Death and Taxes Blog

Leona Helmsley, the so-called Queen of Mean who died recently, left most of her money to... her dog. The Washington Post has the story here. Some of the other provisions:

She left money to two of her four grandchildren (the children of her deceased son, Jay Panzirer) "so long as they visit their father's grave site once each calendar year. Otherwise, she wrote, neither will get a penny of the $5 million she left for each."

According to the article, "Helmsley left nothing to two of Jay Panzirer's other children - Craig and Meegan Panzirer - for 'reasons that are known to them,' she wrote." Ouch!

I would not have recommended the "grave visiting" requirement -- it strikes me as a ham-handed attempt to control people from beyond the grave. If the grandchildren loved their father and view the visitation of his grave as an important way to show this, then they'll visit the grave regardless of any incentive to do so. If the grandchildren didn't love their father, or think there are better ways to show their love than visiting a grave, they're likely to resent the requirement.

I'm becoming a pretty big Edith Wharton fan. I loved The Age of Innocence (the movie is pretty good too), and am now working my way through The House of Mirth.

The House of Mirth (which was published in 1905) focuses on Lily Bart, who is beautiful but relatively poor and 29-years-old, which means that she's running out of time to make an advantageous marriage. Ms. Bart is ambivalent about marrying, and about the social circle in which she travels -- part of her wants to find a wealthy husband, but another part of her wishes to simply be herself (perhaps with the not-so-rich but intelligent Lawrence Selden?). Ms. Bart's situation becomes precarious when she befriends Gus Trenor, the husband of her good friend. Mr. Trenor agrees to invest some of Ms. Bart's money, but it soon becomes clear that Mr. Trenor expects to be "paid" in some way for this favor. It also becomes clear that Mr. Trenor didn't invest Ms. Bart's money at all (instead he is making gifts to her, which is clearly inappropriate). Ms. Bart doesn't have the ability to return Mr. Trenor's gifts -- she's already spent the money. Even worse, Ms. Bart's cousin, Grace Stepney, has been talking to their wealthy aunt (Mrs. Peniston) about Ms. Bart's behavior. This talk comes in Chapter XI of Book One, and borders on undue influence (although Ms. Stepney is driven not by hope of inheritance, but by hatred of Ms. Bart).

Later in the book, Mrs. Peniston dies, and Ms. Bart hopes that a long-promised inheritance will alleviate some of her financial concerns. But at the reading of Mrs. Peniston's Will (in chapter IV of Book Two), Ms. Bart learns that -- except for one small gift -- "she has been disinherited" in favor of Grace Stepney. Ms. Stepney is to receive the residue of Mrs. Peniston's estate (the property remaining after specific gifts are made and debts and expenses are paid).

I'd be curious to find out when the practice of holding a formal "reading of the Will" died out. (I've never been asked to give such a reading, although I'd welcome the opportunity).

One of the first articles I ever posted on the internet (which I initially wrote for my client newsletter) talks about biweekly payment programs offered by lenders. (The article is here, as a pdf -- the part about biweekly payment programs starts in the middle of page 3.) My conclusion is that paying 1/2 of your monthly mortgage payment every two weeks (for a total of 13 full mortgage payments per year instead of 12) is a great idea, but being forced to pay an enrollment fee to do so is a pretty bad idea. That's because you can make these payments manually or automatically (via billpay), at little or no cost.

Evidently these biweekly payment programs are still being offered, so somebody must be taking the bait. CitiMortgage just sent me a mailing offering to set up biweekly payments for me via The Biweekly Advantage Plan -- I even get a "free" iPod Shuffle! You'll notice I put "free" in quotes, because you actually have to pay $375.00 to get the iPod (which retails for around $80.00).

Does it strike anyone as smart to pay $375 in order to (a) get something you can buy for $80 and (b) have something done for you that you can do for free?

