Death and Taxes Blog

I previously blogged about slimy ex-judge Robert Cochonour here and here. The charitable foundation that was supposed to inherit Jay Hayden's property wants Mr. Cochonour to supply answers about where the money went; the probate judge handling the case is suggesting that this is an "exercise in futility" (here's the article).

Without absolving Mr. Cochonour of any of the blame, I have to wonder about this passage from the article:

When Hayden died of cancer in 1985, he left Cochonour in charge of his estate, most of which was bequeathed to the Jay E. Hayden Foundation.

In 2002, foundation officials started asking why they had not received the money willed by Hayden almost two decades years earlier.

If you know you are an estate or trust beneficiary, the time to ask questions is now -- do it early and often. Don't wait 17 years.

I blogged here about Anna Nicole Smith's Will. I said the Will (drafted by an attorney who doesn't appear to be an estate planner) was "a mess."

The Will has been admitted to probate, as per this article. An important point: the admission of a Will to probate doesn't mean that the Will is valid -- you can still prove that someone made the testator sign it (undue influence), or that the testator didn't know what he or she was doing when the Will was signed (lack of capacity), or that other circumstances make the Will invalid. All the judge is doing in admitting the Will to probate is saying that, on its face, the Will appears to be valid. Probate is somewhat unique in the law in allowing this -- it's like "admit first, ask questions later," and in most cases no notice needs to be given before the initial ruling on a WIll's validity is made.

Note the following passage in the above article, which relates back to the drafting of the Will:

Outside court, [attorney for the estate Bruce] Ross said he would eventually present testimony from the lawyer who drafted Smith's will, saying that Smith did not intend to disinherit Dannielynn.

"There is no provision in the will that names Dannielynn and purports to disinherit her," said the lawyer.

Ross said the attorney who drafted the will would testify that he and Smith discussed the possibility of her having future children.

"She said, `I probably won't have future children, but if I do I would want them to be the beneficiaries of the trust,'" Ross said.

Asked why Smith made a provision to leave everything to her son and to specifically disinherit future children, Ross said, "Anna was concerned that someone would pop up out of the woodwork."

I don't understand Mr. Ross's argument. The Will clearly states that "I have intentionally omitted to provide for... future spouses and children... hereafter born or adopted...." Ms. Smith couldn't specifically name Dannielynn because -- wait for it -- Dannielynn hadn't been born or even conceived when the Will was drafted! Instead, Ms. Smith clearly disinherited "children... hereafter born or adopted," which Mr. Ross seems to acknowledge. Either (1) Ms. Smith intended to disinherit after-born children or (2) Ms. Smith didn't intend to disinherit after-born children, and the drafting attorney better make sure his malpractice insurance is up to date.

I've loved Donna Tartt's writing ever since I read this passage early in her 2002 novel The Little Friend. It introduces us to two sisters named Allison and Harriet Cleve (Harriet is the novel's main character):

Allison spent a lot of time with her great-aunts, on the weekends and after school.... What a good little cook, the aunts all sang. How pretty you are. You're an angel to come see us. What a good girl. How pretty. How sweet.

-----

Harriet, the baby, was neither pretty nor sweet. Harriet was smart.

From the time she was old enough to talk, Harriet had been a slightly distressing presence in the Cleve household. Fierce on the playground, rude to company, she argued with Edie [her grandmother] and checked out library books about Genghis Khan and gave her mother headaches. She was twelve years old and in the seventh grade....

This past week, laid up with sinus problems, I finally made my way through Ms. Tartt's first novel, The Secret History. I liked it almost as much as I liked The Little Friend. Both books are "thrillers," of a sort, although they take place in different worlds. The Little Friend takes place in Alexandria, Mississippi, while The Secret History is set at a fictional private college in Vermont. The Secret History is the story of six friends and classics scholars. Here, one of the six (Henry) is telling our narrator (Richard) about another of the six (Francis). And, interestingly enough (to me, at least), trusts play a part in the story:

[Francis] and his mother live off the income of a trust, as I expect you know, but they also have the right to withdraw as much as three percent of the principal per year, which would amount to a sum of about one hundred and fifty thousand dollars. Generally this isn't touched when it turns up, but in theory either of them can take it out whenever they like. A law firm in Boston serves as the trustees.... Francis had assured me that getting the money was a simple matter of going downtown and signing some papers....

But he wasn't back when he said he would be, and three hours passed, then four.... [Then] Francis burst in, half-hysterical. The money for that year was all gone, you see. His mother had checked out every cent of the principal at the first of the year and hadn't told him about it. It was a nasty surprise, but even nastier given the circumstances. [And, indeed, the circumstances are very nasty. -Joel] He'd tried everything he could think of -- to borrow money on the trust itself, even to assign his interests, which is, if you know anything about trusts, about the most desperate thing one can do....

While trusts that allow the beneficiary to withdraw principal are fairly common, I've never seen a trust with multiple beneficiaries that allowed any one of the beneficiaries to withdraw the entire principal. You can see the reason for that, as you get a race to the trustee to request the money (and what happens if both beneficiaries ask at the same time -- who wins?).

