Death and Taxes Blog

It's easy to get worked up if you are involved in probate litigation.  Things tend to get very emotional.  There are cases where somebody involved -- a trustee or other family member -- has done something really evil.  But there are a lot more cases where emotions simply run high and the folks involved act like the other side is evil, even if they aren't.

Good probate lawyers aim to give their clients tangible success -- removing a bad trustee, getting the share of the estate they deserve, etc.  But some clients want intangible benefits -- "piece of mind," or "a sense that justice has been done," or "the knowledge that I 'won'."  I'm hesitant to get involved in cases where these types of intangible benefits are sought, mostly because what I'm supposed to do gets so convoluted.  It's also difficult to work with very emotional clients.  They tend to be all over the map -- first they want this, then they want that, then they want to do away with any negotiation and simply "sue the bastards."  That wastes a lot of time and money -- do you really want me to bill you at my ($200) hourly rate for listening to you rant about your "no good" sister?

I think in terms of money, and in terms of alternatives.  This comes from my training as a mediator.  If the question is "to settle or not to settle," then what's your BATNA (Best Alternative To a Negotiated Agreement)?  What's your WATNA (Worst Alternative To a Negotiated Agreement)?  I spend a lot of time explaining to my clients what will happen when or if we go to court.  Court does offer some benefits, but there are also the drawbacks (in terms of costs and time).

Of course, there are drawbacks to a negotiation as well.  You may not walk out feeling as though you "won."  You may feel like you shouldn't have been forced to compromise with the "devil" on the other side.  But if your goal is to bring a probate matter to a close, and to move on, then maybe negotiation will work for you.  Even if it means you have to let go of some of your vitriol.

While there are Illinois statutes telling executors and trustees what they may do, there really aren't many statutory references to what they can't do, or to the general duties a trustee or personal representative owes to the beneficiaries.  These duties are generally a creature of caselaw, which makes secondary sources an important research tools when disputes arise over a fiduciary's conduct.

Take, for instance, the trustee who loans money from the trust to himself.  The first question is whether the trust document allows this (most trusts don't).  If not, the trustee may ask, "but what's wrong with doing this?"  One answer comes to us from Bogert’s Trusts and Trustees (§543(J)), which says that a trustee who loans trust funds to himself…

brings into play a conflict of private and representative interests. As lender it is his duty to get the best terms possible as to interest, security, and maturity. As debtor his impulse is naturally in the direction of getting the money at the lowest rate and often on other terms not advantageous to the lender. If he lends to himself, he cannot give an impartial judgment as to the adequacy of the security offered.

In other words, think about the terms and conditions a trustee would impose if a third-party came to him and asked for a loan from the trust.  Would he make the loan?  What would the terms (interest rate, repayment dates, etc.) be?  Even if the trustee isn't trying to put himself ahead of the trust beneficiaries, he can do so in ways large and small.

What's the penalty if a trustee loans money to himself?  Traditionally, when a fiduciary makes a loan to himself, “he is chargeable with principal and interest, or with any profits he makes thereby, at the option of the beneficiaries. Where a trustee uses trust funds in his own business, he is chargeable with principal and interest or with a pro rata share of the profits of the business at the option of the beneficiaries.” Scott on Trusts, §170.17 at 387.

This article talks about the Florida bar and how it might attempt to tighten professional responsibility laws as they relate to estate planners.  The problem in a nutshell:

Florida Supreme Court rules prohibit lawyers from being named as beneficiaries in the wills they draft for clients. But nothing stops them from being designated as personal representative or trustee. As the personal representative or trustee, an attorney stands to earn significant fees.

Illinois attorneys also aren't prohibited from being designated as a fiduciary, but the stakes are higher in Florida because of the state's ridiculous fee schedule for personal representatives (Florida's term for an executor or administrator). 

Florida law offers a sliding scale for fees of personal representatives -- ranging from 3 percent of the first $1 million in probate estate assets to 1.5 percent of everything above $10 million. The fee can rise to 6 percent if a lawyer agrees to serve as both a personal representative and counsel to the estate, according to trust and estate lawyers.

