Death and Taxes Blog

The New York Post has the details, here.

This is an interesting article about how the bad economy has made people more aggressive in pursuing unclaimed property. In most states, unclaimed property is accessed via the state's treasurer -- that's the case in Illinois as well (go here for the state's site).

And, as the website mentions, the property might not be just in your name -- check for deceased relatives as well. However, the article is right to mention that you'll want to do a cost-benefit analysis to determine whether it's worthwhile to collect the property. I am working with the Illinois state treasurer on two estates involving unclaimed property, and let me just say that it's a lengthy process (not that I'm blaming them -- they don't want to be in the position where they pay the wrong people). You may need to present a small estate affidavit or even open a probate estate for a deceased person. And you also may need to present evidence of the decedent's address. All of this means you'll want to make sure that you'll be making money on the transaction, not losing money.

The Velvet Touch is a Michigan chain of adult bookstores/massage parlors/etc. The owner and founder, Terry M. Shoultes, passed away in 1998, but the battle over his estate is still continuing. Here is the full story.

Isn't it funny how some people seem to be magnets for probate disputes? Anna Nicole Smith had a dispute during her life (over her husband's estate), and now there's a dispute following her death. The same is true of Nina "Little Sweetie" Wang. I blogged here about the controversy surrounding her husband's death. Now there is a fight over the estate of "Little Sweetie" herself. This article has the juicy details. The dispute pits Mrs. Wang's father-in-law, Wang Din-Shin, against "Tony Chan, a married feng shui master who claims to be Ms Wang's secret lover, [and who] says she wrote a new will in 2006 in which she named him as the sole heir."

In addition to representing parties in probate and probate litigation proceedings, I also am a mediator. I offer mediation services at my regular hourly rate ($275, payable equally by the parties), as a (hopefully) quicker, less expensive alternative to full-fledged litigation.

We all crave simplicity, don't we? I know I do, and I know I sometimes get frustrated when things seem complicated just for the sake of being complicated. But I also recognize that, sometimes, things are complicated because that's the way life is.

The Five Wishes advance directive is an attempt to simplify matters, by allowing a person to dictate "how you want to be treated if you get seriously ill and unable to speak for yourself." It's a do-it-yourself document, one not written in legalese. But, as Ray J. Koenig III and MacKenzie Hyde make clear in their article in this month's Illinois Bar Journal (to be found here), users of the Five Wishes need to be careful what they wish for.

Some of the problems addressed in the article:

-Five Wishes creates ambiguity, as it doesn't define important terms like "health care professional"

-Five Wishes blurs the line between an agent under a health care power of attorney and an agent under a property power of attorney. Five Wishes allows you to delegate some property-related activities to your (health care) agent.

-Five Wishes allows a principal to essentially name a doctor as his or her agent, which is contrary to Illinois law.

-Five Wishes is ambiguous regarding when the agent takes over in the decision-making process.

The authors make it clear that Five Wishes has some value as a tool to stimulate dialogue about hard-to-discuss issues, but there are obviously some very major concerns about whether Five Wishes should be used in addition to or in place of Illinois powers of attorney.

I've taken the leap to Twitter, even though I'm fairly suspicious about such things. You can find me here, if you're interested (and believe you me, I'll understand if you aren't). I occasionally tweet about estate planning and probate, although it's difficult to say anything of substance in 140 characters, and my mind wanders to topics such as family, film, architecture, the piano, genealogy, and baseball (to name a few). I do often include links to new blog posts.

Schoenmeyer Law Office, P.C., my firm, is also on Facebook -- here.

Here is an interesting summary of a California legal malpractice case, Chang v. Lederman. The case involved an attorney named Gregory Lederman, his client Raphael Schumert, and Mr. Schumert's girlfriend (later wife), Myung Chang.

Chang alleges in her complaint that in February, 2005, Schumert instructed Gregory Lederman, as his attorney, to revise the trust to provide for distribution of the entire estate to Chang, with the exception of $250,000 to be distributed to his son. According to the complaint, Lederman refused to do the amendment stating that an Etti Hadar would sue Schumert and also advised that a psychiatric evaluation be done before any changes be made to his estate plan. Schumert died on March 17, 2005.

