A Tale of Three Halves
Last fall, the Illinois Appellate Court, First District, Second Division, ruled on an interesting case of “first impression” involving our probate courts. The case, Harris v. Adame, involved incapacity and property ownership with respect to joint tenancy, an issue that is likely to appear more often over the next few years, given our aging population. Two brothers, Arnold and Arthur, once owned a home together in joint tenancy with rights of survivorship. In 2002, Arnold was in a car accident that left him in a coma. The court appointed a guardian of the person and estate for Arnold, who later recovered but kept the guardian. A few years later, in 2005, the guardian helped sell the brothers’ home to Jose Adame. The title packet included a form stipulating that Arnold was subject to guardianship. Less than a year later, Arnold died without a will, i.e., intestate, leaving his brother, Arthur, as his sole heir. In 2008, Cook County’s Office of the Public Guardian (OPG) was appointed guardian for Arthur. Next, in 2009, the OPG filed a citation to recover assets against Adame in an attempt to void the entire 2005 home sale. At trial, Adame argued that he was an innocent bona fide purchaser (BFP). OPG argued that the entire transaction was void because Arnold was incapacitated when he signed the conveyance, despite the fact that Arthur had capacity. Adame stated that he did not have legal notice of Arnold’s incapacity before the 2005 closing. Adame further argued that if the transaction was found void, then, because he was a BFP, he should to be reimbursed for the money he paid for the home. The trial court, in 2012, ruled in favor of the OPG on the issue of whether the entire transaction was void but decided not to rule on whether Adame was a BFP and, therefore entitled to reimbursement. Huh?! I know, right? Enter a timely and appropriate appeal by Adame questioning whether the aforementioned ruling was erroneous. The appellate court, rightfully, found just that. In particular, the court found that the transaction regarding Arnold’s joint tenancy interest was void, but the sale of Arthur’s was valid and Arnold’s estate now had Adame as a tenant in common. Essentially, Arthur wasn’t due Arnold’s entire estate only Arnold’s half. The court explained the rule that without a court order, neither a person who has been adjudicated disabled nor that person’s guardian can sell the disabled person’s property interest. Here, the guardian acted without leave of court, so the transaction selling Arnold’s interest was void. As a response, OPG argued that Arthur’s part of the transaction should be considered void because at the time of the trial, Arthur was also incapacitated. The court found the OPG’s timing was off and required proof that Arthur was incapacitated at the time of executing the sale contract. OPG provided no such proof, so Arthur’s transaction was not void. Not depending on the appellate court to get the law right, Adame argued that even if the entire transaction was deemed void, the after acquired title property doctrine should apply. The after acquired title property rule provides that a transaction may be found void if a ne’er do well tried selling a property – the entire enchilada – when they don’t have marketable title. However, only half of the interest was sold to Adame, so the doctrine was inapplicable in this case. Well, if only half of the transaction is valid – or void – depending on one’s perspective, then the entire transaction must be void, OPG stated, to which the court responded with a first-year law school lesson in joint tenancy. First, the court again reminded OPG that, in law, a party needs evidence to support one’s arguments, and OPG provided no evidence, i.e., case or statutory law providing that an entire transaction is void simply because one party’s joint tenancy interest was not conveyed. On the contrary, the court provided ample support for the rule that one tenant can server joint tenancy without the other tenant’s knowledge or consent, transforming the joint tenancy into a tenancy-in-common with the new interest holder. And Arthur did just that: he created a tenancy-in-common relationship between Arnold’s estate and Adame. Now, to ensure that all parties were on the same page, the court then explained the fact that when a party severs joint tenancy, even if the action was a mistake, the agreement severing the joint tenancy is still enforceable. Thus, the appellate court found Adame owned ½ interest in the home and further instructed the trial court to determine whether, since Adame paid consideration for an entire house but only obtained ½ interest, Adame should be reimbursed for the other ½ of the consideration paid. Seems like an easy determination…
4 Key Concerns on Estate Planning for Disabled Children
