Death and Taxes Blog

This is a fun topic. Are there public policy limits to how you can give away your property in your Will or trust? The answer is yes -- some obvious examples of provisions that would be struck down:

"I leave $50,000 to my son Robert, so long as he divorces his horrible wife Bonnie within one year of my death"

"I leave my entire estate to Pamela, so long as, within six months of my death, she murders the following individuals:..."

These provisions would be null and void, so Robert gets his money with no need to divorce, and Pamela gets her inheritance without having to go on a killing spree.

A recent 1st District case (an appeal from Cook County) dealt with the question of whether a specific provision should be void as against public policy. The case is Estate of Feinberg, and it's here as a PDF. Basically, Mr. Feinberg's trust left property to his grandchildren, but any grandchild who marries outside the Jewish faith (to a person who doesn't convert in one year after marriage) is disinherited. Oh goy!

This provision was held null and void, because of the long-standing Illinois rule that "testamentary provisions which act as a restraint upon marriage or which encourage divorce are void as against public policy." There is, however, an interesting dissent, which tries to distinguish between the above divorce example and this case.

Thanks as always to Patricia Brosterhous for bringing this case to my attention through her IICLE Estate Planning & Probate Flashpoints. I'll comment on some of the other cases she mentions in the next few days.

I recently wrote a post about saving time and money in probate (it's here). The real message behind all of my ideas is "get organized." And yet I have encountered a number of situations lately where there's sheer disorganization, to the point where multiple members of the same family are attempting to open a probate estate for the same person. Even worse, most of these estates are fairly small, so there's little money to spend. And yet, if you have multiple probates (or attempted probates), you have to bring in the attorneys for each court call, and then work out which person or persons will be handling the estate. It's ALWAYS better to work out these details before things get into court.

Probate has a reputation of being expensive and time-consuming. I would say that that reputation is unfair in some cases, but you still have to be careful about how the probate is handled. And there are certainly some general and specific things that you can do to save money in probate. Many of these things involve saving your attorney from having to perform some duty that you can do yourself. Here's my list:

1. Obtain waivers of notice from all heirs and legatees (beneficiaries under the Will). This can save 1/2 hour to an hour of attorney time. If waivers aren't obtained, the attorney needs to send notice to each heir and legatee of the fact that the estate has been opened. Obviously, waivers only work if the heirs and legatees are willing to sign the waivers -- in an estate with a lot of heirs and legatees, or an estate where people don't get along, waivers probably can't be obtained.

2. Prepare a list of heirs and legatees yourself (with their addresses), instead of having your attorney do it. This can save hours of work.

3. Have a "proper" Will. There's not much you can do on this front once the decedent is dead, but things go much more smoothly if the Will was drafted correctly. And that typically means "He/she got it off the internet" won't work. Most internet/software Wills that I see forget to do the simple things, like waive the requirement that the executor post a surety bond. If this isn't done, you need to purchase such a bond, which can cost from $100 to many thousands of dollars per year.

4. Present the attorney with a list of the decedent's assets, including potential values, account numbers, and how the assets were owned. Again, this saves the attorney from having to spend the time to track down this information.

5. Be careful about attorneys and other professionals. Interview more than one attorney, and make sure that you understand the extent of your attorney's experience in the area of probate, as well as how fees will be structured. Some attorneys charge hourly (that's what I do); some seem to charge a flat fee. Find this out beforehand. Other things to inquire about:

a. How work will be handled. Are there specific non-legal things you can do in order to speed the process along or save money?

b. Who will be handling the matter. Will it be the attorney? An associate? A secretary? A legal assistant? You need to know, and you also need to know whether the person is going to be responsive. If you as a potential client leave a message for an attorney, how long before the attorney calls you back?

c. Does the attorney have good working relationships with accountants and financial folks, who can sometimes handle estate issues for less money, or does the attorney expect to do all of this work himself or herself (and charge for every minute)?

None of the above should suggest that you can do all, or even most, of the probate by yourself. A good attorney will save you lots of money in the long run just by doing things the right way. I would also suggest that clients not be penny wise and pound foolish. By this, I mean that the attorney should spend some time and money at the beginning of the probate, learning about the decedent's situation and communicating with the executor and the heirs and legatees, and should charge accordingly. This is a good thing, in the long run -- the more time spent upfront, the greater the chance to avoid problems later in the probate.

