents to the title company, for signing by the buyers.  The buyers signed, and the title company faxed the executed documents back to the lender.  The lender's response?  Sending more documents.  And more documents.  And more documents. 

Then, once the lender had received every document they could possibly want?  Crickets -- the lender stopped returning the title company's calls.

Everything was eventually resolved.  I realize I'm tilting at windmills here -- clients choose lenders based on their interest rates, not their service on the closing day -- but it's a real annoyance.