My own feeling -- which I've discussed before, here -- is that I would prefer not to act as a fiduciary for my clients, and will do so only if the client (1) initiates the request, (2) doesn't really have other options and (3) understands why it might be a bad idea.

From a client perspective, I'd think about this:

What time is it when your estate planning attorney asks to be appointed as trustee or executor in your documents?

Time to find a new estate planning attorney.

I've written lots of times (most recently, here) regarding the controversy in the estate of Rosa Parks.  According to this article, the parties are talking settlement.  The question involves whether Mrs. Parks' friend and associate Elaine Steele "used undue influence to convince Parks in 1998 to leave the bulk of her estate to the Rosa & Raymond Parks Institute for Self Development."  I can't say that I've ever heard of someone exerting undue influence to get someone to leave their estate to charity, but I suppose there's a first time for everything. 

One interesting issue involves the valuation of Mrs. Parks' personal property:

An auction house is cataloging Parks' estate, chiefly to determine what of value she left when she died.

But [the attorney for Mrs. Parks' nieces and nephews] said placing a value on many items is difficult, however. What, for example, is the value of a plate Parks used when eating with then-President Clinton?

This is an interesting valuation problem.  What's the value of...

one of my dinner plates?
one of Mrs. Parks' dinner plates?
one of Mrs. Parks' dinner plates used when eating with then-President Clinton?

Valuing everyday items that have value only because of the identity of their owner is tricky business.

This article offers a "two-fer" in terms of information: telling people how to choose an executor, and giving executors a list of their duties.

I've written previously (here and here) about the possibility that former homes of the famous and infamous could garner increased interest (and price tags) when their owners go to sell.  But if the home was the site of an actual murder, there's always the chance that the value will decrease because of the "creep out" factor.  Defamer handles this issue in its own irreverent way, here.

In "The Ethicist" column this weekend, Randy Cohen tackles a question from an Oak Park, Illinois attorney with the initials J.S.  Hmmmmm.

Anyway, the question is as follows:

I am an attorney. While a potential client and I were preparing her will, she asked how it would be affected if she committed suicide. A little flustered, I asked if she was seriously considering suicide. She said no, but did she mean it? I don't want to ignore a cry for help, but is it appropriate to try to be her social worker — she does see a psychiatrist — especially considering the rules governing attorney-client confidentiality? What should I do?

Mr. Cohen's response is available at The New York Times' site (here - registration required) or via this link to the Houston Chronicle.

The probate of a Will is supposed to begin with the filing of the original Will with the county clerk's office.  But what if you can't find the original Will?  Then you've got problems.  But luckily, you also have a couple of good Illinois resources for dealing with this situation (although registration is required for both):

Janet's L. Grove's article in the October 2005 issue of the ISBA Trusts and Estate Section newsletter

Helen Gunnarsson's article in the October 2006 Illinois Bar Journal

If you are seeking to probate a lost Will in Illinois, you need to overcome the presumption that the lost Will was revoked by the person who created it (the "testator").  But how do you prove a negative (that the testator DIDN'T revoke the Will)?  Ms. Grove indicates that good evidence would include the following:

(1) continued strong relations between the testator and the beneficiaries,

(2) declarations by the testator of an unchanged attitude concerning the dispositions in the will, and

(3) possession of or access to the will by an adverse party.

If you are able to overcome the presumption of revocation, you aren't done -- now you have to prove that (a) the lost Will was a valid Will (i.e. properly executed) and (b) the contents of the lost Will (what did it say?).

For a Florida take on this issue, check out Juan Antunez's post here.  Professor Beyer discusses Texas law and lost Wills here.

Juan Antunez has a nice post (here) about "Florida's unforgiving 2-year non-claim statute."  Mr. Antunez starts with a good summary of the forces at work in Florida (and most other probate statutes):

An overarching theme of Florida’s probate code (and recurring point of discussion on this blog) is the tension between basic due-process rights on the one hand and Florida’s strong public policy favoring the speedy administration of estates on the other. In order to move things along as quickly as possible (with the least amount of litigation expense possible), Florida law provides extremely short windows of opportunities for litigants to file claims.