I posted yesterday about an issue involving small estate affidavits.

This morning I learned that the Illinois Secretary of State's office has its OWN small estate affidavit form, which it prefers that you use if you are trying to change the title on an automobile. The form is available here as a pdf.

Thanks to attorney Caroline Zoes for this helpful tip!

In Illinois, you can avoid a probate if the decedent owned less than $100,000 in probate assets (that is, assets in his or her own name), and owned no Illinois real estate, at the time of death.

You can do so by presenting a small estate affidavit to the people or entities holding the decedent's assets: banks, insurance companies, IRA custodians, etc. The affidavit sets forth the facts -- that the decedent died (attaching a death certificate), that the decedent had or didn't have a Will (attaching a copy of the Will, if the decedent had one), etc. You also list the decedent's probate assets, and tell who should receive them in what percentages. The people or entities holding the decedent's assets should then distribute them as provided in the affidavit, thereby avoiding probate.

There's a small estate affidavit form in the Illinois Probate Act, but the form has a problem. Here's the relevant part:

7. (a) All of the decedent's funeral expenses have been paid, or (b) The amount of the decedent's unpaid funeral expenses and the name and post office address of each person entitled thereto are as follows:

Name and post office address Amount

(Strike either 7(a) or 7(b)).

8. There is no known unpaid claimant or contested claim against the decedent, except as stated in paragraph 7.

The issue is, what do you do in the typical small estate situation, where there are some assets and also some bills? Do those bills rise to the level of "known unpaid claimant" or "contested claim"? Can you in good faith sign this document under penalties of perjury, including paragraph 8, if you know of a potential claim? Local attorney Cary Lind has a nice discussion here (note that this is an old article -- hence the reference to a $50,000 amount rather than $100,000).

Just a follow-up/clarification on this post from a month ago. It may be implied in the post, but in an intestate case (that is, where the decedent left no Will), all that's needed is a petition to amend heirship and a new affidavit of heirship.

I would also add that a lot of the difficulty and expense (in terms of time and money) in amending can be addressed at the beginning of the process. The attorney should explain to the client what an heir is, and the client should be able to get the attorney a list of all of the decedent's heirs, with full names and addresses (and, if possible, telephone numbers).

The procedure for admitting to probate a Will executed in Illinois, by an Illinois resident, is pretty simple. A wrinkle is added if the Will wasn't executed in Illinois. A typical scenario is where a person executes a Will in another state, and then moves to (and dies in) Illinois. Can the "foreign Will" be admitted to probate in Illinois?

The answer is "yes," in the following situations:

1. The Will has already been admitted to probate in another state,

2. The Will, although executed outside Illinois, was executed in accordance with...

a. Illinois law;
b. The law of the state in which it was executed; or
c. The law of the state in which the testator lived when the Will was executed.

The rules about admitting a Will already admitted to probate in another state are found in Section 7-3 of the Probate Act. The big question here is whether the original Will can be obtained from the other state.

Section 7-4 of the Probate Act addresses the admission of a not-yet-probated Will executed outside of Illinois. Proof is easiest when the Will already complies with the execution requirements in Illinois, which are (from Section 4-3 of the Probate Act) as follows:

Every will shall be in writing, signed by the testator or by some person in his presence and by his direction and attested in the presence of the testator by 2 or more credible witnesses.

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.

A couple of things involving probate in Cook County that have changed recently (or maybe I just became aware of):

1. Fee increase. It now costs $304 in fees to open a probate estate worth more than $15,000, up from $279. The entire fee schedule can be found here (as a PDF).

2. Cover sheet. One procedural thing that needs to be done when you go to file your petition to open an estate: completing a probate division cover sheet. I don't know why it's needed, but it is -- the form is here (again, as a PDF).

Section 6-1(a) of the Illinois Probate Act requires that "[i]mmediately upon the death of the testator any person who has the testator's will in his possession shall file it with the clerk of the court of the proper county...." It's a felony (under section 6-1(b)) to "wilfully alter[] or destroy[] a will without the direction of the testator or wilfully secrete[] it for the period of 30 days after the death of the testator is known to him."

