The Estate Department is a monthly column written by CARY A. LIND and published in Newsbriefs, the monthly newsletter of the Northwest Suburban Bar Association. The columns are written for other attorneys. We believe, however, that even non-attorneys will enjoy some of the subject matter and case summaries. A listing of the articles is given at the top. If you see one you like, scroll down to the text.
We hope you enjoy the articles.
JOINT TENANCIES -- SEE YOU IN COURT!!BREACH OF FIDUCIARY DUTY - WHO DO YOU TRUST?
DEAD-MAN'S ACT, HEARSAY, AND OTHER DULL SUBJECTS
PUTTING IT TOGETHER
THE GOOD DAUGHTER, THE BAD SON, AND THE UGLY RESULTS
CONSTRUING ELEANOR'S WILL
A VERY EXPENSIVE WITNESS
CLAIMS IN PROBATE I -- IN GENERAL
CLAIMS IN PROBATE II -- PERSONAL SERVICES
CLAIMS IN PROBATE III -- MARITAL AND FAMILY RIGHTS
JOINT TENANCIES -- SEE YOU IN COURT!!
This is the first article of a series about Probate, estates, and related matters, especially issues which lead to contests or disputes. I hope that you will find the subjects interesting and helpful, and your suggestions and questions are always welcome.
The contests I see most often involve joint tenancies. While the same rules apply to real estate, stocks, bonds, and other assets, most disputes involve joint bank accounts. People have used joint bank accounts for two different purposes. One purpose was to make a gift to one joint tenant on the death of the other. Historically, that was the only result of a joint tenancy account. Over time, a second practice arose. One person would put one or more additional names on an account "for purposes of convenience" to assist with financial transactions or to do something other than making a gift. This practice was usually intended to avoid wills and Probate and was often nicknamed "poor man's Probate."
Beginning in 1955, the Illinois Supreme and Appellate Courts began to acknowledge "convenience" accounts and to address the legal issues related to them. The basic law is now well-established. An instrument creating a joint account in compliance with the statutes presumably speaks the whole truth. In order to go behind the terms of the agreement, the one claiming adversely thereto has the burden of establishing by clear and convincing evidence that the gift was not intended. Evidence and lack of donative intent must focus upon or relate back to the time of creation of the joint tenancy. If the decedent possessed donative intent at the time of the creation of the joint tenancy, a subsequent change of mind is not sufficient to sever the joint tenancy.
A party attempting to overturn a joint tenancy ("contestant") faces at least four hurdles. First, upon the death of one joint tenant, the presumption is that the account passes to the survivor. Unless there is sufficient evidence, that presumption cannot be overcome. Second, the contestant must find some way to avoid the Dead Man's Act and the Hearsay Rule, both of which bar evidence of discussions or transactions with the decedent. Often, that prohibited evidence is the only evidence, and there is no way to prove the case without it. Third, the burden of proof is by clear and convincing evidence. That is a significantly higher standard than preponderance of the evidence. Fourth, even if the contestant gets past the first three hurdles, every case turns on its specific facts, and the contestant must still prove his case. (In a later article, I will discuss in greater detail the Dead Man's Act, the Hearsay Rule, and presumptions as they apply to Probate contests.)
If the contestant does get past those hurdles to a trial on the merits, the Courts have looked at numerous factors in determining whether the account was or was not established for convenience. Those include:
- Whose money initially funded the account and was put into the account?
- Who reported the income on the account for income tax purposes?
- Whose Social Security Number is on the account?
- Who made deposits and withdrawals to the account?
- For whose benefit was money withdrawn and how was it used?
- Who had possession of the passbook or other account evidence?
- Was there a prior history of joint tenancy accounts between the parties or the decedent and other persons?
- What is the relationship of the joint tenant to the decedent?
- What did the decedent say when the accounts were created?
- Did the decedent understand the ultimate effect of setting up the joint account? Did the decedent mistakenly think that money was to pass under his or her will?
- What does the will say?
- Is there a difference between those parties who were to take under the decedent's will and those who will receive the assets of the joint account? If the parties are the same, are the amounts significantly different?
- Without the joint funds, will there be sufficient money to pay the expenses of the administration of the estate and the decedent's final bills?
This is not an exhaustive list, and any evidence that is probative and relevant would also bear on the decision of the Court.
Practical Suggestion 1: Litigating joint bank accounts can be extremely difficult and time-consuming with no sure way to predict the ultimate results. Before starting that kind of litigation on behalf of the estate or the contestant, thoroughly consider the law and the facts.