The question in the case discussed by Mr. Antunez involves whether the 2-year limitation on claims can be overriden if a decedent's Will directs that “just debts, funeral and administration expenses be paid as soon after [her] death as may be practical . . ."  The court finds that it can't, because this would leave an estate open to claims indefinitely, which defeats one of the main purposes of the probate code.

This case is of interest in Illinois because our state has a similar 2-year bar on claims after death.  I would add that a claim filed more than two years after a decedent's death is in fact not a "just" debt or expense, since it's not recognized as a valid debt or expense under the law. 

From an executor or administrator's perspective, it's important to realize that such a debt or expense CAN'T be paid without a violation of fiduciary duty.  You may feel bad for the creditor, and feel like it's unfair that it isn't being paid money it may have been owed, but you shouldn't act on those feelings (unless you have the consent of all of the beneficiaries).

If you read a lot of the cases that involve undue influence of an elderly person, certain patterns become clear.  There tend to be a lot of cases involving younger family members (children and grandchildren) trying to take advantage, as well as some cases involving unscrupulous attorneys.  Another group of individuals who show up with some regularity in these types of situations: police officers.

In re Estate of Theodore Hoellen is one such case, involving a Chicago cop.  The facts are fairly typical for this type of situation:

The record shows that respondent [Donald L. Owsley], a Chicago police officer, first met Hoellen in the summer of 1999 when he responded to a 9-1-1 call from Hoellen's neighbor after Hoellen mistakenly entered the neighbor's home believing it was his home. After the incident occurred, respondent began regularly visiting Hoellen at his home. Hoellen's case was referred to the Public Guardian's office based on allegations that respondent was financially exploiting Hoellen, who lived alone and suffered from dementia.

In most of these cases, the exploitation is only uncovered after the elderly person dies, but here the Cook County Public Guardian's office was on the case.  They "filed a five-count amended petition for issuance of a citation to recover assets alleging that over the years, respondent had engaged in a course of conduct designed to manipulate and financially exploit Hoellen, an 89-year-old physically and mentally impaired senior citizen who, it was argued, was unable to protect himself from such exploitation."  Citations to discovery information and recover assets are used a lot in the deceased estate context, but can be used by guardians of living individuals as well.

A couple of weeks ago, I talked about some new projects I'm undertaking on my regular site (www.jas-law.com).  One of those projects involves posting the entire Illinois Probate Act with (1) each code section on its own page and (2) comments and cross-references.  I've started in on this project, and hope to have it completed by the end of the year.  You can see a preview of how it will look and work as follows:

Click here to be taken to my Probate and Estate Planning-Related Statutes page.

Click on The Illinois Probate Act of 1975.

Click on Article I: General Provisions.

Click on any of the highlighted sections, such as 1-2.01. "Administrator".

I'm working my way through James Joyce's sometimes impenetrable Ulysses with the help of a class at the Newberry Library and Don Gifford's Ulysses Annotated.  It's a struggle, but my pace is fairly light (10 pages a day), and the novel really does have a lot to offer.  Besides the portrait of Dublin on June 16, 1904 and the rather obvious references to The Odyssey and other classical works, there is a surprising number of references to Shakespeare.  In Chapter 9 ("Scylla and Charybdis"), one of the novel's main characters, Stephen Dedalus, talks about his theories on The Bard, Anne Hathaway (Shakespeare's wife), and Hamlet.  He even works in a mention of some probate issues starting at line 686:

You mean [Shakespeare's] will.
But that has been explained, I believe, by jurists.
[Hathaway] was entitled to her widow's dower

At common law.  His legal knowledge was great
Our judges tell us.
Him Satan fleers,
Mocker:
And therefore he left out her name
From the first draft but he did not leave out
The presents for his granddaughter, for his daughters,
For his sister, for his old cronies in Stratford
And in London.  And therefore when he was urged,
As I believe, to name her

He left her his
Secondbest
Bed.