One question that recently arose in one of the Illinois State Bar Association's e-mail discussion groups is this: If you have a number of Wills of a deceased testator in your possession, must you file ALL of these Wills with the clerk of the court of the proper county? Or, if you believe that the most recent Will is valid and revokes all prior Wills, may you just file this most recent Will?

I am of the belief that you must file ALL Wills of a deceased testator, although you can obviously seek to have admitted to probate only the most recent one. The statute discusses "the testator's will," but doesn't define that term. Certain attorneys have suggested that they have the ability to decide which of the testator's Wills is THE testator's Will, and to file only that Will. I disagree on this point -- I think that a probate judge is the only person who can decide which Will (if any) is valid, and since filing comes before this determination, individuals in the possession of a decedent's Wills (whether attorneys or not) must file all Wills.

I will agree that the Illinois Probate Act could be clearer on this point -- a simple change to the statute would do it (maybe a reference to "any original will of the testator"?).

Note that confusion can also be avoided if the testator destroys his or her prior Will whenever he or she executes a new Will.

Cook County has a pretty major backup in the probate area -- four judges now handle all decedent's estates cases. That's a lot, considering that they handle new cases as well as ones that are dragging on from prior years. As a result, the timeframe for opening an estate has expanded. If I file a petition right now, I may not be able to get a court date for another 4 (or 5 or 6) weeks. Not to mention the fact that, when you go into court, you typically have to wait for an hour or more to have your case called.

If I ran the Cook County Probate Court, my solution to the above problem would be computer filing of "non-contested" estates. I'd estimate that at least 80% of all probate cases in Cook County are open and shut -- no one is contesting the Will, and everyone just wants the probate process to move along as quickly and easily as possible. In cases like that, I would allow the attorney to file all court papers to open the estate via e-mail (as PDFs). The attorney would have to indicate that the PDFs are true and correct copies of the original papers (which are in the attorney's possession).

Perhaps one additional judge could be hired to handle computer filing (review and issue orders). His or her salary could be paid by a $100 "convenience fee" charged for computer filing. It seems to me that everyone wins:

1. Non-contested estates get processed more quickly and more cheaply (you'd rather pay a $100 convenience fee than pay an attorney to sit around in court for hours at a time at $200 or more per hour).

2. The other judges are freed up to handle the contested estates, which are also processed more quickly and more cheaply.

[added 3/18/08: Another idea, based on my observation of court this morning -- a LOT of court activity involves attorneys asking for routine continuances, which are of course routinely granted. Again, if the parties agree and a judge agrees, why do the attorneys need to sit around in court -- wasting their time and their clients' money -- waiting to be heard? Can't the additional judge mentioned above handle these situations too?]

People are often upset to hear that a deceased person's debts must be paid as part of the probate process. But the dirty little secret is this: because of the laws, and the incompetence of creditors and their attorneys, you can often avoid many debts.

Let me give an example: I'm administering an estate. The decedent had a pretty big credit card balance (over $15,000) at the time of her death. There were probably 9 or 10 other debts that she owed at the time of her death (mostly unpaid utility bills).

Upon opening the probate estate, I sent notice directly to all known creditors. I also published general notice to creditors in the local newspaper. These notices are required under Illinois law, which also bars claims that are not filed within a certain period of time (usually six months after notice is published in the newspaper).

The notice period for this estate expired on February 23rd. Can you guess how many creditors filed claims prior to the expiration? Not a one, which means all of these claims are barred.

Special "praise" should be reserved for the law firm representing one of the creditors (the credit card company). My experience with them:

-I send them notice of my client's death.
-I am contacted by one of their representatives (not an attorney) about settling the debt.
-I ask the representative to fax me information about the debt (monthly statements), so that I can ascertain whether the debt is legitimate.
-I don't receive the information; when I call and tell the representative this, he becomes belligerent.
-The representative finally mails me some information about the debt, although not the information I requested. He also sends me copies of the fax cover sheets for the faxes he supposedly sent to me. Unfortunately, these sheets show that the representative was using the wrong fax number.
-This is the last I hear from the representative.

So now the claims period has expired, which means the credit card company won't be getting paid. And they have their attorneys to thank.

