In this issue

Mary Cascino identifies problems with the Disposition of Remains Act.

Janet Grove explains how to probate the will that isn’t there.

Paul Meints and Ray Koenig explain to the ISBA’s legislation committee why the Trusts and Estates Section Council sees a need for a will repository—and a proposed mechanism to meet that need. We understand the proposal was received with interest but passed over because the upcoming legislative session is supposed to be limited to appropriations and essential matters. This will allow a year to input your ideas to the Council and your general support.

Dave Berek continues to keep us posted on federal developments with new CRT provisions, an IRS “solution” that raises new problems, and other interesting points.

Circular 230 have you in a whirl? In the June issue Guy E. Williams and Scott E. Garwood spelled out the problem. In the August issue Katarinna McBride explained why and gave some potential language. Lawpulse By Helen W. Gunnarsson in the August issue of the Illinois Bar Journal also emphasizes the need to say something. But what? To save re-inventing the wheel, Jay S. Goldenberg gets to the practicality of language to use,

Finally, on the theme of practicality, Jay Goldenberg boils Cook County (and elsewhere) probate procedure to help the greenest newcomer—with some worthwhile material for old pros.

Potential statutory conflict on disposition of remains

By Mary Cascino, Pasquesi Associates, P.C., Highland Park

A situation may arise in which there is a lack of direction for disposition of the remains of a decedent. To cure this problem, New Public Act 94-0561, the Disposition of Remains Act has been enacted to establish an order of priority of persons who may decide Unfortunately, it conflicts with the Illinois Health Care Power of Attorney, 755 ILCS 45/4-10, and, actually, preempts the authority granted to an agent in a statutory Health Care Power of Attorney to control disposal of a principal’s remains.

Paragraph 1 of the statutory form of the Illinois Health Care Power of Attorney states: ”My agent shall also have full power to authorize an autopsy and direct the disposition of my remains.” While the new Public Act establishes a priority list of persons having the right to control disposition of a decedent’s remains, it does not expressly include an agent under an Illinois Health Care Power of Attorney, except to the extent the agent is included in the catchall phrase: ’any other person or organization that is willing to assume legal and financial responsibility.’

Under the new Act, the person with first priority with respect to disposal of remains is the person designated in a written document that conforms to Sections 10 and 15 of the Act. Section 10 provides a specific form entitled “Appointment of Agent to Control Disposal of Remains” and calls for stringent execution requirements. The Act, therefore, creates a new Advance Directive.

Further, a Health Care Power of Attorney is not one of the documents recognized by the new Act to direct the disposal of the principal’s remains. Under Section 40 of the new Act, directions by a decedent may be by Will, pre-paid funeral or burial contract, a cremation authorization, or a written instrument that satisfies the requirements of the Act. The new Act does not recognize a Health Care Power of Attorney as a document that can authorize disposal of a person’s remains.

Although a Health Care Power of Attorney could be revised to comply with the new Act, the new statute sets forth stringent execution requirements for a valid Appointment of Agent to Control Disposal of Remains. This is a significant difference from the execution requirements for designating an agent under a Health Care Power of Attorney. In addition to requiring that the wording substantially comply with Section 10 of the new Act, Section 15 requires that the instrument be properly completed, signed by the decedent, agent and each successor agent (reflecting acceptance and willingness to act), and that the signature of the decedent must be notarized.

A Health Care Power of Attorney requires only one subscribing witness and no notary. The theory for this ease of execution is to make the durable statutory forms readily available, even when a principal may be unable to appear before a notary public. In addition, neither the designated agent nor any successor agent under a Health Care Power of Attorney is required to accept the appointment and agree to assume the obligations provided in the appointment.

Until these conflicts are addressed by the legislature, or the Courts, the Appointment of Agent to Control Disposal of Remains is, in effect, another Advance Directive that a principal must execute in order to effectively designate an agent and successor agents to dispose of one’s remains, unless he does so by Will, pre-paid funeral or burial contract, or a cremation authorization.

Yes, you can probate a copy of a lost will

By Janet L Grove, Armstrong & Grove, Mattoon

It is a myth that a photocopy of a will cannot be admitted to probate. In fact, Illinois has allowed admission of a lost or destroyed will with no copy at all when evidence was sufficient to support the proper execution and contents of the will. Estate of Gabriel (1965), 59 Ill.App.2d 388, 210 N.E.2d 597; Cassem v. Prindle (1913), 258 Ill. 11, 101 N.E. 241.

Despite these cases, law firms with a habit of keeping a conformed copy rather than a photocopy of a will may want to rethink that policy. Having a photocopy including the testator’s signature would certainly be the best evidence of the testator’s execution but the steps to admit a lost will do not begin with execution.

Instead, the first hurdle is to rebut the presumption that a lost will has been revoked by the testator. The presumption applies only if the original executed will was in the possession of the testator and cannot be found upon the testator’s death. Estate of Phillips (July 14, 2005), 2005 WL 1652463 (Ill.App. 1st Dist.). If it is established that the will was not in the testator’s possession or was lost or destroyed after the testator’s death, the presumption does not apply. Estate of Deskins (1984), 128 Il.App.3d 942, 471 N.E.2d 1018; Gabriel, 59 Ill.App.2d 388, 210 N.E.2d 597; Cassem, 258 Ill. 11, 101 N.E. 241.

