Ads for Cremation Society of Illinois, J.G. Banks

1. Cremation Society of Illinois.  Last Sunday (May 15, 2005), The Chicago Tribune had an advertisement for Cremation Society of Illinois.  The ad featured a young doctor (wearing scrubs, with a stethoscope around his neck), and featured the following copy:

"I see it all the time - no living will."

If recent events have made you rethink the importance of a living will, we can help.  Dealing with difficult issues is something we do every day, so we can give you expert guidance and keep you from making uninformed decisions.  We'll be happy to answer any questions regarding living wills and preplanning cremation services.  Call us today to request your free living will.

This ad troubles me for a couple of reasons.  To begin with, I'm a little bothered that the Society seems to be attempting to engage in the practice of law -- note the references to "expert guidance," and to the fact that they will "be happy to answer any questions regarding living wills."  My bigger problem is that they are dispensing bad advice.  As I've discussed previously,...

-Living wills apply to only one very specific situation (see this post);
-A health care power of attorney is a much better solution for end-of-life decisions (see this post); and
-According to two experts in the area of bioethics, "[t]he living will has failed, and it is time to say so" (see the end of this post).    

The Society is obviously seeking to appeal to people who followed the Terri Schiavo case, and to use the offer of a free living will to open discussions about cremation.  I have no problem with that in theory.  But the fact that the ad's legal advice is faulty makes me suspicious -- if the Society's "expertise" about cremation is similar to its expertise about living wills and other advance directives, its customers are in big trouble.

2. J.G. Banks' Secrets of Probate Profits.  The front section of this morning's Tribune features a full-page ad from J.G. Banks, who is referred to as a "legendary probate investor."  Mr. Banks is giving seminars in the Chicagoland area next week, to discuss his "Secrets of Probate Profits."  The idea appears to be that savvy investors can purchase real property owned by probate estates at deep discounts, and then flip this property for a hefty profit. 

The concept of buying properties in probate seems to be rising in popularity.  I am the administrator of a probate estate in Will County, and within five days of opening the estate, I was contacted by three separate investors seeking to purchase the decedent's house.  The appeal of this arrangement is that the sale can be completed quickly, without the need to pay a realtor's commission. 

But is this type of arrangement a good deal for an investor, or for an estate's beneficiaries? 

-For an investor, I suppose that you could make a fair amount of money by targeting certain probate estates, and offering up-front cash and a quick sale in return for a discount on the fair market value.  Of course, while Mr. Banks says that such a sale involves "helping beneficiaries settle the estate by purchasing its assets," some might view the practice as ethically suspect, since the type of people willing to accept less than fair market value for an estate's property are either ignorant of the law (see below), or desperate, or both. 

I guess my main question is, What does Mr. Banks bring to the table?  His ad states that "few people know how to find and purchase property from an estate."  Does the seminar focus solely on how to find probate estates that may own real estate?  If so, I can save you the time and trouble of attendance -- you can find these estates by:

(1) reading the obituary section of your local newspaper,

(2) reading the claims notices placed in your local legal periodical by attorneys for recently opened probate estates (in Chicago, this periodical is the Chicago Daily Law Bulletin); or

(3) visiting the local courthouse, and checking to see whose Wills have been filed recently (after a person dies, his or her Will must be filed with the local clerk).

You can then check at the courthouse to see if a probate estate has been opened for a decedent, and obtain names and contact information for the probate estate's executor/administrator and beneficiaries.  This will also usually tell you if the decedent owned real estate.

-For an estate's beneficiaries, the benefit strikes me as almost non-existent.  Mr. Banks states that "most beneficiaries want their money quickly," which is certainly true.  But he goes on to say that "[f]ifty dollars today is a lot better than the promise of $100 sometime off in the future," which strikes me as a fairly ridiculous statement on any number of levels. 

To begin with, probate estates are not typically administered over a 10-year or 20-year period; instead, we're usually talking about 1 year or possibly 2 years of administration.  If you'd prefer to have $50 now rather than $100 in a year, then you might want to spend some time learning about the concept of "the time value of money."

More importantly, probate doesn't really allow for an immediate distribution of property to a beneficiary.  In most cases, distributions aren't made from an estate until all debts and expenses are determined and paid, and this part of the process takes about six months from the date the probate estate is opened.  Given the fact that you aren't going to receive your money for six months anyway, why not place the property on the market with a realtor, and try to sell it for its fair market value?

I would also add that executors and administrators owe certain fiduciary duties to the beneficiaries of an estate, and that selling estate property at a discount would seem to me (absent other compelling facts) to be a violation of these duties.  That's why I didn't sell the house in the probate estate I'm administering to any of the investors who contacted me -- their offers (none exceeding $100,000 for a house valued at about $160,000) were simply unacceptable.

Comments

[CB]

This is really informative commentary. I'm in Texas and I just got a mailer from this guy. I have been a real estate investor for a few years and I deal with properties in probate.

I already know how to find the properties but I will probably attend his seminar for curiosity sake.

For an estate's beneficiaries, the benefit depends on the condition of the home and a few other factors. If the home has mortgage to pay and the estate doesn't have the money to pay the mortgage, its better to sell quickly for a lower price and get something intead of losing to to the bank in foreclosure.

If the home is in poor condition, maybe the decedant didn't have the money or gumption to keep the house in good shape. They might have a house that needs 10's of thousands of dollars in repairs and no money in the estate to pay for it. I've purchased homes that had been release from probate two and three years later, after they had listed it with a realtor, fbso, ect. but it never sold because of the poor condition. Believe me those people were excited to finally be rid of the house and the responsibility.

[Joel S.]

CB-

Thanks for your comments. I'd be interested to hear about your thoughts regarding the seminar.

I think your point about repairs is a good one, but I think that the condition of the house has to be built into the fair market value of the house. For instance, a house in bad shape may be worth $40,000 or $50,000 less than a similar house in the same area that's in good shape. If an investor wants to buy for (let's say) $180,000, then put some money and/or work into the house and resell it for $220,000, and can do so successfully, I have no problem with that. I have a little more of an ethical problem where a house is worth $180,000 (even with its deficiencies), and an investor is able to convince the beneficiaries to sell for $100,000.

[El]

Thank you for this very helpful info...As a realtor, I was intigued by this JG Bank's seminar on Probate Properties. You gave me what I needed to know.

[Leonard]

Thanks for the article. Saved me a lot of time and money.