I've written extensively about statutory custodial claims, most extensively here:

Part 1: An Introduction

Part 2: Problems

In Part 2 above, I note some of the problems with the statutory claims law. There's now a bill pending in the Illinois Senate (SB1230 -- full text here) that would amend this law by making the following changes:

Change #1: Preventing someone convicted of financial exploitation under 2-6.2 of the Illinois Probate Act from receiving payment of a statutory custodial claim;

Change #2: Allowing a person to disallow statutory custodial claims against his or her estate via a Will or codicil; and

Change #3: Mitigating the claim amount to the extent that the caregiver benefited from the arrangement (had housing, etc. provided).

I'm sort of neutral on the first and third of these changes. Change #1 is a hot-button issue since old people vote, and everyone loves to rail against financial exploitation of the elderly. Change #3 is good in theory -- the question of how to deal with the benefits received by the caregiver has always been an open issue -- but fairly vague.

Change #2 is idiotic. If I dedicate myself to your personal care and you are disabled, why should you be able to eliminate my ability to file a claim against your estate? If we're going to allow this, I think it has to be with the consent of the caregiver. In other words, if you want to prohibit statutory claims under your Will or codicil, you have to get me to agree to give up my rights. Then I can decide that you're an ungrateful so-and-so, and leave you to care for yourself.

As a solo practitioner, I'm often asked "where do your clients come from?" In fact, I've been asked this question so often lately that I decided to check. I occasionally run some numbers, and try to keep track of my referral sources, but I don't update that information as often as I should. So here goes...

This year I have worked on behalf of and been paid by 49 clients. You'll notice how I phrased that last sentence -- I'm not counting potential clients (people who have contacted me but haven't formally retained me) or clients for whom I've done work and haven't yet been paid (there aren't many of them -- in six years as a solo, I've never had a problem getting paid).

So, where did these clients come from?

14 clients were referred to me by other attorneys (mostly other estate planning/probate attorneys). That probably surprises some people -- why would my competitors give me business? The answer: because they aren't my competitors. I previously worked at three different law firms, all of them pretty big, and made a lot of contacts at those firms and with other attorneys at big law firms. For the most part, my attorney contacts don't do work for Joe and Jane Middle Class; instead, they do work for Richie Rich and his family. So when a friend/family member/potential client who isn't filthy rich comes to them looking for an attorney, they are nice enough to send them my way.

11 clients were referred to me by other clients, which gives me a nice feeling.

9 clients came to me via the internet (my website or this blog). This number is steadily increasing -- I'll probably begin work for 3-4 more internet clients by the end of this month.

8 clients were referred to me by non-attorney professionals (accountants, financial planners).

6 clients were referred to me by friends.

That adds up to 48 -- the 49th client is the client I have represented for the longest, who was the only client I had when I began my solo practice.

Mick Jagger's father, Joe Jagger, died in November of last year. Mr. Jagger left all of his assets not to Mick but to his other son Chris -- here's a short article.

I wish more people with wealthy relatives would take this approach. There's little reason to leave a bunch of your money to a wealthy child, parent, or sibling -- in some cases, it just causes headaches. I assume Mick Jagger understood this, as he's named as his father's executor.

If a client feels funny about disinheriting a family member because of lack of need, I always suggest putting their rationale for doing so in their documents. Of course, the better approach is to talk to family members and explain why you want to leave your money elsewhere.

My almost-six-year-old daughter has developed a taste for mysteries, so I've decided to start reading Nancy Drew to her. We're beginning at the beginning, with book #1 (The Secret of the Old Clock); surprisingly, the book has a probate-related aspect. From the School Library Journal write-up:

After aiding an injured child, Nancy accidentally stumbles upon the mystery of Josiah Crowley's missing will. While several of Crowley's impoverished relatives claim that he had included them in his will, his arrogant relatives, seem to possess the only copy, which leaves them in total possession of the deceased man's fortune. Nancy is intrigued by the situation and begins searching for Crowley's missing antique clock, an object that reportedly contains a clue to the will's location.

A new film version of Nancy Drew also opens today (here), starring Emma Roberts (Julia's niece).

In the June 2007 edition of IICLE Estate Planning & Probate FlashPoints, Patricia Brosterhous mentions that the U.S. Treasury has proposed regulations dealing with the estate treatment of claims against an estate. This has always been a tricky area. On the one hand, we know that an estate tax deduction is allowed for claims against an estate pursuant to Section 2053(a)(3) of the Internal Revenue Code. On the other hand, the amount of these claims can be in question far beyond the date on which the estate tax return needs to be filed. How do we value these claims? Here's what the proposed regulations say:

[T]he proposed regulations adopt rules based on the premise that an estate may deduct under section 2053(a)(3) only amounts actually paid in settlement of claims against the estate. If the resolution of a contested or contingent claim cannot be reached prior to the expiration of the period of limitations for claims for refund, the estate may file a protective claim for refund to preserve its right to claim a deduction under section 2053(a).