If the presumption applies, the burden of proof in Illinois is on the party seeking to probate the lost will. Keep in mind that the task is to prove that something did not happen: that the testator did not revoke the will. It has been made clear by the Illinois Supreme Court that there is no laundry list of testimony that can prove such matters and the facts and determinations in other cases provide ‘little assistance in the determination of a case of this kind.’ In re Morgan’s Estate (1945), 389 Ill. 484, 487, 59 N.E.2d 800, 801. Subsequent court opinions confirm that the facts and circumstances as a whole will be evaluated to determine whether the presumption has been overcome in each individual case. In re Moos’ Estate (1953), 414 Ill. 54, 110 N.E.2d 194; Estate of Babcock (1983), 119 Ill.App.3d 482, 456 N.E.2d 671; Phillips (July 14, 2005), 2005 WL 1652463 (Ill.App. 1st Dist.).

Evidence has generally included the following: (1) continued strong relations between the testator and the beneficiaries, (2) declarations by the testator of an unchanged attitude concerning the dispositions in the will, and (3) possession of or access to the will by an adverse party. Such evidence has been successful in some cases: Page v. Maxwell (1886), 118 Ill. 576, 8 N.E. 852; Morgan, 389 Ill. 484, 59 N.E.2d 800; Jackson v. Jackson (1971), 132 Ill.App.2d 66, 268 N.E.2d 62; Babcock, 119 Ill.App.3d 482, 456 N.E.2d 671. Yet, other attempts did not get over the evidentiary hurdle: St. Mary’s Home for Children v. Dodge (1913), 257 Ill. 518, 101 N.E. 46; Griffith v. Higinbotom (1914), 262 Ill. 126, 104 N.E. 233; Moos 414 Ill. 54, 110 N.E.2d 194; Phillips (July 14, 2005), 2005 WL 1652463 (Ill.App. 1st Dist.).

Evidence that an adverse party had possession of or at least access to the will may not be given great weight since at least one court did not want to presume that the will was destroyed without authority, as that would be presuming a crime. St. Mary’s Home for Children, 257 Ill. 518, 101 N.E. 46. But, it is still important evidence and may influence the initial determination of whether or not the presumption of revocation even applies. Deskins, 128 Il.App.3d 942, 471 N.E.2d 1018.

In Morgan, it is interesting to note that the Illinois Supreme Court found “it is not necessary that the court be able to determine what happened to a will if there is evidence that indicates it was not revoked or cancelled by the testator.” Morgan, 389 Ill. 484, 59 N.E.2d 800 at 801.

One technical problem with all aspects of proof arises from the Dead Man’s Act. 735 ILCS 5/8-201 (West 2004). This act basically prevents an adverse party or person directly interested in the action from testifying on his or her own behalf as to any conversation with the decedent or event which took place in the presence of the decedent with one applicable exception: If a witness testifies on behalf of the estate representative as to a conversation or event that took place in the presence of the decedent, then the adverse party or interested person may testify as to the same conversation or event.

The court in Phillips barred testimony pursuant to the exception to the Act stating that the conversations at issue may have occurred close in time but were two different conversations. If the adverse party were allowed to testify, the estate would have no way to offer contradictory evidence, which is exactly what the Act is intended to prevent. Phillips (July 14, 2005), 2005 WL 1652463 at page 8 (Ill.App. 1st Dist.).

It is worth noting that the adverse party in Phillips went on to attempt a disclaimer of his interest in the estate in order to testify without application of the Dead Man’s Act but the court looked to the Illinois Code of Civil Procedure to bar the effect of an assignment or release made for the purpose of allowing such person to testify. 735 ILCS 5/8-501 (West 2004).

Should the presumption be overcome or not apply, the next order of business is proving the proper execution and attestation. Gabriel, 59 Ill.App.2d 388, 210 N.E.2d 597. Next comes the task of proving the contents of the lost or destroyed will. Absent a reliable copy, declarations by the testator are not sufficient to establish the contents and most successful cases have included testimony of the drafting attorney or witnesses who knew the contents of the will, though it is not necessary for them to recite the will verbatim. Griffith, 262 Ill. 126, 104 N.E. 233; Casem, 258 Ill. 11, 101 N.E. 241.

Perhaps an ounce of prevention at the time of signing can prevent some of these difficult consequences. First, clients should be informed of the proper way to revoke a will and what happens if they make notes or corrections directly on the original. This may be done in a follow-up letter from the attorney with the final invoice. Also, if a client takes the original, the attorney should ask the client where he or she intends to store the original and make note in the client’s file. Some attorneys go so far as to note the combination of the client’s safe or the name and address of the bank where the safe deposit box is located as well as where the client keeps the keys to the safe deposit box. (One client told his attorney not to worry about the heirs finding the safe combination when he was gone as it was on display where they would find it right away-- inside the liquor cabinet.)

Of course, many attorneys take the position that the safest way to protect a client from misadventure is to retain the will themselves and give the client a copy for reference. The Illinois Probate Act provides that, “[a] will may be revoked only (1) by burning, cancelling, tearing or obliterating it by the testator himself or by some person in his presence and by his direction and consent, (2) by the execution of a later will declaring the revocation, (3) by a later will to the extent that it is inconsistent with the prior will or (4) by the execution of an instrument declaring the revocation and signed and attested in the manner prescribed by this Article for the signing and attestation of a will.” 755 ILCS 5/ 4-7 (West 2004). Thus it becomes impossible for the client to inadvertently change a will left in the attorney’s care. Conversely, if the attorney’s safety deposit box is somehow destroyed, the action was not a revocation within the statute and the contents can be proven. Unfortunately, this does leave the attorney with the responsibility of caring for wills of clients who may have disappeared over the years.

There is, however, an exciting alternative on the horizon in Illinois that may reduce the incidence of lost or destroyed wills and relieve attorneys from long term storage issues. Paul Meints of Bloomington, Illinois is leading a strong movement by the ISBA Trusts & Estates Section Council to establish a will repository. Once in place, original documents could be stored in the circuit clerk’s office. At the very least, a repository will increase the chance that the family can locate the original will when it is needed, regardless of the client’s lifetime of relocation. Be sure to read the separate presentation on the will repository in this newsletter.

