Articles Posted in Estate Planning

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On February 9, 2017, Representative Bill Mitchell of Decatur, introduced HB3089 to the Illinois House of Representatives.  The proposed legislation would amend the Probate Act of 1975, by adding an additional subsection to 755 ILCS 5/18-3, which provides the notice requirements for probate estates.  This bill has not yet cleared the House of Representatives, as it was referred to the Rules Committee on March 31, 2017, which is where it currently stands.

Section 18-3 of the Probate Act of 1975 states the current requirements for notice of probate estates.  Most probate attorneys are already familiar with these requirements: Publication of creditor notice for three consecutive weeks in the county where the estate is being administered, and mailing direct notice to any known or reasonably ascertainable creditors.  HB 3089 would add an additional subsection which would require direct notice be sent to the Illinois Department of Healthcare and Family Services (DHS) if the decedent was 55 years of age or older or resided in a nursing facility or other medical institution.  HB 3089 further provides that the notice be sent to the Bureau of Collections at the Chicago office of the Department, and must include a copy of the underlying petition as well as the decedent’s social security number and date of birth.

There are a few interesting pieces of this proposed legislation which are worth examining.  The first is the number of probate estates this would impact.  Presumably, a large number of decedents are over age 55 at the time of death.  Furthermore, the notice would also be required for any decedent (regardless of age) who “resided in a nursing facility or other medical institution.”  The concern with this language is that it is broad and undefined.  Does it apply for a decedent who ever resided in a nursing home, or just resided there at the time of death?  What is considered a “medical institution?”  Does it apply for assisted living facilities, rehab, or extended hospital stays?  If this legislation passes, the best practice for attorneys may simply be to send the notice to DHS for every probate estate opened.

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Probate is the process by which a court will supervise the administration of an estate when someone passes away.  Many clients prefer to avoid probate because the process can be time-consuming and costly.  This article will examine the various ways probate can be avoided.

Joint Tenants with Rights of Survivorship.  When there are more than one owner to a piece of property, there are different ways the property can be titled.  One example is joint tenancy.  When a decedent dies while holding property in joint tenancy with another person, the property will pass to the surviving owner by operation of law.  This applies for both real estate and personal assets such as a bank account.

Beneficiary Designation/Payable on Death.  Many assets such as retirement accounts will allow for a beneficiary designation or payable on death designation to be placed on the account.  In this case, when the owner of the account dies, it passes automatically to the beneficiary who is listed on the account.  However, the key for this technique is that there must be a valid and living beneficiary at the time of death.  If there is no beneficiary listed, the asset will pass with the decedent’s estate, which will most likely trigger a probate proceeding.

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Wills do not expire, but certain changes can render them useless. It is important to review your will periodically to ensure it still does what you want. The following are five ways your will can become out of date.

  1.  Your beneficiaries have died. For example, if your will leaves your estate to your two siblings and both die before you, your will is still valid, but it will have no effect on who will inherit from your estate. Instead, your estate will be distributed according to the law in your state, just as if you had died without a will.
  2. You have potential new beneficiaries. A will that was written before you got married will be of little assistance in distributing your estate. Illinois law includes provisions that provide for a spousal share. In this case, Illinois law is dictating where your estate is going, not you.
  3. Your executor is dead or unable to serve. The executor is the person named in your will who oversees the distribution of your property. If the person you named as executor is unable to serve, the court will have to appoint someone else. Beneficiaries may have a say who is chosen, but it may not be someone you would have wanted in the position.
  4. You no longer own property named in the will. If your will attempts to divide your estate equally by giving cash to your daughter and real estate of equal value to your son and the real estate is sold before you die, your son will receive nothing. In this case, your will is no longer ensuring your estate is divided equally.
  5. The law changes. If your estate plan was designed specifically to avoid estate taxes and the estate tax law changes, your will may no longer serve its purpose.

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The Illinois Living Will Act has been in effect since 1984. It is based on the common law doctrine of informed consent. This right gives individuals the authority to refuse medical treatment. It also gives individuals the ability to record directions about future medical care should they become terminally ill and unable to communicate their choices. A Living Will can authorize the withdrawal or withholding of medical procedures which delay death for terminally ill patients.

A Living Will is often executed by an individual at the same time he executes a Power of Attorney for Health Care. A Living Will can provide a clear indication of the individual’s wishes to family members who are reluctant to withhold or withdraw medical procedures. In the case where the provisions of a Living Will conflict with a Power of Attorney for Health Care, the Power of Attorney supersedes the Living Will. Continue Reading

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The ability to make a will involves the issue of mental capacity.

In Illinois, there is a presumption that every adult is sane until the contrary is proven and the burden is upon him who asserts the lack of testamentary capacity. In other words, everyone is presumed to have the mental capacity to make a valid will. It is up to the person challenging the validity of the will to prove otherwise.

Illinois courts also recognize that someone who suffers from some mental impairment can still have testamentary capacity. There is a case where a 74 year old woman executed a will after she was diagnosed with senile dementia and had the intelligence level of a 12 year old child. Despite these short comings, she read newspapers, was aware of and interested in current events, knew her relatives and asked about their well-being and could transact business. The court ruled that she had the capacity to execute a valid will.

