Death and Taxes - The Blog

Billy Graham Potential Probate Controversy

Blogging is light this week with the Christmas holidays, but you may want to check out Juan Antunez's post (here) about the controversy in Billy Graham's family, over where Mr. Graham and his wife will be buried.

Seth A. Kaplan on In Terrorem Clauses

I've spoken previously about in terrorem (or "no contest") clauses, most recently here.  In this month's Illinois State Bar Association Trusts & Estates newsletter, Seth A. Kaplan reviews the Illinois caselaw on this subject.  Mr. Kaplan's conclusion:

To date, no Illinois Appellate Court has enforced an in terrorem clause against a beneficiary.

Basically, courts have gone out of their way NOT to enforce these types of clauses, relying on arguments like "the clause is against public policy".  While this is bad news for people who want to limit the ability of their beneficiaries to contest provisions of their Will, I would point out that in terrorem clauses can still serve an important function in cases involving unsophisticated beneficiaries, who don't realize that these provisions are unenforceable.

I wish there was a mechanism for essentially certifying in terrorem clauses during the testator's life, either by a court proceeding or by a visit from a neutral third party (sort of a probate arbitrator).  The judge or probate arbitrator could issue a ruling stating that he or she has examined the testator and the testator's situation, and found that the testator is acting of his or her own volition, without undue influence.  Maybe the reasons for the disinheritance could also be set forth.

Charitable Beneficiaries Play Hardball

When I was a young associate, I handled an estate involving a number of charitable beneficiaries.  Under the decedent's Will, money was also to go to a charity that didn't exist (something like the Pet Society of Chicago), which raised all sorts of questions about the decedent's intent.  Most of the other charities agreed that the money should go to another of the animal-related charities mentioned in the decedent's Will, but one charity (we'll call it ARThur's Institute) resisted.  Essentially, their argument was, "we're not going to leave money on the table -- we want a share of the money that was to pass to the Pet Society of Chicago, even if we're not entitled to it."

I was reminded of that case when I read this article, about the UW (University of Wisconsin) Foundation and the estate of Harold Mennes.  The timeline is fairly clear:

1996: Mr. Mennes executes a Will leaving most of his estate (about $800,000) to UW.  In the Will, he disinherits his daughter, Mary Ellen Jenson, from whom he was then estranged.

2000: Mr. Mennes and his daughter reconnect and are close until Mr. Mennes' death.

2001: Mr. Mennes, in a letter that was notarized and witnessed, leaves his daughter $100,000 from an investment account upon his death.

2004: Mr. Mennes dies.

Did the letter constitute a codicil (amendment) to Mr. Mennes' 1996 Will?  What about the fact that Mr. Mennes got rid of the investment account before he died?

This case was finally settled, although the UW Foundation's tactics have been criticized by the administrator of the estate.   As the article puts it:

The case highlights a dilemma for nonprofit groups: how hard to pursue money they believe is theirs. Fight too hard and they risk antagonizing potential donors, but too soft might mean they lose money for their cause.

In Terrorem (No Contest) Clauses

Bankrate.com has a nice article (here) summarizing what an in terrorem (or "no contest") clause can do for you:

The in terrorem provision, known less formally as a "no-contest" clause, is a paragraph or more of legal boilerplate aimed, as its Latin name implies, to scare off legal challenges by heirs who don't feel they've been given their fair shares of               the enchilada.

In essence, the provision states that if you contest this will or trust, you forfeit your inheritance. In fact, to continue with the spooky theme, typical language instructs the court to consider contentious heirs as having died childless before the deceased.

The article also presents some interesting differences in state laws.  Evidently in terrorem clauses are not recognized (or enforced) by Florida courts, and in a few states you can actually have your Will declared valid while you are still alive.

I previously blogged about in terrorem clauses here.

Probate, Claims and the 2-Year Bar

Juan Antunez has a nice post (here) about "Florida's unforgiving 2-year non-claim statute."  Mr. Antunez starts with a good summary of the forces at work in Florida (and most other probate statutes):

An overarching theme of Florida’s probate code (and recurring point of discussion on this blog) is the tension between basic due-process rights on the one hand and Florida’s strong public policy favoring the speedy administration of estates on the other. In order to move things along as quickly as possible (with the least amount of litigation expense possible), Florida law provides extremely short windows of opportunities for litigants to file claims.

The question in the case discussed by Mr. Antunez involves whether the 2-year limitation on claims can be overriden if a decedent's Will directs that “just debts, funeral and administration expenses be paid as soon after [her] death as may be practical . . ."  The court finds that it can't, because this would leave an estate open to claims indefinitely, which defeats one of the main purposes of the probate code.