Of course, not much in Ulysses is straight-forward.  Here Dedalus is talking about Shakespeare's relationship with his wife (which Dedalus felt was poor), and about the reasons why the only gift Shakespeare made to her in his Will was of "my second best bed."

This site gives a nice, short overview of what such a gift might mean.

Stuart C. DuBose (pictured at left) has been nominated to be a circuit court judge in Alabama, but is involved in an estate situation that doesn't cast him in the best light.  Let's play spot the ethical problems!

According to this article, Mr. DuBose prepared a Will for a man named Joseph L. Sullivan without ever meeting Mr. Sullivan (Problem #1 - communication, diligence).  The Will named one of Mr. DuBose's other clients, a woman named Weaver, as the executor and sole beneficiary; even worse, Weaver was the one who asked Mr. DuBose to prepare the Will in the first place (Problem #2 - conflict of interest among clients).  Mr. DuBose was named as successor executor (Problem #3 - conflict of interest, self-dealing).

There was some litigation over the Will (filed by Mr. Sullivan's sister after his death), and Mr. DuBose then entered into an agreement with Weaver by which Weaver agreed to pay Mr. DuBose "33 percent of any estate settlement if there was no lawsuit filed concerning it, 40 percent if a lawsuit was successfully defended and 50 percent if it moved to an appellant court level." (Problem #4 - conflict of interest, potentially unreasonable contingent fee)

Evidently two disputes erupted over Mr. Sullivan's estate -- the one filed by his sister, and a dispute between Weaver and Mr. Dubose over whether he was entitled to 40% of the estate settlement.  The former was settled some time ago; the latter was just settled, with Mr. DuBose receiving attorney's fees of almost $1 million.  That's almost $250,000 per ethical problem if you are keeping track.

According to this article, a North Carolina judge has ordered a company called American Family Prepaid Legal Corp. (and what looks like a sister company called Heritage Marketing and Insurance Services) to stop hawking their wares in the state.  The "wares" in question are estate planning services, and a lawsuit is pending against the company (the North Carolina Attorney General filed suit against the companies back in May).  According to the article:

American Family Prepaid Legal would solicit customers to buy legal services plans to create living trusts to avoid paying probate costs, the lawsuit says. The company billed its living trust, which cost $1,995, as a bargain when compared with probate costs, the lawsuit says. But for someone to pay almost $2,000 in probate costs, his estate would have to be worth more than $500,000, the lawsuit says. Once the consumer signed up for the living trust, a Heritage sales agent visited the home, ostensibly to have the consumer sign paperwork but really to try to sell deferred annuities.

This is pretty much the same rationale that was used in Pennsylvania earlier this year (see this article), when Pennsylvania's attorney general filed suit against American Family and Heritage, and American Family was kicked out of The Better Business Bureau of Western Pennsylvania.

A few months ago I had some not-so-nice things to say (here and here) about a group of "legal reformers" called HALT.  Sure enough, HALT recently defended American Family Prepaid Legal (here).  Part of HALT's argument is true -- I agree with the statement that "[s]tate and local bar associations use unauthorized practice of law statutes to prevent affordable alternatives to lawyers from being able to do business."  However, these statutes do also have a valid purpose of consumer protection.  Unfortunately, the folks at HALT, in their quest to make consumers safe from evil lawyers, appear to have succeeded only in making consumers more vulnerable to evil non-lawyers.  Nice work!

Helen W. Gunnarsson has the cover article in this month's Illinois Bar Journal, and the title is "Should You Store Your Client's Will?"  (registration may be required for non-members)

The article gives a nice overview of the issues involved with handling old Wills.  The problem is that some attorneys -- in particular, solo practitioners and small firm attorneys -- agreed to hold original Wills for their estate planning clients.  Often this is done by the attorneys in hopes that more legal work would arise in the future (either in terms of changes to the Will, or when the Will "matures" and a probate is needed).  There's a view -- mentioned by Ms. Gunnarsson -- that this line of thinking is either unethical or morally repugnant.  I would agree with that, but then again, I don't hold original documents for my clients.  I don't safekeep documents for the same reasons I don't sell real estate (or Mary Kay products or Beanie Babies) on the side: it's not my job, and it detracts from my job.  As a lawyer, do you really want to compare yourself to attorney/babysitter/agent/bodyguard/unauthorized biographer/realtor/cobbler Lionel Hutz?