In summary, Illinois law requires three things for someone to have the mental capacity to make a valid will:

He must know who his spouse, children, grandchildren and other relatives are;

he must generally understand what assets he owns; and

he must be able to form a plan in his head regarding how he wants his property distributed.

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A personal representative is the individual who handles the matters of an estate as it makes its way through the probate process. If there is a will, the personal representative is the executor. If there is no will, the personal representative is the administrator.

The personal representative has specific powers even before the Probate Court issues his Letters of Office. He can carry out any gift the decedent has made of his body, arrange the burial of the decedent, make payment of funeral charges and take acts necessary to preserve the estate’s assets.

After his Letters of Office are issued, the representative can exercise all powers given to him in the will. In addition, the representative can lease, sell or mortgage the estate’s property, borrow money with or without security, continue the decedent’s unincorporated business, perform any contract of the decedent and take possession, administer and grant possession of the decedent’s real estate.

For a complete list of powers of a representative, check out 775 ILCS 5/, which is the Illinois Probate Act.

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Like all other unique forms of real estate ownership, Co-Op Housing presents some interesting difficulties for those in the real estate market.

The end of World War II marked the beginning of an acute housing shortage in the United States. Returning servicemen and woman, many of whom had lived with their parents before the war, returned home looking to live independently and to begin raising families. Unfortunately, major cities like Chicago, had little to offer.

The Federal Government recognized the need and opportunity to provide service members with affordable housing while stimulating the building trades. As part of the Serviceman’s Readjustment Act, federally approved builders were given the green light to construct 4-unit apartment style buildings to house veterans and their families. The veterans would obtain a mortgage subsidized by the Veteran’s Administration and enter into an agreement to manage the property.

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One of the most important, but most often overlooked estate planning documents, are the Powers of Attorney. Powers of Attorney fall into one of two categories: (1) Powers of Attorney for Property and (2) Powers of Attorney for Health Care. Essentially a Power of Attorney legally authorizes a trusted family member or friend to make decisions on your behalf in the event that you become incapacitated or are unable to make decisions on your own. Powers of Attorney are powerful documents that can protect you and your family from the need for expensive guardianship proceedings.

Although Powers of Attorney for Health Care are regularly accepted by hospitals and doctors, many banks and financial institutions are making it harder and harder to use a legally valid Power of Attorney Document. If a manager at your financial institution believes, in good faith, that your Power of Attorney is no longer valid you may be left with no choice but to petition a court for guardianship.

To avoid this from happening we advise that you review your Powers of Attorney to ensure (1) the your Power of Attorney documents are up to date and include the most recent statutory language; (2) that your Powers of Attorney are no more than 5 years old; and (3) that your Power of Attorney allow sufficient authority for your agent to amend trust documents, make gifts, and designate or change beneficiaries.

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In a time when advances in medicine are providing longer, more fulfilling lives for our family members with special needs, it is more important than ever to take advantage of all the financial planning tools available for their specific needs.

The Illinois ABLE Act provides for a new tax-advantaged investment program that allows a blind or disabled person (or their family) to save for disability related expenses without jeopardizing the disabled individuals means tested federal benefits. Unlike the assets of a traditional Special Needs Trust, ABLE account assets can and should be spent on expenses related to the family member’s disability. These expenses include education, housing, transportation, employment training, assistive technology, personal support services, health, prevention and wellness, financial management, legal fees, and funeral/burial expenses.

A properly established ABLE account will allow a disabled individual to save up to $100,000 in their own name. The disabled person or their family may contribute up to $14,000 per year into the ABLE account without effecting eligibility for SSI or other federal means tested programs. Although the Illinois State Treasurer’s Office is responsible for administering the ABLE program, the funds are privately held assets that are totally controlled by the account holder.

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The Reverse Mortgage has gotten a bad reputation in the time since it was first created by the Federal Housing Administration in 1988. The mere mention of the Reverse Mortgage usually brings to mind foreclosed homes and declining financial health. In fact a Reverse Mortgage is simply an equity loan secured by someone’s home with a deferred payment plan. Unlike a traditional home equity line of credit, no reverse mortgage interest or principal is due until the loan reaches maturity. As long as the homeowner resides in the property and stays current on property tax and insurance payments, they can reside in the home without making any payments on the money they have borrowed.

In order to qualify for a reverse mortgage, a homeowner must be age 62 or older with substantial equity in their home. There are no income or credit score requirements. Typically, the older the homeowner, the more they can borrow. A homeowner has the option of taking out a lump sum amount or establishing a line of credit that grows over time if money is not withdrawn.

A homeowner does have the option to pay down the balance of a reverse mortgage over time. Interest paid on the loan can be taken as a tax deduction. If no payments are made, the reverse mortgage is still not due until the last surviving borrower passes away or fails to occupy the home as their primary residence. Reverse mortgage lenders will give the heirs of an estate up to 12 months to complete the sale of the home or refinance the balance of the reverse mortgage. It is VERY important that the heirs of a deceased home owner contact the mortgage lender as soon as possible to inform them of the passing and the heirs’ plans for the property.

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