Practical Suggestion 2: This analysis applies to any joint asset contained in any estate or related to any estate or estate plan. (It also can apply to Totten trusts or other assets payable on death to another.) When you encounter a joint asset, ask the surviving joint tenant if he or she knows the decedent's true intent. The majority of people will tell the truth and will still do what is right, regardless of the consequences. Otherwise, the law will decide, and that decision may or may not be what the decedent truly wanted or what is morally "right."
Most Important Practical Suggestion: The best way to avoid these disputes is to address the issue while the testator is alive. When you sit down to do a will or trust for an individual, ask about joint tenancies. Are there any? If there are, what does the testator intend? Are they meant to be gifts, or are they for convenience only and meant to be part of the "pot"? Put the answer in the will or trust. Faced with a strong statement of the decedent's intent, most Courts will have an easy time making the decision. The mere statement of that intent should also deter most litigation.
BREACH OF FIDUCIARY DUTY - WHO DO YOU TRUST?
As attorneys, we all know what a fiduciary relationship is. Certain other relationships are also fiduciary as a matter of law, including trustee/beneficiary and principal/agent. Recent cases have also noted that an agent under a property power of attorney stands in a fiduciary relationship to the principal as a matter of law. In all other cases, a fiduciary relationship is not presumed, even between two spouses, parent and child, and child and parent and must be established based on the facts of the particular case. "A fiduciary relationship exits when one person places trust and confidence in another who, as a result, gains influence and superiority over the other. The factors to consider in determining whether a fiduciary relationship exists between parties, include the degree of kinship, the disparity in age, health, mental condition, education, and business experience, and the degree of trust placed in the dominant party. When the fiduciary relationship does not arise as a matter of law, it must be proved by clear and convincing evidence."
Fiduciary relationships and breaches of fiduciary duty arise often in contested Probate matters. A breach of fiduciary duty is sometimes considered to be a particular type of undue influence. "In certain instances, the law will raise a rebuttable presumption that the will was executed as a result of undue influence. Where a fiduciary relationship exists between the testator and the devisee who receives a substantial benefit from the will, and where the testator is the dependent and the devisee the dominant party and the testator reposes trust and confidence in the devisee, and where the will is written or its preparation procured by that devisee, proof of these facts establishes prima facie the charge that the execution of the will was the result of undue influence exercised by that beneficiary." "The burden of proving the fairness of the transaction, after a full and complete disclosure, is on the dominant party." The foregoing quotes refer to receiving benefits under a will, but the applicable law is the same with regard to wills and will contests, lifetime gifts, and any other circumstances when a fiduciary benefits from the relationship.
Stop and reflect for a minute. Has this ever happened to you? Someone (perhaps an existing client) contacts you to ask if you will prepare a will for his or her parent. The parent acting solely on his or her own then wants to leave a greater share to that child. Even if that is not undue influence, it sure looks like it! You also prepare a power of attorney for property. You have just created a fiduciary relationship as a matter of law! After the parent dies, the estate will seek to recover the excess benefit going to the agent/child. Now, instead of the decedent's other children having to first prove the existence of a fiduciary relationship by clear and convincing evidence, the burden of proof is on the child instead, and the burden of proof often decides this kind of case. After the death of the transferor, the recipient is usually hard-pressed to prove the donor's intent with admissible evidence.
Practical Suggestion 1: Whenever assets are missing from an estate, you should look for any fiduciary relationship. If you can establish the relationship and shift the burden of proof, you may have won the case. If you find a property power of attorney naming the transferee as agent, you have hit paydirt!
Practical Suggestion 2: The best way to avoid later fights is at the planning stage. When you meet with a client to prepare a will, be alert for any relationship that may be deemed "fiduciary," either because of the facts or as a matter of law. Wherever you find one or wherever one heir, legatee, or other individual will receive a disproportionate share of the estate (either through Probate or otherwise), I suggest you do two things. First, state clearly in the document what is being done and why. It may not prevent an attack, but it will go a long way to discourage one. Second, make notes or other contemporary records to document the client's position. You will probably be called as a witness if the matter ever does go to litigation. You and your file may be the difference between your client's intent being carried out and a successful challenge that yields a contrary result.
DEAD-MAN'S ACT, HEARSAY, AND OTHER DULL SUBJECTS
Probate litigation is different from most other litigation in one critical way: by definition, one party to the transaction is either dead or mentally disabled. As a result, presumptions and certain rules of evidence take on much greater importance.