A number of articles in The Shark Free Zone address the bad idea of designating a minor as a primary beneficiary. Single parents especially struggle with this issue, which is why “it takes a village,” is more than political rhetoric. Another issue parents and family members struggle with is the unfortunate circumstance of managing the car of a disabled child or loved one. Yet, it is even more critical to plan for unfortunate events when you are the caregiver of a disabled person. As usual, examples often help distinguish bad planning from poor planning but this time we’ll just look at a scenario and the resulting considerations. Twenty years ago, Kelly and Sean’s daughter, Carrie was born mentally and physically disabled. As a result, Kelly and Sean decided that Kelly would remain at home to care for Carrie and the family would depend on Sean’s paycheck and Carrie’s Social Security Disability Income (“SSDI”). About a month ago, Kelly and Carrie were involved in a car accident and ended up with a settlement award of $50,000 after medical expenses were paid. Fortunately, neither Kelly nor Carrie was severely injured but the incident shook Kelly considerably. So she and Sean finally had the “what if” discussion about the possibility of something tragic happening to one or both of them. If one or both of them died, who would care for Carrie and what would that look like? Well, Kelly and Sean have several issues to consider, including: Guardianship v. Powers of Attorney. Carrie is an adult and, in Illinois, obtaining guardianship for a disabled adult is a lengthy and costly process. To avoid that process, powers of attorney for Carrie might be useful. The question of usefulness hinges on the severity of Carrie’s mental disability with respect to legal capacity needed to grant authority provided in powers of attorney. Adverse Implications of Government Assistance. Irrespective of who dies, if sufficient means are not available to ensure Carrie’s basic needs – food, shelter, clothing, and medical care – are met during the remainder of her life, she may need additional government assistance, such as Medicaid. However, when someone on Medicaid receives an inheritance, they may become temporarily ineligible for Medicaid. So particular testamentary planning, such as “special needs trusts,” may be needed. Sufficient Life Insurance. If Sean passes away, the question is then, how much of a death benefit is needed. Also, if Kelly predeceased Sean, who would be the contingent beneficiary able to act on Carrie’s behalf. Appropriate Fiduciaries. If both Kelly and Sean die, the question again is who will be able to financially and compassionately manage Carrie’s estate and how would that estate be structured? Caring for a child with mental or physical challenges has at least one commonality with caring for a child with no challenges: the need for a careful, caring, and protective plan in the event the parent is no longer able to provide needed care because the ability or inability of our loved ones doesn\’t change the fact that they are our loved ones.
How Do I Love Thee? Let Me Count the 8 Articles
On Valentine’s Day it may seem off-kilter to some to read an article on death, but not here in the Shark Free Zone. The interesting truth about estate planning is that it can be a genuine measurement of how much someone loves you. If we consider the 8 basic articles that are found – or should be found – in wills, the evidence is undeniable. So, from a potential beneficiary’s perspective, hoping he or she is loved, let’s look: Article 1: Family. Love = your name is in this article. Article 2. Definitions. Love = your name is listed in the “partner” definition since you and the testator (person writing the will) are cohabiting, i.e., unmarried and un Civil Unionized, because Illinois doesn’t recognize in-state Domestic Partnerships or common law marriage. Article 3: Guardianship. Love = if you’re 14 years old (why are you reading this?), your parent or parents have named at least 2 other individuals to take care of you, just in case… Article 4: Debts, Taxes, Expenses. Love = The estate has sufficient funds to cover memorial services, credit card debt, taxes, and any other bona fide expenses that belonged to the dearly departed and not you. Article 5: Personal Property. Love = you get the Beatles White album, first edition. Article 6: Residuary Estate. Love = you get a whole lot more than the Beatles White album, first edition. Article 7: Personal Representative. Love = your name isn’t listed, so all you have to do is accept the Beatles White album, first edition and any other bequests; and you don’t have to worry about a greedy beneficiary trying to sue you for breach of fiduciary duty, such as not handing over the Beatles White album, first edition. Article 8: Disaster Awaits. Love = hoping this article isn’t triggered.