Drew Peterson, Chicagoland's most talkative murder suspect, is back in the news. Or, rather, his third wife, Kathleen Savio, is in the news. As you may remember, Ms. Savio "was found drowned in her bathtub shortly before the divorce settlement between her and Peterson was finalized." That's according to this article, which talks about how various relatives Ms. Savio are seeking to re-open her probate estate. (It seems like there is a battle over who should be in control of the re-opened probate estate, but that's another matter.)

When do you re-open a probate estate? When you discover property that needs to be probated. For instance, let's say that you administer a decedent's estate -- publish the correct notices, pay claims, distribute to the legatees, close the estate in court. But you then discover that your decedent had a $200,000 bank account in his own name that you didn't know about, and that never went through the probate process. In order to get the $200,000 to the legatees, you need to re-open the probate estate. The procedure for re-opening an estate is set forth in section 24-9 of the Probate Act.

Illinois has a pretty shameful history of not requiring attorneys to take continuing legal education classes. That's now changed, with some new CLE requirements. One good thing about the change is that more CLE classes, and different types of CLE classes, are being offered. Yesterday I listened in on a teleconference about new developments in Illinois probate law. I might spend the next few posts talking about some of these developments. Thanks to yesterday's speaker, Robert Hamilton, for drawing my attention to these topics.

First up is a change to the Illinois Trusts and Trustees Act. But note that this change doesn't take effect until mid-2008. Here's the provision that's been changed -- it comes in an area of the Act that lists the powers a trustee is given:

(760 ILCS 5/4.26)

(This Section may contain text from a Public Act with a delayed effective date)

Sec. 4.26. Small trust termination. To terminate the trust and distribute the trust estate, including principal and accrued and undistributed income, if the trustee determines, in the trustee's sole discretion with the consent of the recipients, that the market value of a trust is less than $100,000 and that the costs of continuing the trust will substantially impair accomplishment of the purpose of the trust.

Distribution shall be made to the persons then entitled to receive or eligible to have the benefit of the income from the trust in the proportions in which they are entitled thereto, or if their interests are indefinite, to those persons per stirpes if they have a common ancestor, or if not, then in equal shares. The trustee shall give notice to the persons at least 30 days prior to the effective date of the termination.

If a particular trustee is an income beneficiary of the trust or is legally obligated to an income beneficiary, then that particular trustee may not participate as a trustee in the exercise of this termination power; provided, however, that if the trust has one or more co‑trustees who are not so disqualified from participating, the co‑trustee or co‑trustees may exercise this power.

This Section shall not apply to the extent that it would cause a trust otherwise qualifying for a federal or State tax benefit or other benefit not to so qualify, nor shall it apply to trusts for domestic or pet animals.

The provisions of this amendatory Act of the 95th General Assembly apply to all trusts created before, on, or after its effective date.

(Source: P.A. 95‑605, eff. 6‑1‑08.)

A couple of comments:

1. I don't write much about the Trusts and Trustees Act because I don't use the Act very often. The Probate Act has provisions that apply to almost every probate estate. The Trusts and Trustees Act mostly covers problem areas -- it gives default provisions in cases where the trust instrument doesn't address an issue. But most trust well-drafted trust instruments handle these issues, and probably do so better than the Act does.

2. What's small trust termination and why is it important? Small trust termination provisions are important in cases where a trust is so small that the administration of it no longer makes much sense. Note the requirement above that "the costs of continuing the trust will substantially impair accomplishment of the purpose of the trust." If I leave property to a trustee, with my daughter as beneficiary, that's great. But what if the trust has $60,000, but it's costing $15,000 per year to administer? That probably wasn't what I intended, so this provision allows the trustee to terminate the trust and distribute it to the beneficiary or beneficiaries immediately.

Again, the key is viewing the Act as a default provision. I can set different terms for the termination of a small trust in my trust instrument, if I desire.

A few things to follow up on the Steve Fossett case:

1. Eric Zorn of the Tribune discusses the case and the law, and quotes yours truly, here.

2. Juan Antunez weighs in with a nice post here about Mr. Fossett and how Florida law deals with this issue.

3. One other section of the Illinois Probate Act applicable in cases involving individuals missing and presumed dead is section 24-5, which makes potential beneficiaries in these cases post a surety bond (essentially an insurance policy) of twice the value of the property they are to receive. This is done so that, if the person (Mr. Lazarus?) does show up alive and well, he or she can get his or her property back. If the person's probate assets (i.e. the assets owned by him in his own name) were extensive, then the cost of premiums on this bond might be pretty high.