The Dead-Man's Act, 735 ILCS 5/8-201, begins as follows:
In the trial of any action in which any party sues or defends as the representative of a deceased person or person under a legal disability, no adverse party or person directly interested in the action shall be allowed to testify on his or her behalf to any conversation with the deceased or person under legal disability or to any event which took place in the presence of the deceased or person under legal disability, except in [certain enumerated instances].
The spouse of an interested party is also barred under the Dead-Man's Act.
In determining whether the Dead-Man's Act applies to particular evidence, it is important to read the language of the statute carefully. The Statute is limited to parties aligned in a particular way and to certain types of evidence. The exceptions can be critical. In Citation proceedings, the Court does have the discretion to call a party as the Court's witness, so as to avoid the bar of the Act. Unless a party is called as the Court's witness, there is independent testimony by a disinterested witness, or the Estate "opens the door" by introducing testimony which can then be contradicted, a party may lose a case or be unable to assert an otherwise valid claim because of the bar of the Act.
Even if a party gets past the hurdle of the Dead-Man's Act, the evidence may be barred by the Hearsay Rule. Hearsay is a statement offered in evidence to prove the truth of the matter asserted. In most Probate litigation, the key question is whether the statement is offered to prove the truth of the matter asserted or whether it is offered to prove some other fact or aspect of the case, such as the decedent's or ward's state of mind. A full discussion of hearsay is beyond the space available for this article. Keep in mind, however, that it gives the estate a second shot at barring admission of testimony related to purported statements of the Decedent.
When evidence is lacking, cases are often decided by presumptions. The key Illinois decision on presumptions came in a Probate case, Franciscan Sisters Health Care Corporation v. Dean, 95 Ill.2d 452, 448 N.E.2d 872, 69 Ill.Dec. 960 (1983).
"[T]he term "burden of proof" encompasses both the burden of producing evidence that will satisfy a judge of the existence of an alleged fact and the burden of persuading the trier of fact that the alleged fact is true. [Citation omitted]. The burden of persuasion does not shift but remains with the party who initially had the benefit of the presumption. . . .
The prevailing theory regarding presumptions that Illinois follows and Diederich speaks about is Thayer's bursting-bubble hypothesis: once evidence is introduced contrary to the presumption, the bubble bursts and the presumption vanishes. [Citation omitted] . . .
The amount of evidence that is required from an adversary to meet the presumption is not determined by any fixed rule. A party may simply have to respond with some evidence or may have to respond with substantial evidence. If a strong presumption arises, the weight of evidence brought in to rebut it must be great. [Citation omitted].
Thus, a presumption will decide the case if there is insufficient evidence to the contrary to rebut the presumption. Once sufficient evidence is produced and the presumption "bursts," the trial commences as if there never was a presumption in the first place, and each of the parties bears its respective burdens of proof on all issues.
This material may seem rather dry and technical, but these rules decide more Probate cases than the evidence. In the next two articles, I will bring together issues discussed here with those related to joint tenancies and breach of fiduciary duty to demonstrate how they apply to real cases.
Let's look at how the law and rules on joint tenancy, fiduciary relationships, Dead-Man's Act, hearsay rule, and presumptions interrelate in an actual fact situation. Della Decedent sets up two bank accounts. Account A is an account in joint tenancy with Carla Crook, her cousin. Account B is in the name of Della payable on death (POD) to Carla. Bank accounts are used here for illustration, but the rules and analysis are the same for other kinds of property. Della has a Will which leaves all of her Estate to her only child, Vera Victim. These issues arise after Della's death. A Court will usually decide the case on an asset-by-asset basis, and the results can be and are often split.
The presumption for Account A is that Della intended to make a gift of the account to Carla. If there is no other evidence, Carla wins. If there is enough admissible evidence that Della had a contrary intent when she first set up the account, the presumption "bursts," and trial is held de novo with no presumption either way. Carla cannot testify to any transactions with or conversations between herself and Della unless the Estate "opens the door" by presenting testimony of specific incidents. Without Carla's direct testimony, she will likely lose.
The presumption for Account B is also that Della intended to make a gift of the account upon her death. However, a POD account is rarely set up "for convenience," since the decedent has full control over the account while she is alive and the beneficiary has no rights in the account until the owner dies. If there is no other evidence, Carla wins. Even with other evidence, Carla will still probably win.
Now assume that Carla is acting as a fiduciary for Della pursuant to a property power of attorney or as otherwise established. If the bank accounts were set up prior to the date the fiduciary relationship arose, the results would be the same, since Carla did not take any action to benefit herself during the time she stood in a fiduciary relationship towards Della.
