Death and Taxes - The Blog

Do You Want To Be the Executor?

BusinessWeek online has a nice story (here) about the risks of acting as executor.  As the article puts it,

If asked to be an executor, you may feel flattered, or loath to turn down a loved one. But think carefully before accepting. Executors are entitled by law to be paid, but the work is generally tedious and time-consuming, even if you farm some of it out to professionals. Moreover, if you make mistakes, you may damage relationships with other heirs or even be held personally liable.

There are usually three hot-button areas that can cause you trouble as executor:

1. Doing your job.  This is obvious, a no-brainer.

2. Doing things in a timely manner.  I'm working on an estate matter right now where the decedents, a married couple who owned a condo in downtown Chicago, died in 2002 and 2003.  The executor just recently put their condo on the market -- it's been sitting vacant for more than three years (the executor didn't bother trying to rent it out, either).  Big mistake.

3. Keep the beneficiaries informed and up to date.  Think of yourself as working for the beneficiaries of the estate.  Give them updates at regular intervals -- ask them WHEN (and how) they want to be updated.  This is especially important if you are thinking of taking an executor's fee -- you'll need to produce timesheets showing exactly what you did to benefit the estate.

Realtors and Oak Park's "For Sale" Sign Ban

In the past, I've blogged about Oak Park's ban on "for sale" signs (here). 

I've recently spoken with two Oak Park realtors about the ban.  Both of them informed me that the realtor community in Oak Park works very hard to made sure that the ban is kept in effect.  One local realtor told me last week that, when she started working in Oak Park, she had a client (seller) who wished to display a "for sale" sign.  She was told by another realtor that she shouldn't allow such a display, because it would give her a bad reputation in the community, and other realtors might not want to work with her.  As a result, the realtor convinced her client not to display a "for sale" sign.

I find the above very troubling.  One of the reasons why the ban is still in effect, even though clearly unconstitutional, is because the individuals most active in selling Oak Park real estate have a vested interested in retaining it.  A "for sale" sign is one cheap method of advertising real estate for sale that doesn't require the services of a realtor.  If you eliminate the ability to display a "for sale" sign, you are making it more difficult to be a FSBO ("For Sale By Owner") seller.  That means more business for the realtors, and no incentive to push for a ban, even though it seems like "for sale" signs = more potential buyers becoming aware that a given property is for sale = a net plus for sellers of Oak Park real estate.

The Ethicist on Debts of a Decedent

One of my favorite parts of the New York Times magazine is Randy Cohen's column entitled "The Ethicist."  This week Mr. Cohen tackles a question about a decedent's debts (registration may be required).  As Mr. Cohen puts it, "The law requires your late sister’s estate to meet her business obligations; ethics urges you as an individual to respond to her personal obligations." His full answer is very interesting, and well worth reading.

Oak Park's Kelo Problem, Part 2

Last week I talked about Oak Park's Kelo problem.  You may say to yourself, "I understand that Oak Park likes to restrict the ability of owners of real estate to use their property, but so what?"  To my mind, there are two negative consequences to Oak Park residents:

1. Businesses have started to leave Oak Park for other localities that are more business-friendly.  If you're looking for proof of this fact, look no further than Madison Street.  If you drive through Oak Park on this street (going West from Austin to Harlem) you'll see a pretty blighted area.  But if you continue West on Madison into Forest Park, things change -- you'll see a vibrant area full of funky shops, nice restaurants, etc.  Businesses have lots of choices in where to locate -- why put up with the hassles of Oak Park when you can go to a nearby village that actually wants to help you succeed?

2. Real estate taxes in Oak Park have skyrocketed, making it hard for some residents to continue living here.  I spoke last week about the real estate owned by the village (and therefore not on the tax rolls).  This fact -- along with rampant government spending -- has created a totally expected result: skyrocketing real estate taxes.  My real estate taxes went up "only" 10%, but other residents report increases of 40% or 50%.  Or even more -- here are the property tax numbers for an Oak Park property my client sold on Thursday:

2005, 1st installment: $563.91
2005, 2nd installment: $1,976.26

In Cook County, the 1st installment always equals 1/2 of the previous year's taxes, so we know that the 2004 taxes for this property were $1,127.82.  That makes for an increase of more than 225%(!) from 2004 to 2005.  Yikes!