4. Slate's Explainer column weighs in here.

Steve Fossett's Wikipedia page describes him as "an American aviator, sailor and adventurer" who "made his fortune in the financial services industry and is best known for many world records including five nonstop circumnavigations of the Earth: as a long-distance solo balloonist, as a sailor, and as a solo flight fixed-wing aircraft pilot." In other words, Mr. Fossett is a millionaire version of those folks who try to set Guinness World Records by doing the lindy hop for hours on end, growing long fingernails, and smoking 100 cigarettes at a time.

Or maybe Mr. Fossett WAS an upscale version of those folks. Mr. Fossett has been missing since September 3rd, and his body hasn't yet been found. What is a family to do in this situation? This Chicago Tribune article indicates the answer -- asking a probate court to issue an order that the individual did in fact pass away. I blogged about the portions of the Illinois Probate Act allowing this here.

I previously blogged (here) about how Cook County probate records are now accessible online. This makes it easy to check whether a probate estate has already been opened for an individual. That's important, as it can save time and money. I recently opened an estate for a deceased individual, and just received a call from an attorney who is ALSO planning to go to court to open an estate for the same individual. That's a waste of time and money that could be avoided by a quick check online. (Even better: having family members who check with each other to coordinate things like probating mom's estate.)

I am a member of the Chicago Bar Association's Probate Practice Committee. This past week, the Committee had its monthly meeting, and the speaker was Sheila Threlkeld of the Cook County State's Attorney's office. The Cook County's State's Attorney represents the interests of Cook County and the Cook County Treasurer's office.

You might ask, "why does Cook County have an interest in decedent's estates?" The answer lies in one word: escheat. "Escheat" is just a fancy word meaning that, if you die having no valid heirs and legatees, your property passes to the government. In Illinois the relevant statute allowing property to escheat is Sec. 2-1(h) of the Illinois Probate Act. You'll notice that, by "government," we usually mean the county where the property was or is, or where the decedent resided. THAT is why Cook County is potentially interested in estates.

You can't really talk about property escheating without talking about unknown heirs, which is why the State's Attorney wants to receive notice when heirship is unknown. For instance, let's say that you are handling the probate estate of a person who died single and without children. Maybe you were hired to handle the case by the decedent's friend, who doesn't know anything about members of the family. Maybe the decedent's parents survived him. Maybe not. Maybe the decedent had siblings, who are alive or who are dead but have living children. Maybe not. In some cases, you'll have to go to court and state in your affidavit of heirship that you just don't know whether the decedent has heirs. In that case, you'll want to give notice to the State's Attorney BEFORE you go to court. (This is a requirement under the Cook County Rules of Court -- see Rule 12.2(c).) The State's Attorney will take over if no known heirs appear during the probate proceeding. (The State's Attorney is being increasingly stymied by genealogy or heir search firms that try to locate unknown heirs -- for a fee, of course.)

Note that a different situation arises if you have known heirs you can't find (because you don't know where they are). Property of these types of heirs passes to the State of Illinois as unclaimed property, which the heirs can then claim if they later come forward. The State's escheat interest comes pursuant to Illinois' Uniform Disposition of Unclaimed Property Act.

Sometimes you know the heir's name and address, but the heir refuses to sign a receipt for his or her distribution. This is often the case where a decedent leaves a "screw you!" gift to someone (like "I leave my son MICHAEL the sum of $1, because he's a jerk and that's all he deserves -- HAHA"). Why would Michael want to assist with the administration of his father's estate in this situation by signing a receipt for his $1? In such a case, you can still close the estate without Michael's receipt as long as you deposit Michael's share with the Cook County Treasurer (and get a receipt from them). There's a bit more work involved -- you need to petition the court to make this deposit -- but at least it resolves the issue.

I blogged here about a horrible proposed change to the statutory custodial claims provision in the Illinois Probate Act. A slightly different change to this provision will become law in January -- here is what it says. As you can see, the changes are really a balancing act. On the one hand, the minimum payment amounts are increased; on the other hand, there's an acknowledgement that an award can and should be reduced by the benefits conferred on the caregiver (such as free housing).

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