However, what if the fiduciary relationship was established first, and then Account A was set up by Carla? Assume also that Della herself signed documents setting up the account. After Della dies, there is no admissible testimony as to Della's intent, and a peculiar situation results. On the one hand, because Account A was a joint account, the presumption is that Della intended the account to be a gift to Carla, and Carla wins. On the other hand, because Carla benefited from an account established during the time Carla was a fiduciary for Della, the presumption is one of fraud which Carla cannot rebut, and Vera wins. What happens when the Court is faced with "dueling presumptions"? The Fourth District Appellate Court was faced with that exact question in Estate of Rybolt. The Court acknowledged that it had "an interesting conflict of presumptions in this case." That Court said:
We conclude the facts here require strong evidence to overcome the presumption of fraud. As more of our population become aged, more will need financial assistance. Unfortunately, greed and the temptation to benefit oneself will exist. If the presumption of fraud can be offset by a presumption of donative intent through joint tenancy with right of survivorship, then greed will often win out. We deem it necessary to hold in this case that the presumption of donative intent was outweighed by the presumption of fraud--that presumption requiring more evidence to overcome. Thus, under our facts, Vera wins. To date, no other Appellate District has addressed that question. Based on my experience, I agree with the decision, and I hope it will be followed by other Courts.
A similar analysis will apply to other variations of these facts. For example, if there is a three-way joint tenancy and one of the names is "removed" to the benefit of the fiduciary, that is a breach of fiduciary duty. If "new" money is added to pre-existing accounts to the fiduciary's benefit, it is a breach of fiduciary duty. In some cases, the party benefiting may not be the actual "fiduciary," but two or more people may act in concert or conspiracy.
In general, a Court will look at the assets before the fiduciary relationship arose and at the date of death and will review the Decedent's testamentary plan. Where there are significant deviations from the Decedent's intent and where the fiduciary is involved in benefiting herself or her cohorts, a Court is more likely to act. While the law is clear, each case turns on its particular facts in light of the evidentiary rules and probably the applicable presumptions.
Let's look at how the law and rules on joint tenancy, fiduciary relationships, Dead-Man's Act, hearsay rule, and presumptions interrelate in an actual fact situation. Della Decedent sets up two bank accounts. Account A is an account in joint tenancy with Carla Crook, her cousin. Account B is in the name of Della payable on death (POD) to Carla. Bank accounts are used here for illustration, but the rules and analysis are the same for other kinds of property. Della has a Will which leaves all of her Estate to her only child, Vera Victim. These issues arise after Della's death. A Court will usually decide the case on an asset-by-asset basis, and the results can be and are often split.
The presumption for Account A is that Della intended to make a gift of the account to Carla. If there is no other evidence, Carla wins. If there is enough admissible evidence that Della had a contrary intent when she first set up the account, the presumption "bursts," and trial is held de novo with no presumption either way. Carla cannot testify to any transactions with or conversations between herself and Della unless the Estate "opens the door" by presenting testimony of specific incidents. Without Carla's direct testimony, she will likely lose.
The presumption for Account B is also that Della intended to make a gift of the account upon her death. However, a POD account is rarely set up "for convenience," since the decedent has full control over the account while she is alive and the beneficiary has no rights in the account until the owner dies. If there is no other evidence, Carla wins. Even with other evidence, Carla will still probably win.
Now assume that Carla is acting as a fiduciary for Della pursuant to a property power of attorney or as otherwise established. If the bank accounts were set up prior to the date the fiduciary relationship arose, the results would be the same, since Carla did not take any action to benefit herself during the time she stood in a fiduciary relationship towards Della.
However, what if the fiduciary relationship was established first, and then Account A was set up by Carla? Assume also that Della herself signed documents setting up the account. After Della dies, there is no admissible testimony as to Della's intent, and a peculiar situation results. On the one hand, because Account A was a joint account, the presumption is that Della intended the account to be a gift to Carla, and Carla wins. On the other hand, because Carla benefited from an account established during the time Carla was a fiduciary for Della, the presumption is one of fraud which Carla cannot rebut, and Vera wins. What happens when the Court is faced with "dueling presumptions"? The Fourth District Appellate Court was faced with that exact question in Estate of Rybolt. The Court acknowledged that it had "an interesting conflict of presumptions in this case." That Court said:
We conclude the facts here require strong evidence to overcome the presumption of fraud. As more of our population become aged, more will need financial assistance. Unfortunately, greed and the temptation to benefit oneself will exist. If the presumption of fraud can be offset by a presumption of donative intent through joint tenancy with right of survivorship, then greed will often win out. We deem it necessary to hold in this case that the presumption of donative intent was outweighed by the presumption of fraud--that presumption requiring more evidence to overcome. Thus, under our facts, Vera wins. To date, no other Appellate District has addressed that question. Based on my experience, I agree with the decision, and I hope it will be followed by other Courts.