For attorneys who retire or otherwise cease to practice, this is truly a great step forward in service to clients in the years ahead. Please support this development and contact the ISBA Trust & Estates Section Council if you would like more information.

In support for will depository legislation for Illinois

By Paul A Meints, Bloomington and Ray Koenig Ill, Peck, Bloom, Austriaco & Mitchell, LLC, Chicago

1. The concept of a will depository [being one and the same as a “will repository”] has been a goal of the Trusts and Estate’s Committee of the Illinois State Bar Association dating back to approximately 1988 when it was first proposed by Mr. Joseph LaRocco, an older sole practitioner in Chicago, now deceased, who was then a member of the Committee. Numerous meetings inside and outside of the Bar Association occurred. HB3562 was introduced in the 92nd General Assembly but failed to become law.

2. The will depository has been a high priority for prior ISBA Presidents as the result of receiving input from the Bar Association’s Membership. It remains a priority for the current President, Robert K. Downs. It is a current priority for the Bar Association’s upcoming legislative agenda. It remains, to my knowledge, a priority for aging lawyers in Illinois.

3. The problem of being unable to locate a testator is uniform throughout the State of Illinois, being a larger problem for the sole practitioner or for the small law firm.

4. An inability to practice law can arise at any time and at any point in an attorney’s lifetime. It is not limited to older attorneys in Illinois. Death, disability, disbarment or sanctions, divorce, and disagreements leading to the split of a law firm are the most common reasons when the issue of locating a testator becomes an important issue.

5. Similar problems occur in other states. Indiana is the most recent state to adopt will depository legislation. To the best of my knowledge, based on conversations with interested attorneys in Indiana, it was implemented without serious challenges inside the bar association, the Indiana Judges and Lawyers Assistance Program, and the County Circuit Clerk’s group. The Indiana legislation is not perfect legislation but does exhibit a “blend” of practical alternatives to the various underlying issues. The current Illinois proposal is patterned largely after the legislation in Indiana that was signed into law by its Governor in late May, 2005. Approximately 27 states have some form of will depository legislation. Every state surrounding Illinois has will depository legislation in place. Some states, California and Delaware for example, have some circuit clerks which permit this without further statutory legislation.

6. There is no uniformity among the probate courts handing the affairs of deceased lawyers who had wills in their possession. The result of this is often for a very lengthy and expensive procedure to occur, the expense of which is paid for by the lawyer’s estate. There are no Supreme Court rules to deal with this matter. The Illinois Attorney Registration and Disciplinary Commission has no procedure in place to accept wills of testators who cannot be located. It is my understanding that the Disciplinary Commission has no intent of adopting any procedure for wills, even if the attorney’s license is suspended or revoked.

7. The proposed legislation sets $25 as the statutory filing fee and then proposes some exemptions. As revocable living trusts are often longer documents a split-fee might be considered, e.g., $25 for wills and $35 for revocable trusts. An alternative to this is to set a fixed minimum fee, some charge $20, and then a per page additional fee, sometimes $1 per page. Ohio charges a simple $1 statutory filing fee. Arkansas, Vermont, and Virginia charge a $2 statutory fee. The proposed Illinois legislation follows the fee schedule most recently adopted in Indiana. To my knowledge none of the 27 states have specific authorization for the filing of a revocable living trust.

8. The proposed Illinois legislation requires nothing concerning copying or electronic filing by the circuit court. This is similar to Indiana and in the other states that have will repository legislation. At some point in the future there may be a better way to store documents and, if so, these issues can be raised at that time.

9. The issue has been raised as to whether an attorney should be permitted to “dump” a large number of wills upon the circuit clerk. The proposed legislation has not set any limit on the number of will envelopes that may be deposited with the circuit clerk. The proposed Illinois legislation first requires a “diligent search” for the testator before any documents can be filed with the circuit clerk.

10. Concerns have been expressed that problems may arise if these documents are “public” documents. The proposed Illinois legislation, as in Indiana and other states, specifies that these are not public records and are open to only a narrowly defined group of interested parties. Efforts have been made in this legislation to maintain and preserve the confidential character of the will to the greatest extent possible.

11. This legislation does not permit a testator to deposit his or her own will. Four states currently permit this. The proposed Illinois legislation follows the history of this legislation in Illinois going back to the 1980s.

12. The American Bar Association has urged the individual states to address the problems associated with the death or disability of a sole practitioner. The concept of depositing wills is common in England, Scotland, Ireland, and Canada.

13. The concept of having a “central” filing in Springfield for will documents has been discussed previously. The Illinois approach taken here follows what has recently taken place in Indiana and the other states that have will depository legislation.

14. Questions have arisen as to the need for the circuit clerk to file the will envelope for 100 years. The format of the Illinois legislation is simply to follow the Indiana format. The issue has not, however, been thoroughly discussed at the time this is written. An alternative that exists is to tie the filing period to a fixed number of years following the signing of the will, e.g., storage for 80 years after the document is signed.

Dated: August 16, 2005

Respectfully submitted,

Raymond J. Koening III and Paul A. Meints
For: Trust & Estate’s Section Council

Proposed Will Depository Legislation—Probate Act of Illinois

New Section: 755 ILCS 5/4-16

5/4-16 Deposit of Wills

§16 Deposit of Wills.

(a) A depositor, as defined in section (e), may deposit a will with the circuit court clerk of the county in which the testator resided when the testator executed the will if the depositor certifies that he is unable to locate the testator after a diligent search. This section applies whether it is known or unknown whether the testator is living.