The proposed regulations -- which appeared in the April 23, 2007 Federal Register -- can be found here.

Because county circuit courts in Illinois aren't necessarily designated by the name of the county (see below), it can be tricky to find probate forms online. Here are links to probate forms for Chicago and the collar counties:

Cook County

Du Page County (aka the 18th Judicial Circuit)

Lake County (aka the 19th Judicial Circuit)

McHenry County (aka the 22nd Judicial Circuit) -- scroll down for probate forms

Will County (aka the 12th Judicial Circuit) -- scroll down for probate forms

Kane County (aka the 16th Judicial Circuit) -- put "PR" in the number field and hit enter to access probate forms

For reference, it's important to know that there are 23 judicial circuits in Illinois, which are numbered 1-22 plus Cook. Some of the judicial circuits contain more than one county -- for instance, the 16th Judicial Circuit includes Kane County plus DeKalb and Kendall Counties.

Yesterday I spent the day at this all-day IICLE seminar on Illinois Estate Administration. I learned a lot from all of the speakers, but I especially enjoyed David A. Handler's presentation on disclaimers. I've blogged about disclaimers in the past, and consider them a great (post-mortem) estate planning tool.

One of the elements needed for a valid disclaimer under § 2518 of the Internal Revenue Code is that "as a result of [the disclaimer], the [disclaimed] interest passes without any direction on the part of the person making the disclaimer."

Mr. Handler addressed this issue by reference to the estate of Jacqueline Kennedy Onassis. Mrs. Onassis's Will (which can be found here) specifically allows her children to disclaim certain property that might pass to them. Disclaimed property then flows to her residuary estate, where (under Article FIFTH) it is held as The J Foundation. The issue is this: Mrs. Onassis's children did not disclaim, but if they had, and were also involved in the administration of The J Foundation, wouldn't their disclaimer be invalid? After all, they would still have been involved in directing how the disclaimed property would pass.

If you gave me a comb-over every time a government worker took advantage of an elderly person, I'd be Donald Trump. The latest case can be found here (you can skip CBS 2's slideshow on openly gay celebrities if you want). Karen Bailey is accused of forging a power of attorney to get access to the funds of a woman named Mary Ann Wilson. Some of the shocking details:

1. Ms. Bailey is "a top assistant to Cook County Commissioner Jerry 'The Iceman' Butler," singer of such R&B classics as "Only the Strong Survive."

2. "Bailey earns $64,000 a year and is well known within the County Building for her side business of selling sex toys." Huh?

3. Not so amusing -- Ms. Wilson "was discovered in her home, totally abandoned, in feces, confused, [unable] to walk or talk, and had lost a lot of weight."

The nice thing about powers of attorney -- which have become more prevalent in recent years -- is that they allow individuals you trust to handle your property without needing to go to court and obtain a guardianship. The downside is that there aren't many checks and balances on powers of attorney, so unscrupulous people can use them to take advantage pretty easily.

Cook County has finally joined the 21st century, and made case information available online, here. Of interest to people with an interest in probate:

1. Probate Case search: provides information about probate cases

2. Probate Wills search: provides information about Wills filed in Cook County. I especially like the "Search by Will Name" feature. For instance, want to know about Mike Royko's Will? Type "Royko" in the Search by Will Name field, and hit the Search Now button. You'll discover that Mr. Royko's Will was filed on May 12, 1997, following his death, and is referenced as Will No. 1997W004517. You could take that number to the 12th Floor of the Daley Center in downtown Chicago, and use it to see a copy of the Will.

I'm generally pretty pro-creditor. I believe in paying debts when they come due, in my personal life and my business, and that's my advice to my clients as well. I don't understand it when heirs try to wiggle out of a decedent's valid debts just because they want more money for themselves.

That being said, I'm starting to become a little less creditor-friendly as a result of an estate I'm handling. The decedent didn't have much money (just a condo, which is on the market but hasn't been sold), but she owed money to about fifteen different entities at her death (mostly credit card companies). Now these entities are starting to call me. A lot. And even though I tell them the status (and point out that they won't get their money until the claims period expires at the earliest), they continue to call. (This is dumb for another reason: I have to spend time on these calls, and under Illinois law -- drafted by attorneys, of course -- I get paid before these creditors. So the creditors, in taking up my time, reduce the size of the estate and increase the chance that they won't get their money.)

The creditors also file claims. Or, rather, have their attorneys file claims. That's fine, but their attorneys tend not to practice in this geographic area -- for instance, an Omaha, Nebraska attorney recently filed a claim (on behalf of a credit card company) against the estate in Cook County. Other attorneys from different areas of the country have done the same. So, the attorney...

-doesn't show up to court (but of course I'm expected to do so);

-doesn't prepare the correct claim form; and

-doesn't return my telephone calls or respond to my letters

What can I do? Well, yesterday I went into court and convinced the Judge to dismiss the claim filed by the Nebraska attorney (the grounds: failure to appear). And now I'm going to do the exact same thing with every other claimant who wants their money, but refuses to behave in a reasonable, professional and competent manner.