What's the rush when it comes to probate?

My partner, Ed Reda, provides some thoughts on probate and post-death activity:

We often get calls from people whose loved one has just passed away.  And by “just passed away” I mean only hours earlier.  Frequently they are very concerned about what steps must be taken - immediately - now that their loved one has died.  My standard answer is that the only thing that needs to be done immediately is to call the undertaker.

This perception that something needs to be done almost immediately is a vestige of the old Illinois Inheritance Tax, which was repealed in 1981.  In the days of the Illinois Inheritance Tax, all assets of a decedent were automatically frozen until a written release could be obtained from the Illinois Attorney General.  It wasn’t an onerous or time consuming task to obtain the release, but, people did not want their loved one’s assets tied up - for even a few days.  So, some attorneys would counsel their clients to get to the bank right away and close all of grandma’s bank accounts before her obituary appeared in the paper or the news of her death had become public.


The Illinois Probate Code does require that all original copies of a decedent's will be filed with the Clerk of the Circuit Court within thirty days after the date of death.  This requirement does not mean a probate estate must be filed, but only that the will itself be brought to the court and turned over to its repository of Last Wills for safekeeping.

The son of one of my oldest clients reminded me of the day his father died.  Notwithstanding the fact that I never counseled people to rush to the bank, his mother insisted that they go to the bank and close her husband’s bank accounts, even though her husband had died just minutes earlier.  Upon entering the bank that morning, the son told me that the bank guard greeted his mother with “Good morning Mrs. Clay.  How’s Mr. Clay today?”  Her answer was a classic – “Not good.  He’s not feeling well at all today.”

So, when someone close to you dies, take your time to plan their funeral and mourn your loss.  There seldom is anything of a legal nature that can’t wait until after the funeral.

Facebook posts lead to criminal charges

If you follow this blog, you may have seen my articles about estate planning and the internet.  In those posts, I have indicated that we are at an interesting time where law and technology are intersecting and the law is adjusting, albeit slowly, to new technology.  The Chicago Tribune published a May 4, 2011 story about a woman who was charged with aggravated battery after getting into a bar fight.   This is just one more example of how the legal world is reacting to the online world.  Users of social media need to be cautious about what they say and who they say it to.  Understanding privacy controls is of extreme importance.  

This advice does not extend only to criminal law.  I have heard anecdotal evidence of employers who scan thier employee's facebook pages to determine what they are doing on their "sick days".  Mortgage lenders have reportedly reviewed social media sites to determine if a borrower's "hard luck" story is true or false.  Personal Injury defense attorneys even check social media sites to see if people who claim injuries are, in fact, actually injured.  Social media is a double edged sword.  It opens up the world to the user and, at the same time, it tracks the user's every word... or admission.

Interesting times for Illinois lawyers

The Rules Committee of the Illinois Supreme Court is seeking comments on a proposal to allow jurors to question witnesses in civil trials.  The Supreme Court of Illinois in a news release today indicated that anyone wanting to testify at a public hearing needs to let the Committee know in writing by May 13, 2011 and anyone wanting to offer written comments needs to do so by May 6, 2011.

Such a proposal is a sea-change in the way litigation would be done in Illinois.  Currently, jurors are not allowed to question a witness.  The Supreme Court release indicates that about half of the states in the US allow jurors to question witnesses.

A hearing  will be held on the topic on May 20, 2011 at 10am in Room C-500 at 160 N. LaSalle, Chicago.

The proposed amendment can be found here

Time to Make a Will?

My partner, and the smartest attorney I know, Ed Reda, penned today's blog post about the "right time" to make an estate plan.  Is it ever too late to make a will?

At various times in our life, most of us have thoughts about the need to make a will.  Most of us put that task off by telling ourselves we will get to it later.  But is there a time when it is too late to make a will?  Surprisingly, the answer is a resounding “Yes.”  Here is an actual fact pattern that happened to me today.

I received a call from a fellow we will call Ralph indicating that his friend, Dave, was in Resurrection Hospital and wanted to make a will.  I asked Ralph what was Dave’s medical condition and he replied that Dave had Stage IV lung cancer and was receiving hospice care.  I asked Ralph why he was calling me instead of Dave.  He replied “Dave is really weak and can’t hold the phone.  He asked that I get an attorney for him.”

The red flags popped up all over.  First, any time someone other than the client calls to engage your services, an attorney should proceed with caution.  Does this person have an ulterior motive?  Why isn’t the client calling?  Ralph’s response to my question didn’t put me at ease.  Any time an attorney is called to a hospital to do a will, there is a stronger than normal chance that some heir or relative, disappointed in the terms of the will, can challenge the competence or capacity of the client after his or her death.    The reason is obvious–people in hospitals are not well, and therefore, oftentimes not thinking clearly or in charge of their emotions.

Finally, wills prepared and signed shortly before a person’s death are also often subject to challenge.  Once again, a person days from their death is likely very sick and oftentimes, because of either their medical condition or the medications they are receiving, not completely lucid.  When the client is in hospice care, suffering with Stage IV cancer and too weak to hold a phone, the risks of the will being challenged, and the attorney being criticized for preparing it (or worse, being sucked into litigation) increase exponentially. 

For all of the above reasons, I declined to accept this assignment.  I feel somewhat badly for Ralph’s friend, since he may die without a will, or without a will that expresses his current feelings.  But, he has brought that problem on to himself.  A person truly can wait too long to make a will.

Reminder on Capital Gain Tax Law Change for Primary Residence

A change in the Housing Assistance Tax Act of 2008 changed the rules regarding capital gains on the sale of a primary residence.  Under the prior system, homeowners were able to exclude up to $250,000 ($500,000 for married couples) worth of capital gains on the sale of a primary residence.  One of the rules in order to qualify for the capital gain exclusion was that a property owner had to use the real estate as a principal residence for at least two of the previous five years.  As such, homeowners with rental and vacation property began to sell their primary residence without capital gain and then moved into their second home or rental property so that they could avoid capital gain upon sale of that property also. 

 

The Housing Assistance Act of 2008 sought to close that loophole.  The new law will allow the exclusion of a portion of the capital gain based upon a new formula that seeks to take into account years that the real estate was not used as a primary residence.  Use of the real estate as a primary residence has been termed "qualifying use" and use of the real estate for other purposes is called a "non-qualifying use".

 

Beginning on January 1, 2009,  capital gains are determined based upon the following formula:

(Time of non-qualifying use after 1-1-09) divided by (time of total ownership) = % of exclusion

One benefit here is that non-qualifying use for periods before January 1, 2009 do not count for purposes of making the calculation.  Obviously, properties that have been used exclusively as a primary residence will be eligible to exclude the entire gain up to $250,000 ($500,000 for married couples).

As a result, property owners who have held non-primary residence real estate for long periods of time can still take advantage of major tax savings by converting non-qualified property into qualified property (because all non-qualifying time prior to 1-1-09 is not included).  It makes sense to evaluate capital gains strategy based on this law.