A similar analysis will apply to other variations of these facts. For example, if there is a three-way joint tenancy and one of the names is "removed" to the benefit of the fiduciary, that is a breach of fiduciary duty. If "new" money is added to pre-existing accounts to the fiduciary's benefit, it is a breach of fiduciary duty. In some cases, the party benefiting may not be the actual "fiduciary," but two or more people may act in concert or conspiracy.
In general, a Court will look at the assets before the fiduciary relationship arose and at the date of death and will review the Decedent's testamentary plan. Where there are significant deviations from the Decedent's intent and where the fiduciary is involved in benefiting herself or her cohorts, a Court is more likely to act. While the law is clear, each case turns on its particular facts in light of the evidentiary rules and probably the applicable presumptions.
THE GOOD DAUGHTER, THE BAD SON, AND THE UGLY RESULTS
Sometimes the rules on joint tenancy fiduciary relationships, Dead-Man's Act, hearsay rule, and presumptions give results that are just wrong. The following illustrations are modified from two cases I was involved in. [Editorial note: It is a coincidence that the women in both situations were "good" and the men were "bad." No political or sexist statement is intended.]
The Good Daughter
Jacob and Ruth had two children, Judy and David. After Ruth died, Judy cared for Jacob, who had no mental problems but was confined to a wheelchair, and assisted him in routine ways in handling his financial affairs. Jacob's will divided his Probate Estate equally between Judy and David and named Judy as Executor. Jacob also executed a Property Power of Attorney naming Judy as agent. After Ruth died but before he executed the Power of Attorney, Jacob set up two joint bank accounts with Judy intending that she receive those accounts upon his death. His intent was never put in writing.
After Jacob died, Judy was appointed Executor. The Probate Estate was approximately $200,000.00, and the joint bank accounts totalled approximately $140,000.00. David hired a "Rambo" litigation firm and instituted Citation proceedings against Judy to recover all of the joint funds for the Estate with the additional goal of beating her into submission. David claimed that Judy stood in a fiduciary relationship with Jacob even before the execution of the power of attorney and had benefited from that relationship to David's detriment. Judy hired a skilled litigator to neutralize David's lawyers, but the attorneys on both sides of the proceedings spent great amounts of time and charged the parties thousands of dollars in fees.
The case was ultimately settled. Between the settlement she received and the fees she paid, Judy ended up with only $40,000.00 out of the $140,000.00. That result was absolutely contrary to Jacob's intent, but had the litigation continued, Judy could have ended up with nothing left from the joint accounts or with actually having to pay her attorneys and David combined an amount in excess of all of the joint funds.
The Bad Son
John and Mary had seven children, three sons and four daughters. During their marriage, Mary was hospitalized at least two times for mental illness and could not be "trusted" to handle money responsibly. John put all of his liquid assets into joint tenancy with one of his sons, William (the other two sons resided out of state). Mary did have a limited amount of her own money and put that into joint tenancy with Eileen, one of the parties' daughters. Neither John nor Mary had a will.
John died first. The marital home was in joint tenancy and passed to Mary. The rest of John's assets passed by operation of law to William. William held the money separate and did not take any of it for his own use while Mary was alive. However, he also kept the money entirely away from Mary and paid nothing to any of his siblings. Almost two years after John died, Mary consulted an attorney and was planning to challenge William's ownership of the joint assets when she died. Eileen was appointed Administrator of Mary's Estate and promptly transferred "her" joint accounts into Mary's Estate, since they were admittedly Mary's funds. Eileen then brought Citation proceedings against William on the basis that the joint accounts between John and William were part of a "family plan," were joint for convenience only, were to be held or used only for Mary's benefit so long as she lived, and were then to be distributed as part of Mary's Estate.