After opening a probate estate, you also have to give notice to a group of people described as "interested persons." In a case where the decedent died intestate (without a valid Will), the interested persons are the decedent's heirs. In a case where the decedent had a valid Will, the interested persons are the decedent's heirs and the individuals named as beneficiaries in the Will (the decedent's legatees).

This notice isn't real tricky, except some attorneys forget about it because most of the requirements appear in the Illinois Supreme Court Rules rather than in the Illinois Probate Act.

Most Illinois probate estates are administered without a lot of court supervision, under something called independent administration. If the estate is being handled via independent administration, notice has to be sent to interested persons of their rights to contest this. See Illinois Supreme Court Rule 110.

If the decedent's Will has been admitted to probate or denied probate, notice has to be sent to interested persons of their right to contest this result. See Illinois Supreme Court Rule 108.

A copy of the petition that was filed to open the estate, and a copy of the order entered by the judge admitting the Will to probate (or denying probate) and appointing an executor or administrator, also have to be sent to each interested person. This requirement IS found in the Illinois Probate Act (Section 6-10 for testate estates, Section 9-5(b) for intestate estates).

Two final notes:

1. There are time requirements for giving the above notice. My regular practice is to send out the required notice on the day I open a probate estate, after I return from court.

2. As Section 6-10 above makes clear, additional notice needs to be published if you don't know the name and/or address of an heir (this is called an "unknown heirs" situation).

Once a probate estate has been opened, the decedent's creditors (and potential creditors) have to be notified, so that they have the opportunity to file claims against the estate. The creditor notice requirement is found in Section 18-3(a) of the Illinois Probate Act:

It is the duty of the representative to publish once each week for 3 successive weeks, and to mail or deliver to each creditor of the decedent whose name and post office address are known to or are reasonably ascertainable by the representative and whose claim has not been allowed or disallowed as provided in Section 18-11, a notice....

Section 18-3(a) goes on to list what the notice needs to say, but the important point about this section is the duty to do two things:

1. Mail or deliver notice to known or reasonably ascertainable creditors. This provision tends to be a source of litigation, as creditors try to argue that they were known or reasonably ascertainable and therefore should have been sent direct notice; and

2. Publish notice once each week for three successive weeks to every other potential creditor, in "a newspaper published in the county where the estate is being administered." Section 18-3(b).

This week I want to talk a little about the requirements for giving notice in an Illinois probate proceeding. Notice is one of those things that can really be a problem if you don't do it, and for some reason it's easily forgotten.

For the most part, notice is given AFTER a court appearance. Probate is unique in that you can often go to court first, and then give notice later (rather than having to give notice before you go to court, so that the other parties can be present, which is usually the requirement in litigation). One exception: a situation where a decedent dies intestate (without a Will) and you are going to court to be named as the administrator. In that case, you have to give notice to anyone and everyone who has preference equal to or above you in acting as or nominating someone to act as administrator. That preference list is set forth in Section 9-3 of the Illinois Probate Act (the "Act"). Section 9-5(a) of the Act explains the notice requirement in more detail:

Not less than 30 days before the hearing on the petition to issue letters, the petitioner shall mail a copy of the petition, endorsed with the time and place of the hearing, to each person named in the petition whose post office address is stated and who is entitled either to administer or to nominate a person to administer equally with or in preference to the petitioner.

To take an example: Your father dies intestate, survived by his wife (your mother), you and your five siblings. If you want to act as administrator, you can file the necessary court documents, but have to give notice to your mother and siblings. If your mother wants to act or nominate someone to act, her wishes will trump your wishes. You stand on equal footing with your siblings, so if your mother doesn't take part in the proceeding but one or more of your siblings also wants to act as administrator, the judge will have to make a determination regarding who should act.

I've written before about probate real estate investors -- people who attend seminars (like this one) and then try to launch careers buying real estate in probate for pennies on the dollar, flipping the real estate, and becoming rich.

