Death and Taxes - The Blog

Illinois Estate Tax Forms

This page includes helpful links to Illinois estate and generation skipping tax forms and instructions.  There's even an estate tax calculator (here).

Thanks to John Ahern on the ISBA Transactional Law Listserv for pointing this out.

Professor Langbein on Connecticut Probate

There's a probate-related controversy beginning to brew in Connecticut.  Noted Yale Law School Professor John H. Langbein fired the first shot in this October 23 article from the Hartford Courant.  (Actually, the shot was fired even earlier -- the article was based on Professor Langbein's October 7 testimony to the Connecticut Legislature Committee on Program
Review and Investigations.) 

For those who believe law school professors are masters of obfuscation, consider this passage:

Try not to die in Connecticut. If you are a person of means, you should - late in life - establish your domicile in some place such as Florida or Maine or Arizona that has a responsible probate system. You can still own a Connecticut home and spend plenty of time here. Indeed, if you place title to your Connecticut home in a Florida trust, your trustee can even transfer the house after your death without going through Connecticut probate.

And then, later on:

Connecticut probate is a national scandal. Our bad reputation is longstanding. More than 50 years ago, Professor Thomas Atkinson of New York University, then the leading American authority on the field, wrote that "Connecticut is just about at the bottom of the list so far as its probate court system is concerned."

I move in national trust and estate circles, where Connecticut probate is routinely discussed as a disgrace. For estate planning professionals and law professors, Connecticut is the poster child for how not to organize probate courts.

Interestly enough, at least one Connecticut politician defended the organization of the probate courts before the exact same committee on the exact same day (see this article).

Simultaneous Deaths and Morbidity

Being an estate planner means that you sometimes are placed in the position of being a little morbid.  It goes with the territory, so please don't be offended when your estate planning attorney asks where your property should pass if you and your entire family are wiped out in a plane crash/car accident/natural disaster/bear attack/etc.

One issue related to the above involves simultaneous death.  Let me give a factual scenario:

Mr. and Mrs. Rork (Illinois residents) go on a plane trip with their two children.  The plane crashes -- everyone dies immediately.

How does the property of Mr. and Mrs. Rork get distributed?  That depends on whether they had estate planning documents that define survivorship. 

If the Rorks didn't have estate planning documents that define survivorship, then the "Simultaneous Deaths" provisions of the Illinois Probate Act apply (these provisions are found at 755 ILCS 5/3-1 et seq.).  Essentially, you treat each spouse as the survivor with respect to his or her own property, and joint property is split 50-50.  Presumably Mr. Rork's property would pass to his family, and Mrs. Rork's property would pass to her family.

If the Rorks did have estate planning documents that define survivorship, those documents control.  In most cases I use language saying that a beneficiary must survive by 30 days in order to take under a Will or trust.  Why?  Consider the problem if Mrs. Rork is the sole survivor of the plane crash, but then dies one day later (and assume that both Rorks died intestate).  The "Simultaneous Deaths" provisions wouldn't apply (death wasn't simultaneous); as a result, all of Mr. Rork's property would pass to Mrs. Rork via intestacy, and all of Mrs. Rork's property (including anything inherited from Mr. Rork) would pass only to Mrs. Rork's heirs (parents, siblings, etc.).  That outcome isn't really fair to Mr. Rork's heirs, is it?  (Note that this issue arose in the infamous case of Janus v. Tarasewicz, which involved newlyweds who ingested Tylenol capsules laced with cyanide.)

I also include a "contingent gift" provision in each trust I draft, stating how property should pass if no immediate beneficiary is living.  I usually suggest as a default that such property pass 1/2 to each spouse's heirs, so that the families of both spouses are treated equally.

Planning for an Inheritance

Kelly Spors has an interesting article in today's Wall Street Journal entitled "Don't count on getting an inheritance" -- it's available online here.  The title says it all -- for purposes of your financial planning, there are simply too many "ifs" involved in accounting for a potential inheritance.  The safer approach is to be conservative in your calculations; the safest (and sanest) approach is to view an inheritance as a windfall (i.e. somebody else's money), and to exclude it from your financial planning. 

Mortgage Foreclosure Alternatives

Last week I attended a seminar that covered various real estate topics, including "Alternatives to Mortgage Foreclosure."  A couple of interesting facts from that presentation:

1. The #1 cause of mortgage foreclosures is death (of one of the borrowers or otherwise).

2. Lenders hate foreclosures almost as much as borrowers do -- it's expensive and inconvenient for a lender to have to take over a property via a court proceeding, maintain it, and then sell it.  Lenders are in the lending business, not the real estate business.  As a result, it is possible to work with your lender to avoid foreclosure.  The key is this: You have to contact your lender about a problem as soon as possible.  Unfortunately, too many people fail to do this; instead, they think they'll be able to catch up on their payments, or they just deny that a problem exists.