(b) The circuit court clerk may assume, without inquiring into the facts, that the depositor has first made a diligent search for the testator and that the depositor’s representation is accurate as to the county where the testator resided when the testator executed the will.

(c) Except as provided in subsection (d), the circuit court clerk shall collect a fee of twenty-five dollars ($25.00) for each deposit of a will. The circuit court clerk shall not collect a separate fee for each document deposited in relation to a single testator or for a single joint will prepared for a husband and wife.

(d) The circuit court clerk shall waive the fee under subsection (c) if the depositor is no longer licensed to practice law in any state.

(e) As used in this section, “depositor” is defined as an attorney licensed or formerly licensed to practice in the State of Illinois, said attorney’s representative, the guardian for said attorney, or the personal representative of said attorney’s decedent’s estate.

(f) As used in this section, “will” refers to an original

(1) will;

(2) codicil;

(3) will and one or more codicils;

(4) trust; or

(5) trust and one or more trust amendments.

(g) Upon receipt of a will under this section, the circuit court clerk shall:

(1) provide the depositor with a receipt for the will;

(2) place the will in one envelope and seal the envelope securely in the presence of the depositor;

(3) designate on the envelope the:

(A) date of deposit;

(B) a short description of the documents enclosed;

(C) number of pages received;

(D) name of the testator;

(E) name and address of the depositor; and

(4) index the will alphabetically by the name of the testator.

(h) An envelope and will deposited under this section is not a public record.

(i) During the testator’s lifetime, the circuit court clerk shall:

(1) keep the envelope containing the will sealed; and

(2) deliver the envelope to:

(a) the testator;

(b) a person authorized, in a writing signed by the testator and notarized, to receive the envelope; or

(c) a person, entity, court, or government agency authorized to receive the envelope pursuant to an order entered by a court of competent jurisdiction;

(j) If the circuit court clerk has custody of the will after the death of the testator and is notified of the death of the testator by means of a certified copy of the medical or coroner’s certificate of death or by a certified copy of an order of court determining the testator to be deceased, the circuit court clerk shall deliver the will envelope to the court that has jurisdiction of the administration of the decedent’s estate within thirty (30) days of receiving notification of the testator’s death. If there is any doubt as to whom a will should be given, the circuit court clerk, or any other person, may apply to the circuit court for directions as to whom the circuit court clerk should give the will.

(k) A circuit court clerk may destroy a will deposited under this section if:

(1) the circuit court clerk has not received notice of the death of the testator; and

(2) at least one hundred (100) years have passed since the date the will was deposited.

(l) A depositor that complies with this section is immune from civil liability for depositing the will.

Recent developments in federal tax

By David A. Berek, JD, CPA, CFP, of Frye Louis Capital Management, Inc., an affiliate of Credit Suisse

Revenue Procedures Offer Guidance on Charitable Remainder Unitrusts

On August 22, 2005 the Service issued eight Revenue Procedures setting forth sample trust language for charitable remainder unitrusts. The Revenue Procedures are titled as follows:

Rev. Proc. 2005-52 – inter vivos CRUT for one measuring life
Rev. Proc. 2005-53 – inter vivos CRUT for a term of years
Rev. Proc. 2005-54 – inter vivos CRUT with consecutive interests for two measuring lives
Rev. Proc. 2005-55 – inter vivos CRUT with concurrent and consecutive interests for two measuring lives
Rev. Proc. 2005-56 – testamentary CRUT for one measuring life
Rev. Proc. 2005-57 – testamentary CRUT for a term of years
Rev. Proc. 2005-58 – testamentary CRUT with consecutive interests for two measuring lives
Rev. Proc. 2005-59 – testamentary CRUT with concurrent and consecutive interests for two measuring lives

Each Revenue Procedure gives annotated sample trust provisions, as well as annotations to the provisions.

Each Revenue Procedure also provides alternate provisions regarding: (a) providing for the payment of part of the unitrust amount to a charitable organization; (b) providing for a qualified contingency in the instrument; (c) providing for the last unitrust payment to the recipient; (d) restricting the remainderman to a public charity; (e) retaining the right to substitute the charitable remainderman; (f) providing a recipient and/or the trustee with a power of appointment to designate the charitable remainderman; (g) utilizing the net income method of calculating the unitrust amount; (h) utilizing the net income with make-up method of calculating the unitrust amount; and (i) utilizing a combination of methods for calculating the unitrust amount.

They also explain the income tax deductibility limitations. The assets of a CRUT must be revalued each year. Any Trustee who is an “independent trustee” may value the CRUT’s unmarketable assets. Section 1.664-1(a)(7)(iii) defines an independent trustee as a person “who is not the grantor of the trust, a noncharitable beneficiary, or a related or subordinate party to the grantor, the grantor’s spouse, or a noncharitable beneficiary (within the meaning of section 672(c) and the applicable regulations).”

The sample trusts may be found at <http://www.pgdc.com/usa/item/?itemID=295181>.

Practitioner’s Point: Note that these newly released Revenue Procedures do not address or offer guidance regarding the pitfalls highlighted in Revenue Procedure 2005-24 and reviewed below.