Oak Park has always prided itself on its (ethnic) diversity, but the net effect of its restrictions on property will quite obviously lead to a reduction in the village's (economic) diversity.  And, as this editorial makes it clear, Oak Parkers have no one but themselves to blame for this predicament.

Oak Park's Kelo Problem, Part 1

Oak Park, Illinois, where I live, has had what I call a "Kelo" problem for quite some time.  And now its residents are finally being forced to come to grips with it.

What's a "Kelo" problem?  The name comes from the (in)famous U.S. Supreme Court opinion in Kelo v. City of New London (125 S. Ct. 2655 (2005)).  Kelo involved an attempt by the city of New London, Connecticut to condemn ("take") privately owned real estate so that the property could be redeveloped.  The Supreme Court ruled -- to the dismay of lots of people -- that New London's actions did not violate the Fifth Amendment to the Constitution, which states in relevant part that private property shall not "be taken for public use, without just compensation."  The question in Kelo was whether the planned development of the property -- to create things like a resort hotel, conference center, office space, and residences -- really was for public (as opposed to private) use.

The Supreme Court's decision in Kelo -- that the development was for public use -- strikes me as wrongheaded on a number of levels, but I'm more interested in (and troubled by) Kelo as an example of the overexaggerated role of government in the development of real estate.  The idea behind New London's actions in the Kelo case is that government should be actively controlling and planning the usage of the property within its boundaries.  This is certainly a belief shared by the village of Oak Park -- and many of residents.  Consider the following:

1. Oak Park's village code attempts to ban "for sale" signs from appearing on private property.  I say "attempts" because, as I discussed here, this provision is clearly unconstitutional.  That being said, the provision is still on the books and (more importantly) still adhered to by Oak Park residents and realtors -- there are no "for sale" signs on private property in Oak Park.

2. Oak Park recently banned smoking in all restaurants.

3. The village of Oak Park often seeks to control which businesses come in to Oak Park.  The most recent example involved Oak Park telling Lane Bryant that it is a "niche" business, one that doesn't fit the "kind and quality" of shops desired for the building it wanted to occupy.  This story was picked up nationally and proved quite embarrassing, as some folks saw it as evidence that Oak Park hates fat people (see this blog, for instance). 

4. The village of Oak Park owns a LOT of real estate, and its portfolio continues to grow.  The village has just purchased the Colt Building at 1125-33 Lake Street, and may also purchase the building at 1145 Westgate.  The price tag?  Just under $5 million for the Colt Building alone.  The reason given by the village for the purchases?  According to its press release (pdf here), the purchases "could mean more flexibility in determining how downtown will look in the future."

5. The village appears to use its zoning powers as a sword rather as a shield.  Consider this language from the village's website on planned developments:

A Planned Development (PD) is a special process for approval of larger developments within the Village. An applicant for a PD typically is seeking relief from some aspect of the Zoning Ordinance such as height or set back requirements. The applicant must demonstrate that the Village will receive compensating benefits in return for zoning relief.

(Emphasis in the original) 

Removal of an Executor/Murder Suspect

According to this article, Constance Oxley died of a gunshot wound on July 10. Ms. Oxley's husband, Stephen Bolesky, is now acting as the executor of her estate, but there are whispers that Mr. Bolesky will be charged with his wife's murder.  As a result, Ms. Oxley's family wants Mr. Bolesky removed as executor.

In Illinois, I'm not sure if that would be possible.  As I described in this post, there are a number of reasons why an executor can be removed.  One of those reasons is "the executor has been convicted of a felony," but that hasn't happened yet in this case (Mr. Bolesky is only rumored to be the subject of a grand jury investigation).

One possibly successful argument relates to a catch-all provision in the Illinois statute, that an executor can be removed because he "is incapable of or unsuitable for the discharge" of his duties.  The basis in this case could be either that (1) according to the attorney for Ms. Oxley's family, Mr. Bolesky is being treated at a Rutland psychiatric facility, or (2) the possibility that Mr. Bolesky will be charged with his wife's murder makes him unsuitable to act as executor. 