4 Estate Planning Facts Everyone Should Know
1. You have an estate and a plan even if you’ve not done anything. The answer to how this is possible is found in the definition of “estate” and the law – at least for the state of Illinois. Your estate is everything you own – tangible and intangible. It includes retirement benefits, debts owed to you, your bicycle, your bodily tissues and organs, whatever may be in your bank accounts, and whatever remains of your coming paycheck after obligations are paid. Probate assets of those who die without a plan or a will in Illinois will be distributed according to the laws of intestacy per the Illinois Probate Act of 1975 as amended. Accordingly, debts, your bike, your bank accounts, and your paycheck will go to who the laws of intestacy and the court decides. So, regardless of what you possess and your actions, you have an estate plan. 2. Your estate plan, even the one you don\’t know about, is in effect during your lifetime. Documents you sign at medical and dental treatment facilities before being treated, and even some sporting events, typically involve you implicitly designating your “next of kin” to act on your behalf if you became incapacitated. Sometimes, this isn’t who you think it is. Since you’re going to sign these forms anyway, wouldn’t you rather make an actual decision before the dental cleaning? 3. Family and friends fight over stuff and the fight can become war. Love is love until death and then it becomes war. Folks will fight about could be grandma’s old cookie jar, gold coins, or memorial arrangements. Nevertheless, once a battle ensues, the only real winners are the litigators; they get most of the cookies. Considerations for this fact include: apathy for one\’s family; family harmony; good karma; and increasing the wealth of trial attorneys.* 4. The most important decision you can make in estate planning is not what to give away or who to give it to, but who will manage it or give it away for you. Even if you don’t interact with a certain individual regularly, they protect the cookie jar. These individuals, called “fiduciaries,” include personal bankers, financial planners and advisors, accountants, lawyers, trustees, agents under powers of attorney, guardians, and executors or personal representatives. A large part of guardianship and estate litigation involves the “breach of fiduciary duty,” where the fiduciary has dipped his or her hand into the cookie jar. Sometimes the fiduciary is a family member; sometimes a long-time, trusted friend and advisor; and sometimes not such a long-time friend but is still trusted. Thus, even if you’re not at the point of naming an executor, perhaps you should carefully consider who is going to step into your shoes and manage your finances if you become seriously ill or just go for an annual check-up; then designate someone…in writing. A thoughtful and appropriate designee may prevent abuse, breach, litigation, and possibly war. * Some of my dearest friends are trial attorneys.
4 Occasions When a Will Won\’t Work
Recently, law students received the following hypothetical to answer: “Ms. Angel Booth has phoned you, Ms./Mr. Associate, and said, “Hi, this is Angel Booth and I want to set up a will because I want to completely disinherit my daughter.” What is your response?” After getting rid of the “deer-in-headlights” look, the students came up with a myriad of answers. Yet and unfortunately, this isn’t an uncommon scenario and for valid reasons. Furthermore, this occurs not just between parents and children, but between as many relationship pairings as you can think of. Still, this scenario goes to reason number 1. Using a will is a tenuous proposition at best if you’re trying to disinherit an heir. Admittedly, I’m being a tad hyperbolic, because it can work – after a lengthy court battle involving lawyers, doctors, and a ton o\’ family members. To disinherit an immediate heir, in Illinois, using a standalone will where the value of the estate is more than $100,000 in personal or real property will beg for a contest and bye-bye goes a large portion of the estate – in probate litigation. Mamma Mega Millions Marries Gorgeous. Yes, you’ve been smitten by the most gorgeous, decades younger, individual walking the planet. You’ve worked your petooty off as a single mother, put your children and your siblings through university, and now want to enjoy the million-dollar fruits of your labor with Gorgeous in the bounds of matrimony. You will probably be advised to have an airtight prenuptial agreement. You also want a will prepared, but a will that leaves most of those millions to Gorgeous will shout, “Probate Litigation!” and siblings, children, BFFs, third cousins, you name it will probably shout back with claims against the estate. Grandpa Disses Daughter-in-Law. So, while it can’t be proven that she murdered your dearly departed son, you, Grandpa, just don’t agree on anything with your daughter-in-law about your grandchildren. In your opinion, she isn’t parenting the way your loving son would have. Still, you’ve saved about $30,000 that you want the children, ages 7 and 8 to have upon your death. I previously wrote about the imprudence of leaving substantial financial gifts outright to minors. This is another example. In Illinois, if a minor receives a substantive gift, e.g., more than $10,000, the funds must be transferred into a restricted vehicle for the minor whereby the guardian or custodian is given control. Typically, the guardian or custodian is an adult member of the minor’s family, i.e., Dastardly Daughter-in-Law or a trust company. Thirty-thousand dollars isn’t usually sufficient for a trust company; thus, DDIL will likely gain control over the $30,000. Calling Dr. Cooper. Finally, setting aside seedy scenarios, let’s consider Dr. Amy Cooper. She has a thriving practice with three other doctors and has started accumulating a substantive portfolio. She doesn’t mind paying her fair share of taxes, but doesn’t want her beneficiaries to pay more than their fair share either. Leaving everything outright to her partner and children in a will, however, results in the very thing she doesn’t want.