Revenue Procedure 2005-24 “Solves” a Problem You Didn’t Know You Had Provides Guidance Regarding the Interaction between an Elective Share and a Charitable Remainder Unitrust

In states adopting the Uniform Probate Code and “augmented estate” (keep reading, you’ll see how it can affect your clients) a spouse could elect against a Charitable Remainder Trust, and have part of that remainder go to a non-charitable purpose. In Revenue Procedure 2005-24, 2005-16 effective March 30, 2005 and released in the IRB on April 18, 2005, the Service provides guidance in the form of a safe harbor for meeting the requirements of section 664 that no amounts other than the lead interests of a CRAT and a CRUT be payable to any person other than an organization described in section 170(c). A spouse’s right to elect a portion of a grantor’s estate under a state’s elective share laws that would include the assets of a CRAT or CRUT will be disregarded if the spouse waives that right for all trusts made on or after June 28, 2005. For all trusts made before that date, a spouse’s right to elect under a state’s laws will be disregarded unless that right is exercised. For states with laws that have the elective share right over the assets of the CRAT or CRUT, the waiver must be signed on or before the date that is six months after the due date of Form 5227 for the year in which the later of the following occurs: (1) creation of the trust, (2) the date of the grantor’s marriage to the spouse, (3) the date the grantor first becomes domiciled or resident in a jurisdiction whose law provides a right of election that could be satisfied from the assets of the trust, or (4) the effective date of applicable state law creating a right of election. The trustee must retain a copy in the trust’s records. As a practical matter, practitioners in all states should advise their clients to have their spouses sign a waiver so that if the client moves to a different state, the client does not inadvertently violate the safe harbor provision. It will be more difficult to protect those clients who are single and later marry, or divorce and then remarry.

This “safe harbor” procedure identifies a tax exposure that didn’t exist. The American Council on Gift Annuities has asked IRS to withdraw it and proposed a simpler solution.

Income in Respect of a Decedent and Code Section 691

Private Letter Ruling 200520004 ruled that assignment by executor of decedent’s IRAs and §401(k) plan assets (“employee benefit accounts”) to charity in satisfaction of charity’s residuary bequest from the estate will not constitute a transfer under section 691(a)(2), and therefore only the charity would include the employee benefit accounts in gross income, not the estate. Upon the decedent’s death, the accounts became payable to the decedent’s estate. The executor of the estate proposed to assign the accounts to the charity in partial satisfaction of charity’s share of the residue. The decedent’s will provided that the executor was authorized to make distributions in cash, in kind valued at fair market value of the property at the date of distribution, or partly in each, without being required to make pro rata distributions of such property. 691(a)(2) provides that if a right to receive an amount of Income in Respect of a Decedent is transferred by the estate, there shall be included in the gross income of the estate the fair market value of such right at the time of such transfer. However, the Regulations provide under section 1.691(a)-4(b) that if the estate of a decedent or any person transmits the right to IRD to another who would be required by section 691(a)(1) to include such income when received in his gross income, only the transferee will include such income when received in his gross income. Thus, the Service ruled that the assignment from the estate to the charity did not constitute a transfer within the meaning of section 691(a)(2), and only the charity (ie: not the estate) was required to include the employee benefit accounts in gross income when received.

Developments Regarding Code Section 6166

Revenue Procedure 2005-33 provides guidance on exhausting administrative remedies related to section 6166 elections. A declaratory judgment pursuant to section 7479 may be requested from the Tax Court when an executor has made an election under section 6166 to extend the time for payment of estate tax with respect to an interest in a closely held business, and the Internal Revenue Service has (1) made a determination that the election cannot be made with respect to the estate or with respect to any property included therein, (2) failed to make a determination with respect to the estate or with respect to any property included therein within 180 calendar days after the executor’s filing of the election, or (3) made a determination that the extension of time for payment under section 6166 has ceased to apply with respect to the estate or with respect to any property included in the estate.

Private Letter Ruling 2005-29-006 the Service explains that the interest rate on payments of estate tax deferred under tax section 6166 is subject to change as the federal short-term rate changes.

Circular 230—What to say

by Jay S. Goldenberg, Chicago

Practitioners have been inundated this summer with Circular 230 articles.

You know that you should include disclaimer language in your correspondence, both written and e-mail.

But what?

The underlying purpose is to disclaim your responsibility for penalties incurred in reliance on a general statement that you didn’t intend to be a full-blown reliance opinion. But as a practical matter, you do not want to be scaring clients off. It is therefore a good idea to incorporate language that blames it on the IRS and makes clear that you are still willing to provide reliance language when called upon.
There is much sample language floating around. If you’ve already picked something fine. If you haven’t, start using something like this:

Circular 230 Disclosure: to ensure compliance with recently enacted U.S. Treasury Department regulations, we are now required to advise you that, unless otherwise indicated, any federal tax advice contained in this communication, including any attachments, is not intended or written by us to be used, and cannot be used, by anyone for the purpose of avoiding federal tax penalties that may be imposed by the federal government or for promoting, marketing or recommending to another party any tax-related matters addressed herein.

NOTICE: This article may NOT be relied upon for interesting reading. It may not be, and cannot be, used for penalty protection from the effects of boring tax articles.

Beginner’s guide to probating a decedent’s estate in Cook County

By Jay S. Goldenberg, Chicago

I. Introduction

A. Where This Came From

I received an e-mail from a friend: “I have a probate estate. What do I do?” I have tried to lay out the process step-by-step so the newest graduate will be able to function on the same basis as the experienced pro. Although the ultimate details are particular to Cook County, most of the process should be the same anywhere.

I’ve tried to cover the usual contingencies and point the potential variables.

Since the advent of independent administration, most estates today consist of opening the estate to get the Personal Representative appointed, and reporting with accountings and receipts to close the estate. I’ve concentrated on independent administration, without contest, with variation covered later.

B. Important Tidbits from the Clerk of the Court

Forms can be found at <http://www.cookcountyclerkofcourt.org/Forms/forms.htm>.

My own approach is to download the forms (.pdf format), fill in my continuing information (attorney number, name, etc.) and save the “master” form for use in each case.