No fiduciary relationship ever existed between John and William. John "managed" his own money until his death. No fiduciary relationship ever existed between Mary and William. Eileen, not William, assisted Mary with her financial affairs. John and Mary did not discuss their financial affairs with their children, except that John on one occasion did discuss the joint accounts with William. That conversation was accidently overheard by two of the other children. However, their testimony was barred by the hearsay rule, and in the end there was insufficient evidence to overcome the presumption that the accounts were intended to be gifts by John to William. Out of the entire Estates of John and Mary, William ultimately received approximately $100,000.00 from the joint accounts with John plus a share of Mary's Estate. Mary's Estate was divided into seven shares, one for each child, and her net estate totaled only $42,000.00. Each share was thus $6,000.00. John and Mary never intended to favor one child over the others. Yet, William ultimately received a total of $106,000.00 while each of his brothers and sisters received only $6,000.00!
Conclusion
Too may people still believe the myth that joint tenancies can successfully avoid Probate. Add to that myth the increased use of powers of attorney, and the result often is not only Probate but contested Probate with substantial fees and costs. We should tell everyone, especially our clients, about these problems and how to avoid them.
In earlier articles I discussed measures we as attorneys can and should take to help avoid these situations. The first step in planning any client's estate should be to review the client's assets and how they are held. Only then can we anticipate problems such as these which may arise and plan to avoid them. It is bad enough when a decedent's plan gets altered. It is far worse when the result is exactly the opposite as in these two cases. These are only two examples of what can go wrong. It is our job to see that they go right.
Eleanor was one of six children. She was never married and never had any children. Eleanor's will divided her Estate into eight shares. Four shares were left to her surviving brothers and sister. One share was left to a sister-in-law, who had been married to Eleanor's brother who died. The remaining three shares were divided equally among fourteen nieces and nephews of all of Eleanor's siblings. There was no residuary clause.
Eleanor was confined to a nursing home for because of physical problems. On one particular day (it was alleged), one of the nurses caring for her put the wrong substance into Eleanor's intravenous bag. Eleanor had a seizure, was rushed to the hospital, and spent the next five years in a coma. She never regained consciousness before her death. One of her surviving brothers, William, Sr., and her brother-in-law John were appointed as Eleanor's Co-Guardians, and they pursued the malpractice suit against the nursing home. In her will, Eleanor named one of her nephews, William, Jr., as Executor of her Estate, and when Eleanor died, he was appointed.
The Estate then faced a problem. During the time Eleanor was in her coma, three of her other siblings had died, including John's wife. The will did not say what would happen to a sibling's share if the sibling died before Eleanor. The anti-lapse provisions of the Probate Act direct that bequests descend per stirpes but only to descendants, not to siblings and their descendants (collaterals). Two contradictory outcomes seemed possible. A Court might decide that if a share lapsed, that share would be divided equally among the remaining shares. That interpretation would eliminate all of Eleanor's other in-laws, including John, the Co-Guardian. A Court might decided instead that in the absence of a residuary clause, a lapsed share would pass by intestacy. That would mean that the share would be divided among all of Eleanor's nieces and nephews except those who were children of William, Sr., since he and not his children would be Eleanor's "heir."
Looking at the will, however, a third possibility suggested itself. Eleanor had provided in her will for one spouse of a deceased sibling. It was likely that she would have wanted to provide similarly for her other in-laws. I met with William, Jr., and asked him what he thought his aunt would have wanted. He said that Aunt Eleanor certainly would have wanted the other in-laws to take their deceased spouses' shares.
I prepared for the legatees a long explanation of the situation and laid out the two most likely results of a will construction action. I explained that three-eighths of the Estate could not be distributed until the issue was resolved. I explained that the proceeding would be cumbersome and would cost several thousand dollars in attorney fees. I then laid out the third alternative that William, Jr., and I had discussed. I stated that William, Jr., thought Eleanor would have wanted that result. I sent with the explanation two opposing "directions" to the Estate. One agreed with the third alternative and one did not. I told the remaining legatees to sign one or the other and return it to me. I also told them that only if they were unanimous could we avoid a will construction action.
I sent out sixteen consents (to William, Sr., the one named sister-in-law, and the fourteen nieces and nephews). I received back sixteen consents to the third alternative. The result was almost certainly what Eleanor would have wanted. It was especially important to John, who had put much time and energy into acting as Eleanor's Co-Guardian.
Closing observations: First, amidst all of the Estate contests and litigation, you sometimes find families that do what is necessary to resolve difficult situations, even where it may cost them money or assets. Second, by settling this kind of situation, an attorney can be a hero and save the Estate substantial fees . So much in the practice of law is in shades of grey. It feels good to once in a while guide a case to a result that you know is "right.
Witnessing a will can sometimes be hazardous to your wallet. Read on:
Fact Situation One.