Evidently this practice is more common than ever. I recently filed court documents to be appointed as the administrator of a Cook County probate estate (long story, but there's nobody else who wants to act). The court hearing is set for next week, and all I've filed with the Court is my Petition for Letters of Administration. Yet right after I filed the Petition, I received the following letter from two different individuals (I won't mention their names or the name of the decedent, who I'll call "Ms. X"). Here's how the letters (which are essentially identical) start:

Dear Joel,

First, let [me/us] take a moment to offer [my/our] condolences on the passing of your loved one, Ms. X. While [I/we] know this can be a very emotionally sensitive period, [I/we] also understand you may be facing some serious decisions with which [I/we] might be able to assist you. The reason [I/we] are contacting you is often times...

Here the letters diverge a bit. Both letters talk about how they can help me and my family.

If you were teaching a seminar in acquiring probate real estate, wouldn't you tell people that they shouldn't send your form to every potential seller?

There's been a lot written about the gift tax ramifications of a fan who catches a "big" home run ball (like a player's 500th career home run ball) and then returns the ball to the player. Something I haven't heard anything about -- are there gift tax ramifications to a baseball player (or any famous person, really) giving an autograph? The thought crossed my mind after reading this article about a rare ball owned by David Wells of the San Diego Padres.

The ball, which Mr. Wells purchased for $7,000, originally bore the signature of Babe Ruth (holder of, among other records, the record for most career homers from 1921 through 1973). Mr. Wells later had Henry Aaron (who broke Mr. Ruth's record in 1974) sign the ball, and now has had Barry Bonds (who just tied Mr. Aaron) sign as well. The question for me is this: did Mr. Bonds' signature add more than $12,000 worth of value to the ball? I don't think it did, but you can see the possibility of an autograph (particularly one given by someone who doesn't often give autographs) would be worth more than $12,000. For instance: what's the value of an autograph by J.D. Salinger? Or an autograph by Thomas Pynchon?

Deirdre R. Wheatley-Liss has a nice post about nursing home admissions agreements on her You and Yours Blawg, here. It's amazing to me that people don't hire attorneys to review agreements like these before they are signed. Of course, when I practiced real estate law, I was horrified to see people sign listing agreements with realtors without having an attorney do a review. Most of these clients also didn't read the agreement or think about its import.

I have a few clients who are residents of a nearby assisted living facility. The facility requires a "down payment", a portion of which is then refunded in part following the termination of the agreement with the client (which usually happens as a result of the client's death). Unfortunately, the agreement (a) isn't specific about when the refund occurs and (b) requires the payment of certain monthly changes for two months AFTER the agreement terminates. These problems could be rectified by using an attorney to help negotiate the agreement, or at least review it for problems.

Essentially, in initiating the probate process, you are asking the court to...

1. Rule on the decedent's heirs;
2. Find the decedent's Will (if he or she had one) to be valid; and
3. Appoint an executor (if the decedent named the person in the Will) or administrator (in all other cases) for the decedent's estate.

How does the court make its rulings? By issuing orders, which the attorney has (hopefully) prepared in advance. The relevant orders are...

Order Declaring Heirship

Order Admitting Will to Probate and Appointing Representative (if valid Will)

Order Appointing Representative of Decedent's Estate - Intestate (if no valid Will)

There are two distinct groups with rights in a decedent's estate under Illinois law (three, if you include potential creditors): legatees (i.e. individuals named as beneficiaries in the decedent's Will, if any) and the decedent's heirs (i.e. closest relatives). Heirs are entitled to notice of the proceedings even if they aren't legatees. That's why it's necessary for the court to rule on the identity of the decedent's heirs. How can the court do that? In a number of ways (including considering testimony and other evidence), but the easiest way is by accepting an Affidavit of Heirship filed by someone with knowledge of the decedent's family.

Because every family situation is different, Cook County doesn't have a form for Affidavit of Heirship -- you have to create it yourself. DuPage County actually has two forms, one for the more typical situation where a decedent is survived by a spouse and/or descendants (here) and one for use when the decedent had no spouse or descendants (here).

For more information, you may want to consult an FAQ I wrote on affidavits of heirship, here.