The Clerk’s Web site has a good guide to materials <http://www.cookcountyclerkofcourt.org/General_Info/general_info.htm>, which will lead you to on-line case information (at this writing, still in beta form for probate) and the Rules.

C. WhereYou Open the Estate?

The Probate Act lists several places, in order, of probate. (755 ILCS 5/5-1). With some courts permitting filing by mail, one might file anywhere without having to travel. Unfortunately, that will probably be the case in which there is some dispute and a local attorney keeps you traveling. However the location provisions are not jurisdictional. I have filed in Cook County for several outlying counties and the judges haven’t blinked an eye. I haven’t had to decide how far away I’d try it.

The notice must be published “in a newspaper published in the county where the estate is being administered” (755 ILCS 5/18-3) (b) but for safety’s sake you can publish in the county of residence. Duplicate publication is a lot cheaper than travel.

II. Before you even go to court

Before starting (not necessarily at first meeting—I’ve had cases where I’ve never met the client and done everything by e-mail, fax or even US Mail)—you will need:

A. The Will for Filing

B. Prepare Papers for Signing:

1. A Petition to Open Probate (certified)

CCP0315 Petition for Probate and Letters Testamentary if testate,

CCP0302 for Letters of Administration if intestate

In either case, get information to complete Exhibit A listing all heirs and legatees with their addresses (one who is both may be listed once as heir/legatee). Remember that a trustee-legatee is different identity, and needs separate listing, than the individual in the same body at the same address.

In an intestate estate, identify those persons who have equal or higher priority in to nominate or serve as administrator (755 ILCS 5/9_3). Have the petition signed and you will probably be the one to certify.

In a testate estate with surety waived, the value of assets (real estate, personal estate, annual income from real estate), has minor significance. In an intestate estate, that will affect the amount of surety required (see below).

It is the practice in Cook County that the judges will not appoint co-administrators (if the will names co-executors they must follow, but they have discretion in intestacy). Therefore if the family wants co-administrators get it settled before you waste your time in court.

Usually, the petitioner will be nominating themselves. In any case, make sure the nominee qualifies under the statute. (755 ILCS 5/9_1), (755 ILCS 5/6_13).

If the Personal Representative is not an Illinois resident, identify someone to serve as resident agent (usually yourself) and enter that on your Order of Appointment below.

2. Bond Signed and Notarized

If there is a will waiving surety, use CCP0313. Otherwise you’ll need a bond with surety (CCPO312) (I’m assuming corporate surety—the process for individual sureties is complicated). You can usually get an application form for bond from the bondsman & have that completed (see below) but they’ll usually start without it. The bond is 1.5 times (the personal estate plus 12 months income from real estate). If the only asset of the estate is real estate, a bond of $1,000 will serve until sale (see below). Explain to the potential administrator that they will be billed. If the estate goes beyond a year, there will be an additional premium. The first premium (including for sales proceeds) is applicable regardless of term. Later premiums can get a pro-rata refund.

3. Affidavit of Heirship – Notarized

I use an outline or numbered format. State John Doe died x date. I am a ? of the deceased (showing basis of knowledge). State the number of times married, the termination of each marriage (pre-deceased or divorced, showing the spouse is out of the picture, or the death of the deceased showing there’s a surviving spouse). With respect to each marriage account for the children, pre-deceased children with survivors, etc. If there is no surviving spouse or descendants, work your way up the chain. See the rules of Descent and Distribution in (755 ILCS 5/2_1). Hopefully, with respect to each person in the chain, you can recite “no other children were born to or adopted by the deceased.” If you can’t plug that, you may have to publish for unknown heirs (see below). Also, hopefully state “is a living adult under no legal disability.” If not, you may have to designate someone as a :personal fiduciary” to represent their interests. Do not recite “leaving X etc. as his heirs.” That is a legal conclusion for the Court to draw. The Affidavit is a presentation of facts.

4. Possible Waiver (CCP0303)

In an intestate estate, if there are persons of equal or higher priority of right to nominate or serve than the one filing the petition, you will need their consents to this nomination. Secure their signed consents before filing the petition. See below if they don’t all consent.

III. Filing and setting date

Prepare a Probate Division Cover Sheet (CCP0199) checking off the appropriate boxes as to type of case.

A. File the Will

Make at least one copy of the will for your file. File the will in the Probate Division office on the twelfth floor of the Daley Center. You’ll need the date of death. They’ll give you a post-card sized receipt.

Note—if you are in possession of the will, even if you will not open the estate, you must file the will. Send the receipt to the named Personal Representative.

B. File the Petition

Take several copies of the Petition to Probate Division office with cover sheet. Filing fee is currently $259. If a surety is required, get one of the bonding company representatives in the hall outside the Clerk’s office to sign the original bond. Give them the application.

C. Get a Hearing Date

On filing the petition, the case was assigned to a judge. Go to their courtroom on the 18th floor and request from the clerk a date for hearing. If this is intestate, without waivers and consents, write the hearing room and date on your copy of the petition in the upper right corner and get a date at least 35 days away. Send notice (CCP1004) with a copy of the petition. If you have agreement, schedule at your convenience.

D. Prepare Orders (discussed below)

E. (Possible) Send Notice to the State’s Attorney

You may have unknown heirs. Example – cousin Andrew is in line of inheritance and nobody knows whether he’s alive, had children, etc. Even if there’s a will, they must be notified of this document cutting off their rights. This can be done by publication (below). The share of unknown heirs who cannot be located will be eventually paid to the County Treasurer for “holding”. Therefore the County, represented by the State’s Attorney, has an interest in the matter, including validity of the will. If there is a will and one locatable heir being cut out who could challenge it, they won’t get involved. If there is no such heir, or if it is an intestate estate, send them a copy of the petition, heirship affidavit and will and proposed orders at room 500 in the Daley Center with at least a week’s notice of the hearing date (although I find it helpful to send them the material before I set a date). They can be helpful in clearing matters up, and will appear at the hearing.