5 Key Blocks for the Build-A-Baby Life Stage
Helping new families through my practice is one of the great benefits of my job. It soothes my soul because I know the family will be protected sooner rather than later and we will all sleep better, though the infants rarely have a tough time sleeping soundly. However, becoming a new parent isn’t always easy. The gamete meeting sometimes just doesn’t take place as soon as we want it to; sometimes our gametes just don’t want to meet at all. On these occasions, Artificial Reproductive Technology (ART) can play a very important role. However, ART can be costly, financially and emotionally. I was on a panel with Lambda Legal a few months ago and an audience member referred to the financial program designed by his company to help parents with this issue as the “Build-A-Baby” program. This particular department helped couples design their financial planning so they could afford ART, which can cost thousands of dollars per month and when you factor in particular types of adoptions, the final costs can be hundreds of thousands of dollars. And, as mentioned, that’s just the financial burden. The emotional burden of waiting and hoping is equally heavy, if not heavier. As opposed to ART, either parent or both parents can take an alternative route and adopt. Still, just as with ART and as above sometimes including ART, adoption can be costly and is always emotionally burdensome. Consequently, it is critical that parents understand how they can protect each other and their families at the very beginning, even, sometimes, before the birth occurs. Another panel I was on recently described it as “Building Your Family Fortress.” The following are the cornerstones for today\’s family, whether you use ART, adopt, or your gametes meet the old-fashioned way: Obtain life insurance that will at least replace the primary wage-earner’s salary for 3-5 years. Have powers of attorney – healthcare and property (what some states refer to as including “advanced directives”) prepared for both parents. Free drafts of Illinois powers of attorney are available here. If you’re a same-sex couple, be sure if one of you is the biological parent, then the other adopts the child. The U.S. is still a patchwork of states, some recognizing your legal rights in a Civil Union or same-sex marriage, and others not. The same applies for straight couples who are not married and one parent is the biological parent. If you’re using ART with an unknown donor, the parent carrying the child should designate the other parent as a short-term guardian to go into effect at some point in time until the adoption is complete. Obtain valid wills, irrespective of the gender-orientation of your relationship because you need to ensure that the guardian of your child is who you want the guardian to be in the case of your death. For straight couples, it is critical that you name a successor guardian. Other blocks can also be used, but these 5 bricks represent the cornerstones of a solid fortress that will protect your family now and in the future.