Larry, a widower, had four children: Alice (married to Fred), Barbara (now married to Gary), and Carol from his first marriage, and David from his third marriage. Shortly after his wife died, Larry made a will dividing his estate equally among all four children. David took his mother's death very hard. Larry and David had a falling out, and they became more and more estranged. While Larry was in the hospital, Larry asked Fred, an attorney, to write out a codicil to his will. The major change was to give David only $20,000.00 and to divide what was left among Larry's other three children. The codicil was handwritten exactly as Larry requested and was witnessed by Fred and by Gary, who was not married to Barbara at the time. Fact Situation Two.
Robert never had or adopted any children. His wife, who died before him, had two children, Sandra and Tricia, Robert's stepchildren. Tricia is married to William, and they had one child, Victor, who does not yet have any children of his own. William and Victor were the witnesses to Robert's will.
Unexpected Results.
§4-6(a) of the Probate Act states in part as follows:
If any beneficial legacy or interest is given in a will to a person attesting its execution or to his spouse, the legacy or interest is void as to that beneficiary and all persons claiming under him, unless the will is otherwise duly attested by a sufficient number of witnesses as provided by this Article exclusive of that person, . . . but the beneficiary is entitled to receive so much of the legacy or interest given to him by the will as does not exceed the value of the share of the testator's estate to which he would be entitled were the will not established.
Thus, no person can benefit from a will witnessed by that person or his or her spouse. This statute does not give a "choice." It says that the will or codicil is valid and the share of the said individual is reduced or voided accordingly, no matter what the person wants and no mater how harsh the effect.
With that in mind, let's look again at the two fact situations, both of which are based on actual cases.
In Fact Situation 1, the codicil is valid, and David will receive only $20,000.00. Alice will be limited to < of the Estate, because her husband, Fred, witnessed the codicil, and because that is what she would have received under the earlier will. Barbara's share will not be affected, since Gary was not her husband at the time the codicil was executed. Thus, Barbara and Carol will divide the remainder of the Estate equally (approximately 3/8 each instead of 1/3).
In Fact Situation 2, Tricia cannot take any share of the Estate, because her husband was a witness. Robert's will did not specify that the gift to Tricia was per stirpes. Since Tricia was not Robert's descendant, her share would not automatically descend to Victor. However, descendant or not, Victor's share is also voided, since he witnessed the will. The entire estate, therefore, passes to Sandra. In the actual case from which these facts are taken, Tricia raised argument after argument to attack the severe effects of §4-6, but all of them were rejected by the Appellate Court.
Conclusion.
The lesson to be learned from these examples is obvious. All witnesses should be disinterested under any reasonably foreseeable combination of facts. In Fact Situation 1 above, Fred had no one to blame but himself for the reduction in his wife's inheritance. The attorney in Fact Situation 2 might well face a malpractice suit. None of us wants to wind up in any of these situations. Be careful who witnesses the wills and codicils you draw, and be especially careful what you yourself witness.
CLAIMS IN PROBATE I -- IN GENERAL
Claims in Probate are debts of the Decedent which are owed at the date of death or which arise after death or during the course of administration. To be "allowed," claims must be either paid by or "filed" with the representative. "Filing" is defined very loosely. Mailing of a bill to the Decedent and receipt of the bill by the representative can be adequate "filing."
Barring Claims
Not very long ago, a representative only had to publish against claimants, and if they did not file claims with the Court, the claims were barred. That changed in 1988 with the decision in Tulsa Professional Collection Services, Inc. v. Pope. The United States Supreme Court held that due process requires a representative to make a reasonable effort to determine creditors of an estate and to give them actual rather than constructive notice. The representative cannot close his eyes to known or reasonably ascertainable creditors, publish for claims, and bar those claims based solely on the publication. Actual notice must be given to known or reasonably ascertainable creditors.
After that decision, §18-12 of the Probate Act was amended to comply with the ruling. That section now provides that a claim is barred if one of the following is true and if the creditor does not file a claim:
- Actual notice is given to a known creditor pursuant to §18-3.
- Notice of Disallowance is given to a creditor pursuant to §18-11.
- Notice is published and the claimant is not known to or reasonably ascertainable by the representative.
Regardless of any other circumstances, all claims against an Estate are barred two years after the date of death whether or not Probate has been instituted. This limitation period can be used in connection with assets (often real estate) when the heirs or legatees do not intend to sell the assets and are willing to wait out the longer claim period to obtain clear title.