Estate planning is a big area for legal malpractice claims. Many of these claims are brought by beneficiaries of an individual's estate plan (as the article mentions, the privity of contract required in other malpractice actions is relaxed for an action against an estate planner).

It's hard for me to fault Mr. Lederman here. It's one thing to say "I as beneficiary am receiving less because you the attorney screwed up my husband's Will." But Ms. Chang appears to be saying "I as beneficiary am receiving less because you the attorney weren't sure if my husband was competent to sign his Will." Ms. Chang is essentially asking Mr. Lederman to put her interests above the interests of his client, Mr. Schumert. Put another way (in the article):

To extend liability in favor of a beneficiary who alleges that the testator meant to provide for him would place counsel in the awkward position of being sued for doing what a testator had actually asked him to do.

On a slightly different topic, the words "psychiatric evaluation" caught my eye in this article. I'm not a doctor in real life, nor do I play one on TV. But I do view it as my duty to make sure, in my own possibly clumsy way, that a client seems competent to execute his or her estate plan.

Let me give an example: a few weeks ago I met with a potential client. The meeting took place at his niece's home, where he lives. The niece was also the one who set up the meeting. The potential client was in bed for the entire meeting, seemed disoriented, and didn't seem to know about or be interested in signing a Will. While he seemed to want to leave his property to his niece (once I explained his options to him), I didn't feel confident that he understood what he owns and what would happen to that property at his death. So, I decided to pass on this potential client. I am certainly not saying that the niece did anything wrong, or that the potential client was totally incapable of signing a Will. Rather, I was saying that I wasn't going to be the one to draft it.

During a recent discussion on a ISBA (Illinois State Bar Association) listserv, the case of Society of Lloyd's v. Estate of McMurray case (available here) was brought to my attention. Given my interest in claims against non-probate property, it seems worthwhile to discuss it.

To begin with, this is a Federal (7th Circuit Court of Appeals) case. The issue is whether Society of Lloyd's can extra payment of a judgment from a decedent's trust. The order of events:

-9/11/96: deadline for payment of premium by McMurray
-9/18/96: McMurray creates (and later transfers property to) a living trust
-8/28/97: McMurray dies
-3/11/98: Society of Lloyd's obtains a judgment against McMurray in English court

The court's decision here seems pretty clear -- they use the language of the living trust to find that Society of Lloyd's is a valid creditor of the trust:

The trust instrument provides... in crystal-clear language, that at McMurray's death "the trustee shall pay from the residuary trust estate without reimbursement my legally enforceable debts."

Equally clear is the fact that the court does not hold trust creditors to the same limitations period as probate creditors:

Although the judgment is no longer legally enforceable against McMurray's estate, that fact is irrelevant for purposes of enforcing it against the trust.

What's tricky for estate attorneys, though, is the issue of what would happen if the trust did NOT allow for the payment of legally enforceable debts, or for the payment of any debts at all? Could the trust be forced to pay in that situation? If the answer to that question is no, then why would we as attorneys include language allowing the payment of debts in the trusts that we draft?

At bare minimum, I think it makes sense to draft a trust debt payment provision with specificity regarding when the debt is no longer considered valid. For instance, you could say that claims against a trust are only valid if they comply with the claim filing requirements of the Illinois Probate Act.

Last week I wrote (here) about the question of "who's the client?" in the estate planning context. As one reader pointed out to me in an e-mail, this issue also arises in the estate administration or probate context.

Let's say that you are approached by an individual who is named as Executor in the Will of John Smith. Do you as attorney represent:

-the Executor?
-the Estate of John Smith?
-the beneficiaries?
-some combination thereof?