IV. Court appearance

You may be one of fifty matters. Tell the clerk your case. They have the petition and will. Hand the clerk the items below, having brought copies for yourself (at hearings, always bring copies for yourself to get stamped). This process of giving the clerk the papers, hopefully in order, should be followed for all hearings. Have in order:

A. Affidavit of Heirship

B. Order Declaring Heirship (CCP0305)

Recite the relation of each heir (spouse, child, niece [“child of pre-deceased sibling X’] etc).

C. Bond

D. Waiver and Consent in Intestacy

If you don’t have all consents and show that notice was given, the judge will proceed to next step. If there’s disagreement, counter-petition, etc., the judge will usually go by the majority.

E. Order Admitting Will to Probate and Appointing Representative (CCP0319) or Appointing Administrator (CCP0314)

Either should contain “a verified report per 5/28--11 or an accounting per 5/24-1 shall be filed by or the representative must appear in court on [ 14 months] at 10 AM.” (Actually, 0319 has the language but it has to be added to 0314), these forms are used for both independent and supervised administration, with options to strike language. If the Personal Representative is not an Illinois resident, add “no assets shall leave Illinois without Order of Court” (some judges do not require that in an intestate estate, since there’s a bond and surety—better to have it and strike it out than need to enter).

Step up when called and introduce yourself “X representing Y, the petitioner” (follow this procedure at all hearings).

If you’ve done it right, the judge will sign the orders (including bond). Then step up to the clerk and have them put the judge’s stamp on your copy of the orders (get the other items stamped as filed).
A copy of the Letters of Office will be mailed to you. If you want more, you can go back to the 12th floor with the stamped Order (right after hearing, or at a later time) and order more. There’s a representative of the Law Bulletin there, and you can arrange for publication of notice to creditors and, if necessary, unknown heirs.

CONGRATULATIONS! You’ve opened the estate!

V. Now it’s time to get to work!

I’m going to summarize these, since I’m concentrating on the court process. Have discussed with the Personal Representative the division of duties.

A. Notice

Send CCP1020 notifying the heirs and legatees that the will was admitted, accompanied by a copy of the will and order. Theoretically, this could be the first time they even learn the person’s dead! Actions have simply proceeded to open the estate – and now the heirs have 42 days in which to require proof, or six months in which to contest the validity. Send CCP1021 if the will was denied. You will eventually have to present Proof of Mailing and Publication (CCCP1000A), so use it as a checklist.

B. Get a Tax Number for the Estate

<http://www.irs.gov/businesses/small/article/0,,id=102767,00.html> online application. This is a very sensitive site—no abbreviations, all caps.

C. Set up a Bank Account or Other Form for Cash.

The bank will usually want a photo ID of the fiduciary, as well as Letters of Office and a Tax Identification Number.

D. Contact Banks, etc. to Turn over Funds

They may require a signature guarantee of the Personal Representative, as well as Letters of Office. The transfer of stock certificates will usually require an Affidavit of Domicile to avoid New York transfer tax.

E. Gathering Assets

Although beyond the scope of this article, bear in mind that you can use citation proceedings (CCP0378) to gather information or to recover assets (755 ILCS 5/16_1)

F. Real Estate Sale

Often, particularly in non-tax situations, the sale of the residence can be the biggest delaying factor. This can particularly be a problem if there’s a mortgage or assessments and limited cash available. (Realize that any form of financing will be very difficult while property is in the estate—lenders usually need a cookie-cutter mortgage that meets FNMA rules so they can resell).

Bonds for real estate sales (CCP0361with surety, if waived CCP0362). All you need present to the court is the bond. The Personal Representative has full authority to sell and the buyer is off the hook when they accept the Personal Representative’s deed (you’ll need Letters of Office to furnish the buyer). When you have a contract, go to court and present the bond. Be sure to include the legal description. If there’s surety required, get the surety to sign. No motion is needed—just present the bond and the judge will sign it. Have your copy stamped.

G. Bill Paying

I will assume you have enough value to eventually pay all debts, even if temporarily illiquid. Note the priority of claims in (755 ILCS 5/18_10), particularly that funeral bills start to gather interest. Instruct the Personal Representative to pay current bills. Bills can be paid without authorization of court. The claims are filed with the Personal Representative or attorney. Remember that known creditors are not barred by publication without specific notice.

Credit Card bills should be checked (especially if person was in the hospital for a while). Make sure they stop charging interest at death. Settlement can often be negotiated. Sometimes they will file a claim with the Clerk of the Court, so when you pay them get their release for final hearing.

If you disagree with a bill, send Notice of Disallowance of Claim (CCP0505). They have 60 days to file in court

H. Tax Returns

I prefer to do a 706 (and 700) myself. With regard to income tax returns I refer them to a return preparer (it’s best if the deceased’s preparer does them) for final 1040(s) and 1041s but prefer to review them.

Note this important point sometimes missed—a sale of real estate often has built-in capital loss. Suppose it’s sold for $200,00 with a commission of $12,000. Basis is value at death, of which the sales price is best evidence. Even if the estate has no income, that loss is passed through to the beneficiaries at termination.

VI. Awards

If you are concerned about debts, note that the awards for the surviving spouse and children are second class claims, right after funeral and administration expenses. This also means that you can pay them early. Remember to file a petition with your closing report, and to include the awards in your math. The statute gives a general formula which can be varied if all agree (or contested) with a minimum.