80% Get It Wrong…
In the digital age, it\’s rare that potential clients haven\’t done research before contacting our firm. So, when speaking or meeting with them, it\’s important to hear what they\’ve found. Sometimes it\’s factually correct, but not for their case; sometimes it\’s factually incorrect with respect to their case; and often the pieces just don\’t fit together at all. So then I say, \”Think about this…\” And, as colleagues continue to criticize DIY services, as online legal documents services proceed with IPOs, and as folks continue to ask me to opine, I thought these few facts may be worth sharing:
Blood or Money? Making Fiduciary Designations that Maintain Family Harmony
Tons of articles have been published advising individuals and couples about what to bring to or how to prepare for a meeting with your estate planning attorney. Most of these articles provide the typical list: financial statements, copies of tax returns, mortgage statements, retirement information, and so forth. Not surprisingly, few articles discuss the “hard list”: names of successor guardians for the children, names of successor trustees – particularly if the children have trusts, how special gifts will be distributed, and who should hold title to the home for asset protection purposes. A previous post discussed guardians but another issue that couples may want to consider is how to maintain family accord for the children’s benefit when a member from one spouse’s side of the family may be emotionally closer to the children than a member from the other spouse’s side, but both families want to be involved in the event of an emergency. Under those circumstances, the harmonious decision to name Uncle Louie Guardian and Uncle Gus as Trustee, for example, may be not-so-harmonious. Baby Gina’s and Big Brother Brett’s Uncle Louie on Mama’s side and Uncle Gus on Papa’s side may in fact have a great relationship. However, designating one guardian and the other trustee may place a strain on the relationship that would cause Robin to reconsider his relationship with Batman. Consequently, designating one person as both guardian and trustee would probably be more prudent. Plus, Uncle Gus might even appreciate it once you shared with him the critical and long list of duties a trustee must agree to undertake. Still, what if Uncle Gus is a control freak and would wreak havoc on the rest of you and your spouse’s living days if some authority wasn’t given to him? In that case, you could make Uncle Gus the Executor of the estate. But what if that wasn’t enough? Perhaps he would be satisfied with being the successor trustee of the family trust funds that remained after the children’s trust was fully funded. And if Uncle Gus wasn’t satisfied with that and Uncle Louie refused to switch places? Then consider the following 2 options: Creating a solid co-trustee agreement between the 2 uncles; or Designate a corporate trustee to manage the children’s trust. Sometimes to maintain family accord, retaining a reasonable corporate trustee is the only option. Yes, money leaves the estate but at least it\’s money and not blood.
Estate Planning that Keeps the Caregiver Out of Jail
Recent news stories abound about individuals who were caregivers for aging loved ones, and found themselves in court because they cared too much…about the loved ones’ bank accounts. But we really don’t need to go online or read the papers to hear about Aunt Abby’s favorite nephew, Jonathan, who changed the beneficiary designations on all of his aunt\’s retirement accounts and life insurance policies, naming Jonathan as the single beneficiary. Sometimes family members who spend significant time as the sole or primary caregiver are resentful and feel entitled to the funds because they sacrificed their careers or lifestyles to ensure the dearly departed’s final years or months were comfortable. On other occasions, family members are just plain old everyday crooks. Then on rare occasions, we have the family murderer. To prevent family members who were or will be primary caregivers from feeling resentful and taking nefarious steps toward their “fair share,” perhaps a family meeting should be held once the loved one at issue passes a golden or silver milestone. The meeting should cover 3 primary stages: (1) current living, (2) future living, and (3) postmortem needs. The agenda should also review needed resources and arrangements and pre-existing arrangements: money, physical assistance, companionship, time, estate planning documents, government benefits, and insurance, for example. Once the family determines the relevant needs for the appropriate stages, family could decide together who among its members is willing, able, and competent to manage the tasks and which resources could make tasks more manageable. Furthermore, if one person becomes a primary caregiver, the family should also determine how much that person should expect as compensation from the family and/or the loved one for his or her efforts. Maybe the loved one is disabled too, requiring even more assistance from the family caregiver. Individuals hear this and often say, “But this is family. You shouldn’t have to be paid to take care of your elders. After all…” Well, that is typically said before those individuals have helped elders out of bed, into the bathtub, driven them to and from, prepared their meals, and cleaned their homes. Example: Uncle Teddy is 78 years old. He lives in a 2 bedroom apartment he adores. The building has all of the amenities one really needs – cleaners, laundry, small supermarket, parking, doorman, and even a “wellness checker.” Uncle Frank has 2 children: a daughter who is a single parent with a high school teenager and another child in college, and a son who’s married, without children, and lives in a nearby state. Uncle Teddy’s siblings and parents are dead. However, he has a favorite niece, Martha, who visits him monthly and phones weekly. Uncle Teddy is fiercely independent but his health is declining. Currently, he performs most of his errands, cooks, and drives himself to the doctor. A cleaning person comes in once weekly. He also has life insurance, a will, and Martha as an authorized user on his primary checking account. In a year or 2, Uncle Frank’s mobility will dramatically decrease. However, will still need bills paid, meals prepared, personal grooming, and doctor visits. When he passes away, memorial services will need planning and implementing, his estate will need administering, and before that, his apartment will need cleaning and inventorying. There’s something for every family member to do to help Uncle Teddy now and then. Powers of attorney could also help currently and in the near future. Now, for family members who want to skip stage 2 and help the loved one to the post-mortem stage, like many states, Illinois has a “slayer statute” where family murderers can’t inherit the family home.