Of course, many attorneys choose not to store their clients' Wills, but wind up inheriting these types of documents from old school attorneys (many of whom did offer this service).  Now the question is, what do I do with all of these documents?  The article offers a few suggestions, like using skip tracers or checking the internet Social Security Death Index, but this can take a lot of time and/or money.  The newest idea is proposed legislation that establishes a central Will repository, which is used in a number of other states. 

I've said it before but I'll say it again, because it's so important: probate is not a horrible thing.  This nice article -- by Stephen A. Frost of the law firm Pederson & Houpt -- explains how the evils of probate have been overstated, and gives a nice, easy-to-follow overview of how the process works.

On Tuesday I spoke briefly about executors trying to honor a decedent's wishes, even when it may mean that the estate's value isn't maximized.  On a somewhat similar note comes a follow-up regarding the estate of Chicago comedy legend Del Close.  According to his Wikipedia entry, Mr. Close "donated his skull in his will to the Goodman Theatre for use in Hamlet productions, on the condition that he should receive credit in the program as Yorick." Now his executor has admitted (here - registration may be required) that "she tried to carry out Close's wishes, but pressure from the morgue caused her to instead buy [and give the Goodman] a skull from the Anatomical Chart Company in Skokie."  Alas, poor Mr. Close!  We knew him well -- and his wishes weren't honored.

Harrisburg, Pennsylvania-based attorney and teacher Neil E. Hendershot has started the PA Elder, Estate & Fiduciary Law Blog -- you can find it here.  Welcome to the blogosphere!

According to this article, the only existing Technicolor road-show print of Porgy and Bess is being shown at the Los Angeles County Museum of Art on Saturday.  This story has a probate connection because of comments previously made by Ira Gershwin's executor:

The Gershwin family never liked the film because they felt it was too "Hollywood." In a 1993 interview with The Times, Michael Strunksy, trustee and executor of Ira Gershwin's estate, raised eyebrows and the ire of film historians and preservationists when he stated "we [the estate] now acquire any prints we find and destroy them."

This raises an interesting question about an executor's job.  Usually the executor is charged with maximizing the value of an estate's assets.  How do Mr. Strunksy's comments accomplish this?  Is it more important to maximize asset values, or to be "true" to what the decedent wanted?  This reminds me of Franz Kafka as well, since Mr. Kafka asked his literary executor (Max Brod) to destroy all of his manuscripts upon his death.  (Mr. Brod obviously disobeyed this order.)

And I'm not talking about the Agatha Christie-inspired musical that I appeared in as a high school student (I was Geoffrey, the "foxy Oxford coxswain").  Rather, I mean that I have made a decision to try and update my regular site (www.jas-law.com) more regularly.  This is part of my plan (which you can read about here) to establish that site as the go-to place for Illinois probate information.  I'm also working with the good folks who created my regular site (Justia) to see if we can integrate this blog into it.

This article gives an overview of what the author refers to as the six types of estate planning:

1. Do nothing.

2. Give everything away.

3. Put your property in joint tenancies.

4. Name intended beneficiaries for your life insurance, annuities, IRAs and retirement accounts.

5. Write a will.

6. Write a revocable living trust.

The article is a nice introduction, but I do have two problems with it:

For one thing, the author gives the impression that these six types of estate planning are mutually exclusive.  They aren't.  In many (most) cases, my clients will have a will AND a revocable living trust AND name beneficiaries for their life insurance and retirement benefits AND hold some property jointly AND make lifetime gifts.

Also, one pretty big factual error:  the author says that  "if you become disabled, you’ll have no access to" assets for which you've designated beneficiaries.  That just isn't true.