This case is of interest in Illinois because our state has a similar 2-year bar on claims after death.  I would add that a claim filed more than two years after a decedent's death is in fact not a "just" debt or expense, since it's not recognized as a valid debt or expense under the law. 

From an executor or administrator's perspective, it's important to realize that such a debt or expense CAN'T be paid without a violation of fiduciary duty.  You may feel bad for the creditor, and feel like it's unfair that it isn't being paid money it may have been owed, but you shouldn't act on those feelings (unless you have the consent of all of the beneficiaries).

Should This Man Be a Judge?

Stuart C. DuBose (pictured at left) has been nominated to be a circuit court judge in Alabama, but is involved in an estate situation that doesn't cast him in the best light.  Let's play spot the ethical problems!

According to this article, Mr. DuBose prepared a Will for a man named Joseph L. Sullivan without ever meeting Mr. Sullivan (Problem #1 - communication, diligence).  The Will named one of Mr. DuBose's other clients, a woman named Weaver, as the executor and sole beneficiary; even worse, Weaver was the one who asked Mr. DuBose to prepare the Will in the first place (Problem #2 - conflict of interest among clients).  Mr. DuBose was named as successor executor (Problem #3 - conflict of interest, self-dealing).

There was some litigation over the Will (filed by Mr. Sullivan's sister after his death), and Mr. DuBose then entered into an agreement with Weaver by which Weaver agreed to pay Mr. DuBose "33 percent of any estate settlement if there was no lawsuit filed concerning it, 40 percent if a lawsuit was successfully defended and 50 percent if it moved to an appellant court level." (Problem #4 - conflict of interest, potentially unreasonable contingent fee)

Evidently two disputes erupted over Mr. Sullivan's estate -- the one filed by his sister, and a dispute between Weaver and Mr. Dubose over whether he was entitled to 40% of the estate settlement.  The former was settled some time ago; the latter was just settled, with Mr. DuBose receiving attorney's fees of almost $1 million.  That's almost $250,000 per ethical problem if you are keeping track.

Cincinnati Bengals Probate Fight

What is it about founders of football teams and probate litigation?  The estate of Chicago Bears founder and owner George Halas gave rise to a huge probate case many years back, and now there's the case of Austin E. "Dutch" Knowlton, a founder of the Cincinnati Bengals.  This article has the details.  The case features...

[a]llegations of wrongdoing - including falsification of documents and forgery - ... from Austin E. "Dutch" Knowlton's adult children, who were left out of their father's will.

On one side are attorney Charles Lindberg, the Bengals and the family of Paul Brown, another Bengals founder.

On the other side are the children of Knowlton - a construction giant who also was one of the founders of the Bengals - and their prominent attorney, Stan Chesley.

At stake are 176 shares of the Cincinnati Bengals valued by experts at between $42 million and $350 million.

Heirship and Children Born Out of Wedlock

The Illinois Probate Act says that, if you die unmarried and without a Will, all of your probate assets pass to your descendants.  But what happens if you were never married?  How does a child born to unmarried parents prove heirship?

That's obviously pretty easy if the child is trying to inherit from his or her mother, since a birth certificate would show the relationship.  It gets trickier when the child is trying to inherit from his or her father.  Illinois law (§2-2 of the Probate Act) sets forth the applicable standards -- basically the rule is that a child born out of wedlock "is heir of his father and of any paternal ancestor and of any person  from whom his father might have inherited, if living" if...

1. the decedent has acknowledged paternity of the child OR

2. during his lifetime or after his death the decedent was adjudged to be the father of the child.

The standard of proof here is "clear and convincing evidence," except in cases where there was an adjudication of parentage during the decedent's lifetime -- in that case, all that's needed is an authenticated copy of that judgment.

Caregiver Contracts and Statutory Custodial Claims

Professor Beyer talks here about a recent Wall Street Journal article that discusses "contracts between parents and children or other family members for care of an elderly or disabled parent or relative."

In Illinois, we have statutory custodial claims, which I discussed in two in-depth posts:

Post #1: An Introduction

Post #2: Problems

Statutory custodial claims can be useful in protecting a caregiver's rights, but they are an imperfect solution.  A contract between the caregiver/child and the parent, clearly spelling out how the relationship is going to work (especially in terms of remuneration), is the best solution.  Unfortunately, many people don't view elderly parent and caregiver/child scenarios as requiring any sort of formal documentation.

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.