Estate Planning Tools to Keep Lex-the-Ex Away
Outside of food and clothing, 2 of the most critical matters parents manage for their children are education and housing. Single parents are typically even more concerned with managing these issues because ultimately the responsibility falls on the primary custodial parent. Divorcees may breathe a little easier because of settlement and child custody agreements, but not necessarily. Family courts around the country are filled with defendants and plaintiffs arguing over alleged breaches of such agreements. Consequently, as a single parent, the burden is heavier. Managing housing and educational issues can be made easier with proper estate planning tools. An earlier blog post addresses basic estate planning instruments parents should have in place. This post discusses some of those instruments in more detail. Property Power of Attorney. As mentioned here, this authority, which you to give to another person, allows that person to make and carry out financial decisions for you when you are physically incapacitated. Thus, if you’re ill for a long time and need someone to pay the rent, mortgage or any other expenses associated with your family’s home, you should designate a trusted agent under a property power of attorney. Guardian of the Estate. A will allows parents to designate who should care for their children in the event of a parent’s death – a guardian. This is critical to single parents. However, in Illinois, there are 2 types of guardians: a “guardian of the estate” and a “guardian of the person.” A guardian of the estate status allows the guardian to manage the financial affairs of the minor, e.g., gifts received under a will or trust. This makes sense because sometimes the person you would trust to raise your children may not be as financially well informed as needed to manage large sums of money. So I typically advise clients to consider guardianship from both “personal values” and “financial expertise” perspectives. Trustee. In a vein similar to a guardian of the estate, a trustee is the person, or entity, you authorize to administer, preserve, protect, and grow trust assets. Note: Many people think they’re not personally wealthy enough to require a trust; many are mistaken in this thinking. Example: Sharon is the single mom of a 14 year-old daughter and has a home valued at $150,000 with a mortgage balance of $30,000. She has about $100,000 in a retirement account, and $500,000 in life insurance. Additionally, Sharon keeps approximately $1,000 in her checking account and $2,000 in her savings. She doesn’t feel like she’s wealthy, but if Sharon were to pass away today, her estate would be valued at $723,000. She would have died almost a millionaire! An important and related consideration is that unless other designations are made, life insurance and retirement account proceeds may be paid out to a very young adult, e.g., an 18 year old. How many 18 year olds do you know who are mature enough to manage receiving a lump sum of $600,000? Returning to Sharon’s scenario, where her daughter is a minor: If Sharon didn’t designate a guardian or trustee, but Sharon’s ex-husband, Lex, is lurking around, guess who would likely obtain control over the $600,000 – yep, Lex the ex. Life Insurance. Typically, life insurance is a death benefit and can be used to pay off mortgages and for other housing expenses. An Irrevocable Life Insurance Trust (“ILIT”) is a time-honored estate planning tool and excellent for providing for education and housing costs, especially if one does not intend to benefit from a policy otherwise. Transfer the policy in a trust where someone other than yourself is trustee and your child’s education is relatively secure. Securing the hearth and educational future of children is critical, so review your policies and plans today and get a good night’s sleep going into the New Year. Well…after midnight anyway. Your comments are welcomed as always!