Note the math—a surviving spouse gets at least $10,000 plus $5,000 per minor or adult dependent child. If there is no spouse, the children get $5,000 each plus dividing $10,000 among them.

CCP0337 is an all-purpose petition.

VII. Distribution

A. Advance Distributions

Remember the pecking order: awards, claims, specific bequests, general bequests, residuary legatees or heirs. Heirs and residuary legatees are at the end of the line. If the Personal Representative distributes and doesn’t have enough to pay creditors the Personal Representative is in trouble.

On the other hand, once you’re confident you have enough assets, early partial distribution can make life easier on all. The representative may do so. They may even distribute before the claim period has expired if they get a refunding bond—which needn’t be approved by the Court. Use CCP0389. This can be particularly useful in cleaning up specific or general bequests.

Also remember that when the Personal Representative is the same person as sole heir/residuary legatee, their liability is the same in any case. Early distribution can enable financing of real estate.

B. Real Estate

If you are ultimately distributing real estate, you may use Notice of Probate and Release of Estate’s Interest in Real Estate CCP0421. I prefer a quitclaim deed from the executor to the recipient(s).

C. Accounting – Final Report

Accounting in independent administration can be as simple as one sibling writing another “your share is $X.” I encourage the Personal Representative to set up a spreadsheet and show them how to list receipts and expenses (the return preparer can help). The needs for detailed accounting are covered below.

What is necessary is a Final Report (CCP1011) in which the Personal Representative essentially reports “I’m done” and is hopefully approved by all (see below).

D. Specific Legatees

They can sign receipt on distribution (CCP0379) or Receipt and Approval (CCP1017). I prefer the latter. In either case ignore the approval of account, fees, etc. Their approval is not required. See discussion below about relation between receipt and payment.

E. Heirs/Residuary Legatees

These sign Receipts and Approvals of Accounting on CCP1017. On that form, the attorney and Personal Representative fees are recited for their approval. If they all approve—only once have I had a judge even ask me the size of the estate, let alone question reasonableness.

Problem: What happens if you send out the distributive share – and then the recipient can’t bother to send in their approval?

Answer: You send the receipt without distribution and explain that they can overcome the signed receipt a lot easier than the estate can proceed if we distribute first. They’ll send in their receipts.

VII. Final hearing

A. Without Full Approval

If you do not have full approvals from everyone, 28-11 provides a procedure for giving notice, filing a report, getting Court approval, then sending to legatees that if they don’t object in 42 days it will be final. Handling the dispute is beyond this article.

B. Closing Hearing

You will need

1. Final Report (CCP1011)

2. Receipts and Approvals of Accounting (CCP1017)

3. Proof of Mailing and Publication (CCP1000A)

4. Order of Discharge (CCP1012A)

C. Special Points to Note

If there is personal fiduciary appointed, the Court will want to see an actual accounting showing what they are entitled to, and proof of deposit of that amount in a bank account. Do note that funds for a minor can be deposited in a UTMA Custodial account without requirement of a guardianship of the estate.

When the Personal Representative is identical with the trustee of a distributee trust, notice of hearing should be given to the beneficiaries (Rules of Circuit Court of Cook County 12.13(c)(iii). The court will rely on the attorney’s statement that this was done (iv).

When there is a missing heir: the court will review the accounting for their share. Prepare an order (no form) reciting that the court has reviewed and approved the accounting and the share is $X, ordering the Personal Representative to deposit to the County Treasurer (755 ILCS 5/24-20) and that upon proof of such deposit the Personal Representative will be discharged. Take the stamped order and the Personal Representative’s check to the County Treasurer in the County Building, show it to them, they will deposit it and give you a receipt. You then come in for routine presentation showing the court the receipt and order (thereby reminding them they’ve reviewed everything else) and your Order of Discharge. Theoretically if you get yourself early on the call you can get approved except for the deposit, run to the Treasurer and make it back to appear at the end of the same call.

Send a copy of the stamped Order of Discharge to the bonding company.

IX. About supervised administration

Supervised Administration may be thought of as “old-style” probate before the introduction of Independent Administration. It is (though really not as bad as painted) the “horror of probate” referred to in the probate-phobia materials. It can require more accounting, court permission for every action, etc. It is rarely chosen by the Personal Representative, but may be forced for reasons described below, and I will describe from that perspective.

You may want supervised administration when you represent an heir or residuary legatee other than the Personal Representative and you don’t trust them or feel they need prodding. Even if you’re on the outside but relations are amicable do not push it since can complicate and slow down the process. If you are in the matter from the beginning and will want supervised administration so inform the attorney for the Personal Representative so they will petition ab initio and not need an extra hearing.

A. Present:

1. Petition to Terminate Independent Administration (CCP1003A)

An heir or residuary legatee can terminate as a matter of right unless the will specifically directs independent administration, (755 ILCS 5/28_4).

2. An Order (no specific form – use generalized order CCG0002)

that Independent Administration is terminated and that the Personal Representative shall file an inventory by X [60 days], which is usually the reason you’ve started this process.

B. Later Steps

You will be notified, and in many cases called on for your clients’ consent, for many processes such as sale of real estate.

If you discover assets which are not included in the inventory, report them to counsel for the Personal Representative, and they must be reported by supplemental inventory within 60 days (755 ILCS 5/14_1).

The Personal Representative is required to file an accounting “within 60 days after the expiration of 12 months after the issuance of letters” (755 ILCS 5/24_1).

If the Personal Representative broadly misses the deadlines, you may move (generalized motion form CCG0702 – acutally on motions I prefer to do my own) that a citation issue to show cause why they should not be removed (CCP0213). Rarely does it reach the point of the citation actually being issued. You may eventually get an Order to Account or Report (CCP0600).