As a probate attorney, I encounter a lot of situations where an estate owns property subject to a mortgage.  My first call is always to the lender, to (a) apprise them of the death and (b) assure them of my availability if there are any problems.  I then try to get the property sold as soon as possible so that the mortgage can be paid off.

Corporate Trustee Succession and Trust Administration

One of the advantages of a trust is that the trust document should (if drafted correctly) resolve most questions of trust administration.  When a trust beneficiary asks me "does the trust allow me to do X," I can usually answer their question by reviewing the provisions in the document. 

For instance: what if the beneficiary wants to remove the current trustee of the trust (a corporation) and designate another corporation as trustee?  Most trust documents will tell exactly who has the power to remove a trustee and/or to name a successor trustee.  Typically, this is a power vested in the beneficiary or the trustee itself. 

If the beneficiary does have a removal power, the issue becomes one of procedure -- how is the current trustee removed and a new trustee appointed?  This question relates to what the trust document requires as well as what the current and new trustee need.  (For instance, before accepting the job, a new trustee will usually want the beneficiary to sign a formal approval the previous trustee's actions.)

What if the trust document doesn't allow the beneficiary to remove a trustee or appoint a successor?  In that case, the trustee can sometimes be prevailed upon to step down and name another trustee to do the job -- most trustees (corporate trustees especially) don't like conflict, or an unhappy beneficiary.

Scary Estate Planning and Probate Stories, Part 5

Since Halloween is next Monday, I thought I might tell some true-life tales of estate planning and probate horror.  Some details have been changed to protect the identities of the participants.

Rosie O. wanted to be a good sister.  When her mother died intestate and a widow, she went along with her sister Anna's plan to act as administrator of the estate.  However, soon after being appointed, Anna stopped telling Rosie about estate matters, saying it was "none of your business."

Almost a year later, Anna contacted Rosie and asked her to sign some papers relating to the estate.  Rosie signed the papers without reviewing them carefully.  Only later did Rosie learn that she had signed a receipt for her share of the estate, and had also released Anna from liability for her actions as administrator.  At the same time, Rosie learned that the estate's main asset -- her mother's house -- was being occupied by Anna rent-free.  Rosie was the co-owner of the house, but would have to go to court in order to compel its sale.

Scary Estate Planning and Probate Stories, Part 4

Since Halloween is next Monday, I thought I might tell some true-life tales of estate planning and probate horror.  Some details have been changed to protect the identities of the participants.

Mrs. Felder, an elderly widow, decides she wants to make a Will.  She enlists the help of her good friend Doug, who is an immigration attorney.  Mrs. Felder doesn't have any family, so she decides to leave all of her property to charity.  But which charity?  Mrs. Felder gives Doug a list of charities to take in equal shares, including the usual suspects (Art Institute, the Symphony, the Humane Society) and "The Pet League of Chicago."  Doug prepares the Will according to the list; Mrs. Felder executes it and then (years later) dies.

When the attorneys are brought in to probate the Will, they discover that there is no such charity as "The Pet League of Chicago."  Litigation ensues, as a number of pet-related charities seek to get a portion of Mrs. Felder's estate.

Scary Estate Planning and Probate Stories, Part 3

Since Halloween is next Monday, I thought I might tell some true-life tales of estate planning and probate horror.  Some details have been changed to protect the identities of the participants.

Mr. Lenek and his wife (Michigan residents) executed Wills -- prepared by a well-known law firm -- when they were in their late 60's.   About fifteen years later, Mr. Lenek was in very bad health, and his wife asked their grandson (an exceedingly skilled estate planning attorney) to review the Wills.  The grandson quickly noticed that Mr. Lenek's Will had not been properly witnessed -- the law firm had had only one witness present at the signing.  If Mr. Lenek had died with this Will in effect, the Will would have been invalid.  Luckily, Mr. Lenek was healthy enough to execute another Will, which was witnessed properly.

Scary Estate Planning and Probate Stories, Part 2

Since Halloween is next Monday, I thought I might tell some true-life tales of estate planning and probate horror.  Some details have been changed to protect the identities of the participants.

Mr. Smith went through an exceedingly messy divorce with his first wife.  (Among the first wife's allegations: that Mr. Smith had pretended he was receiving treatment for cancer -- which he really didn't have -- so that he could spend Christmas with his mistress, who later became his second wife.)  Whether due to karma or something else, Mr. Smith actually wound up contracting cancer years later.  While Mr. Smith hated his ex-wife, he had neglected to remove her as the sole beneficiary of his individual retirement account.  As a result, upon Mr. Smith's death, his ex-wife inherited an IRA with a value of almost $150,000.