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Estate Planning

Probate Horrors: Not All Fiction, Unfortunately

By October 19, 2019No Comments
The bloodline may not be all it’s hyped up to be.

Probate is the court process generally required when a person with assets dies without a Last Will and Testament or some other testamentary mechanism in place that designates who should receive those assets. In Illinois, probate is lengthy – at least 14 months; costly – initial processing fees start at $850 and the average retainer is $2500; and assets are frozen for at least 6 months – so heirs cannot obtain their inheritance.

So, in Illinois, unless there’s a possibility that an estate will face a protracted and costlier lawsuit, probate should be avoided. But sometimes, as much as we try, folks just don’t listen:

The Other Heir

Abe died without a Will, leaving his surviving spouse, Christine, and Brandy, the 3 year-old child borne of their marriage, as heirs. At the time of his death, Abe owned a small business, a home, and about $300,000 in a bank account. Christine was informed that because the bank account was the only asset with a designated beneficiary, the estate would require probate.

Unbeknownst to Christine, Abe had another child, Donald, who he’d been supporting even before his marriage to Christine. Donald’s mother promised Abe that she would not confront Christine because the payments she received from Abe were 4 times as much as what she’d receive in child support. At the time of Abe’s death, Donald was 6 years of age.

But then Abe died and so did all payments to Donald’s.

At Abe’s death, his estate balance sheet and the probate distribution would resemble this:

Estate Assets
Home, $250,000
Business, $500,000
Bank account, $300,000 (but this belonged to Christine)
Total non-designated assets: $750,000

Liabilities
Business creditors $250,000
Tax Liabilities, $50,000
Estate administration fees, $10,000
Total Liabilities: $310,000

Distributions to Heirs
Christine, 50%, $205,000
Brandy, 25%, 102,500
Donald, 25%, $102,500

Abe had always been concerned about Donald’s mother’s spending habits; so Abe paid many items, medical bills, clothing, and daycare directly on behalf of Donald. Now, because Donald was a minor and Abe did not plan for him in a Trust, Donald’s mother, the spendthrift, would likely be appointed Guardian of Donald’s estate with direct access to $102,500.

Estate planning could have provided benefit for Donald, even without Christine and Brandy ever knowing. But…

Abe didn’t plan.

That DNA kit/Ancestry App

Suppose that Donald was an adult and had just received results from a genealogical investigation, which illustrated that he and Abe were 99.9% son and father. He decides to search for Abe and learns that Abe just died. Christine refuses to meet with him; so Donald shows up in court… Hence, the reason why probate courts also have bailiffs.

What if Donald was also a spendthrift or worse? Could he inherit?

Yes… Because… Abe didn’t plan.

Probate horror stories can be avoided, even when family dynamics are less than ideal. And hopefully, you’ve found the information shared this week helpful and encouraging so you and your loved ones establish plans to protect your loved ones and your interests.

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