This can be a tricky question to answer -- most model rules of professional conduct were not written with estate planning or probate in mind. However, The American College of Trust and Estate Counsel (ACTEC) publishes commentaries to these rules. Here is what ACTEC has to say on this issue (the emphasis is mine):

A minority of cases and ethics opinions have adopted the so-called entity approach under which the fiduciary estate is characterized as the lawyer's client. However, most cases and ethics opinions treat the fiduciary as the lawyer's client and the beneficiaries as persons to whom the lawyer owes some duties. See ACTEC Commentaries on MRPCs 1.2 (Scope of Representation), 1.4 (Communication), 1.6 (Confidentiality of Information) and 1.7 (Conflict of Interest: General Rule). The lawyer and the fiduciary, following full disclosure by the lawyer, may agree that the fiduciary estate and not the fiduciary shall be the lawyer's client. Such an agreement may significantly affect the extent of the lawyer's duties to the fiduciary, including the duty of confidentiality. However, such an agreement may not limit the duties that the lawyer or the fiduciary otherwise owe to the beneficiaries of the fiduciary estate.

My engagement letter and other correspondence makes it clear that the fiduciary is my client, but I also make the fiduciary consent to my reporting of any wrongdoing by the fiduciary. Still, this may not be a perfect situation, as my e-mailer points out. If there is a problem with the fiduciary, then the beneficiaries have to pay twice: they pay the fiduciary's attorney, and then they hire their own attorney to go after the fiduciary.

I've complained before about the huge backup in the Cook County Probate Court for deceased estates. This isn't the fault of the judges, who are working as quickly as they can; rather, it's a problem that has arisen because we have only four judges handling all of the deceased estates (new and old) in Cook County.

Luckily, Judge Budzinski has issued a general order aimed at helping to speed up the probate process. Recently, attorneys would have to wait four weeks or even more between filing their initial petition and getting a court date to open the estate. However, the general order (a copy of which is attached here) allows an attorney to schedule a hearing with Judge Cesario to open the estate if the attorney would otherwise not be able to get a court date within two weeks.

One of the cases mentioned at the ethics seminar I attended yesterday involves an Illinois attorney named Karris A. Bilal. Mr. Bilal was facing disciplinary action for a number of reasons. One of the reasons involved his actions with respect to his father's wife, Rachell, and Rachel's aunt, Georgia Hodges. From the ARDC Review Board's Decision:

... Bilal drafted a separate document, a Durable Power of Attorney (2004 DPOA). Bilal gave the unexecuted 2004 DPOA to Rachell, who had it executed on June 30, 2004. The 2004 DPOA gave Rachell broad powers to deal with Hodges's property, including the power to make gifts of Hodges's property and to sell real estate owned by Hodges. This power expressly included the house in which Hodges was living, which was being sold....

Bilal also prepared a living trust, similarly dated June 30, 2004, in which Hodges appointed Rachell as trustee. Rachell signed this document for Hodges pursuant to the power of attorney. Hodges's property was placed in the trust. Under the terms of the trust, the trustee was to pay the grantor any trust income or principal the grantor requested during her lifetime. Upon the grantor's death, the trustee was to give the grantor's tangible personal property to charity and distribute the remainder of the trust in equal shares to Hodges's brothers and sisters, Rachell, and Rachell's son.

Bilal also prepared a warranty deed for the sale of Hodges's home. Hodges signed the deed on July 1, 2004. Hodges was not present at the closing. Rachell signed Hodges's name to the documents signed at the closing. Bilal represented the seller at the closing and received attorney fees of $5,000. The house was sold for $240,000. Bilal did not advise Rachell concerning the proceeds of the sale of Hodges's house.

The crux of the problem here is this:

Bilal did not meet with Hodges before preparing the 2004 DPOA, the trust, or the deed. He did not attempt to determine whether Hodges had capacity to sign those documents or whether doing so was in her best interests. Other evidence presented at hearing, including testimony from Dr. Veres, indicated that Hodges had dementia as of at least January 2003 and would not have been competent to sign the documents. Bilal did not give Hodges any advice concerning the documents.

The issue goes to what I was saying yesterday. Who's the client? It should have been Hodges, but Mr. Bilal acted as though it was Rachell. For that reason, and others, Mr. Bilal is suspended from practicing law for 18 months.