If I was acting as the judge in this case, I'd still be uncomfortable with removing Mr. Bolesky at this time.  Right now, he is under suspicion, nothing more.  If Mr. Bolesky is actually charged with a crime, then I could understand his removal (presumably he would be so busy with his own case that he wouldn't have time for handling his wife's estate), but until that happens, I think Mr. Bolesky should be allowed to stay on the job. 

Ronald Lipman on Pooled Trusts

Ronald Lipman is a Houston-based attorney who writes a column for the Houston Chronicle.  Yesterday's column contained the following question from a reader:

Q: We have three children. Our oldest child is in college and will be 21 years old this year. The second child will turn 18 in the next year and will soon be going to college. Our youngest child is 13.

If my wife and I die, there are plenty of assets to care for them and see to their college educations.

How do we ensure that our estate stays intact until our youngest completes her education? At some point after she does complete her education, distribution of the assets to each of them would be appropriate.

I addressed a similar issue -- making fair distributions to children with a large range in ages -- in a post last year about Rupert Murdoch.  The key is to keep all assets "under one roof" (in a single pot trust, or what Mr. Lipman calls a pooled trust) until the last child finishes his or her education.

An Estate Should Be an Open Book

Nothing gets administrators, executors, and trustees in more trouble than not responding to legitimate requests for information -- about their actions, trust or estate assets, expenses paid, etc.  This case -- involving a court-appointed attorney acting as administrator of the estates of a husband and wife who died in a murder-suicide -- is, from an administration perspective, par for the course.  My advice to fiduciaries is, BE OPEN.  If beneficiaries have questions, answer them.  Even if beneficiaries don't have questions, go out of your way to keep everyone "in the loop."  Provide what the law requires in terms of inventory and accountings, and then provide more. 

Ken Lay and Claims Priority

This law.com article discusses an attempt by the estate of Enron founder Kenneth Lay to wipe clean Mr. Lay's criminal record.  The estate's lawyers...

cited a 2004 ruling from the 5th U.S. Circuit Court of Appeals that found that a defendant's death pending appeal extinguished his entire case because he hadn't had a full opportunity to challenge the conviction and the government shouldn't be able to punish a dead defendant or his estate.

The last three words of the above passage -- "or his estate" -- don't really make sense to me from a probate perspective.  As the article notes, the government plans to try and collect $43.5 million from Mr. Lay's estate as part of the estate claims process.  And I can't see any reason why they shouldn't be entitled to do so. 

The bigger issue is that, as the article puts it, "[t]he government... would have to compete with other litigants, if any, also pursuing Lay's estate."  How does that work?

I talked a little about the claims process in Illinois in this article.  To update what I said there:

Section 18-10 [of the Illinois Probate Act] sets forth a classification system for claims, from first class through seventh class.  First class claims have the highest priority -- this class includes funeral and burial expenses, expenses of administration, and statutory custodial claims.  "Debts due the United States" are third class claims in Illinois.

Two concepts are at work here: (1) all claims of a given class must be paid before moving to the next class of claims and (2) if the amount of property available to pay claims of a given class cannot pay all such claims in full, then the claims will be paid on a pro rata basis.  To illustrate, if Mr. Lay were an Illinois resident with an estate of $200,000, and the first class claims total $200,000, then only those claims would be paid (claimants with second class or lower claims -- like the U.S. Government -- wouldn't get paid at all).  If we change the above hypothetical so that the estate contains $500,000, then all first class claims would be paid, and $300,000 would remain for second class claims (which are surviving spouse and child's awards, discussed here).  If those claims are also satisfied and money remains in the estate, then -- and only then -- could the government get paid as a third class claimant (after proving its case, of course).

Putting Together Your "Bye-Bye" File

This is a nice article about a man named Jess Doll and his "Bye-Bye" file, which contains information his survivors will need upon his death.  I think this is a good idea, and something you can do without hiring an attorney.  I'd suggest that the file contain, at a bare minimum:

-your estate planning documents (originals or copies; if copies, you should leave a note about where your originals are kept)

-a somewhat current list (updated once or twice a year?) of your assets, including things like retirement benefits and life insurance

-contact numbers -- who should be informed of your death?

-documents (formal or informal) setting forth burial and funeral instructions

-if you feel so inclined, a "letter of affirmation, or blessing," as mentioned in the article

Do any readers have other ideas about what such a file should contain?