May 31, 2008
May 22, 2008
Amending Probate Papers
Sometimes you file papers to open an estate, and then new information appears. Consider a recent case I had -- decedent left four adult children, but the executor (decedent's daughter) was unsure whether decedent had also adopted three other minor children (her wards) prior to her death.
We opened the estate, listing the adult children but not the minors. Later we learned that the minors had indeed been adopted by the decedent. Now what?
To fix this scenario, I prepared and presented to the court a number of documents, including:
1. A Petition to Admit Will with respect to Omitted or Unnotified Person: Under Illinois law, you have to give certain notice to heirs once an estate is opened. This notice must be given within 14 days of the entry of the initial order admitting the Will to probate. Obviously, since we didn't know about these "new" heirs, we didn't do that. We therefore had to file this petition (available as a PDF here), and I must now give notice to the minor children.
2. A Petition to Amend Heirship: The judge previously decided the decedent's heirship based on the executor's affidavit. This affidavit was incorrect, so I also petitioned the court to allow us to file a NEW affidavit of heirship, and to add the three minors as heirs. The previously-entered order declaring heirship was thrown out, and the new order (showing all 7 children) was entered.
It's unlikely that you'll encounter a situation exactly like this one, but most attorneys WILL encounter a situation where a change needs to be made to previously-filed probate documents. The key is to present the judge with all of the relevant facts, so that he or she can help you work through a solution.
May 19, 2008
Huck Finn and Holographic Wills
I'm rereading Mark Twain's The Adventures of Huckleberry Finn, which is great fun. In Chapter 25, Huck and Jim's traveling companions, the scam artists known as the Duke and the Dauphin, impersonate the brothers (Harvey and William) of a recently deceased rich man named Peter Wilks. But before that, in Chapter 24, we learn a little about Peter Wilks' estate plan:
"[Peter Wilks] most desperately wanted to see Harvey -- and William too, for that matter -- because he was one of them kind that can't bear to make a will. He left a letter behind for Harvey, and said he'd told in it where his money was hid, and how he wanted the rest of the property divided up.... And that letter was all they could get him to put a pen to."
As I've said before, hand-written Wills are perfectly fine in Illinois, but all Wills have to be witnessed by at least two witnesses. If a hand-written letter like this was found in the case of an Illinois decedent, it would not be considered a valid Will, even if it clearly indicated the decedent's wishes. Why? Because the stakes are so high (involving the distribution of all of the decedent's property), the proof required for a valid Will is equally high.
May 18, 2008
EIN PDQ FAQ
I was hoping to have a new podcast up today, but technical difficulties -- my microphone isn't working -- have prevented that. I'll try to get the problem fixed, but thought I'd address the "taxes" part of my Death & Taxes mandate by discussing EINs.
What does EIN stand for?
Employer Identification Number.
Why might I need an EIN in the estate or trust context?
Because the estate or trust you are handling is a tax-paying entity.
What does the EIN do?
It's like a social security number for entities. In the estate or trust context, you can use an EIN to open a checking account. It's also the number you would use to file income tax returns for (to take a couple of examples) the John Smith Trust or the Estate of John Smith.
Hold on a second. Estates and trusts have to file income tax returns?
In some cases (where they earn a certain amount of income). Think of it this way: if income is being earned, the IRS wants it attributed to someone (or some entity). If John Smith dies on April 15, 2007, what happens to the income earned on John Smith's property AFTER that date?
I have a living trust. Do I need an EIN?
Not so long as you are still acting as the trustee of your own living trust.
Where do I get an EIN?
The easiest place to get one is online, here.
What information will I need to get the EIN online?
What a great question, one that the IRS should address on its site. If you are getting an EIN for an estate or trust that you are handling, you should have the decedent's information (SSN, full name and address). You'll also need to give your SSN, full name and address.
Can my attorney or accountant get the EIN for me?
Yes, but you'll have to give him or her authorization to do so by filling out an SS-4 form.
May 8, 2008
Intentional Interference with an Inheritance, and the Ellis Case
Besides an action to contest a Will, a frustrated beneficiary may attempt to proceed with a tort known as "intentional interference with an inheritance." In some cases, this may be the ONLY way in which the potential beneficiary can proceed.
In the Nemeth case (425 N.E.2d 1187), for instance, the decedent's stepdaughter (not an heir of the decedent) filed an intentional interference with an inheritance action against her step-sister because a successful Will contest would have done her no good.
A number of cases have followed, trying to explain the limits and ramifications of the tort. A recent case involves the estate of a woman named Grace Ellis (found here as a PDF). The case was brought by the Shriners Hospital for Children, beneficiaries under a previous Will, against a man named James G. Bauman (who was named as sole beneficiary and executor under the Will that was admitted to probate). Ms. Ellis evidently died in 2003, but the Shriners took no action to contest anything until 2006. Maybe their itty-bitty cars were in the shop all that time? Or (more likely), perhaps the Shriners had no idea that they were named as beneficiaries in a previous Will.
Anyway, the Shriners file their suit, making the same sorts of allegations as you might see in a Will contest (lack of capacity and undue influence). But, of course, they can't file a Will contest, because Will contests must be filed within six months after the Will in question was admitted to probate.
Can you use the intentional interference with inheritance tort to get around the six month period, since it isn't a Will contest? No, says the court.
May 5, 2008
Wills with Testamentary Trusts
I usually talk about estate planning in terms of two different approaches:
Simple: having a simple Will, where you give away all of your property outright
vs.
More involved: having what's known as a pourover Will and a separate living trust. You give your property away in your living trust -- you leave it to a trustee, who holds it for one or more beneficiaries
But there's also a middle way, which involves having only a Will, but incorporating trusts into that Will. This is known as having a Will with a testamentary trust. What's the drawback to this approach, and why isn't it more popular?
Well, when I talk about the advantages of a living trust, I address 5 of them in particular:
1. Probate avoidance
2. Control
3. Creditor protection for beneficiaries
4. Privacy
5. Estate tax minimization
If you create trusts under your Will rather in a separate document, those trusts can't be funded during your life (since your Will has no effect until death). As a result, you will need a probate. Your beneficiaries also don't get privacy, since the trust information is all located in your Will, which is a public document. But the other three advantages still exist.