Classification of claims
Claims are divided into classes:
First Class Claims are funeral and burial expenses (paid by any person), expenses of administration, and statutory custodial claims. Interest on funeral and burial expenses accrues at 9% beginning 60 days after issuance of letters of office to the representative of the decedent's estate, or if no such letters of office are issued, then beginning 60 days after those amounts are due.
Second Class Claims are the Surviving Spouse Award and/or Dependent Child's Award.
Third Class Claims are debts due the United States.
Fourth Class Claims are for money due employees of the decedent of not more than $800.00 for each claimant for services rendered within 4 months prior to the decedent's death and expenses attending the decedent's last illness.
Fifth Class Claims are for money and property received or held in trust by decedent which cannot be identified or traced.
Sixth Class Claims are debts due the State of Illinois and any county, township, city, town, village, or school district located within Illinois (includes Real Estate Taxes).
Seventh Class Claims are all other claims.
Each class of claims must be paid in full before paying any claims in the next class and a class of claims is paid pro-rata if there is not enough money left to pay the class in full. Where all claims will not be paid, the representative may have to notify claimants of the same or lower classes in order to afford due process to and avoid prejudice to those claimants.
The claim provisions appear simple, but problems do arise. The next two articles will explore some of those situations.
CLAIMS IN PROBATE II -- PERSONAL SERVICES
"If you take care of me for the rest of my life, I will leave you (fill in the blank)." When what was promised is not delivered, a claim against the Probate Estate results. Claims for personal services rendered to the decedent by the Claimant while the decedent was alive are very common situations, but they are some of the most problematic of all claims. Such a claim is essentially a "contract" claim. It may be based on either a written or oral agreement. The agreement may be express or implied, implied in fact or implied in law.
As in many areas of Probate law, we start with a presumption, which may decide the case. Where persons live together as members of one family (or for their "mutual benefit") and where nothing more appears than the rendition of such services, the services are generally presumed to be gratuitous. The family relationship which gives rise to the presumption may be one of blood or one of mutual dependence of the family members. The presumption that the services were gratuitous diminishes in direct proportion to the degree of remoteness of the relationship and the nature of the duties performed.
Many factors rebut the presumption that the services were gratuitous. They include: the existence of an express contract; the existence of an oral promise to leave property by will or an invalid or ineffective agreement or instrument showing the Decedent's intention to pay; facts or circumstances which in their nature justify an inference of an actual understanding of the parties; circumstances which are so exceptional as to rebut the presumption; failure or inability to make return either in kind or otherwise rather than reciprocity in services; enhancement of the Estate of the decedent by the work performed; services rendered beyond those of an express agreement; extraordinary services certainly not incident to any normal domestic relationship; actions taken by the Claimant in reliance upon the purported agreement to the Claimant's detriment; financial condition of the parties; and more. Each case turns on its particular facts. If the presumption is overcome, it is gone, and trial is de novo.
The burden of proof is on the Claimant to prove the contract or agreement. Once that burden has been met, the burden shifts to the Estate to prove any claimed payment or completion of the contract on behalf of the decedent. The Claimant has two key hurdles to overcome in proving any claim for personal services: the Dead-Man's Act and the Hearsay Rule. It may be difficult or impossible for the Claimant to prove an express agreement with a decedent without direct testimony by the Claimant of the decedent's statements or promises. Many claims which would otherwise be and should be allowable cannot be proved or sustained because of those evidentiary rules.
Even if the Claimant cannot prove the express agreement, he may still may be able to prove a claim in quantum meruit for the reasonable value of the services. Where services are rendered by one person to another in the absence of a family relationship which are knowingly and voluntarily accepted, the law presumes that the services were given and received in the expectation of being paid for and implies a promise to pay their reasonable worth. Quantum meruit may not yield as great a benefit as was promised, but is beats getting nothing.
Statutory Custodial Claim
Effective January 1, 1989, a new Section 18-1.1 was added to the Probate Act. The "Statutory Custodial Claim" was apparently enacted to remedy the injustice of family members who rendered services and then were unable to prove the agreement with the Decedent or the value of the services. One of a list of enumerated family members who dedicates himself or herself to the care of a disabled person by living with and personally caring for the disabled person for at least three years is entitled to a claim against the Estate upon the death of the disabled person. The claim shall take into consideration the Claimant's lost employment opportunities, lost lifestyle opportunities, and emotional distress experienced as a result of personally caring for the disabled person. The claim is in addition to any other claim, including without limitation a reasonable claim for nursing and other care. The claim is to be based upon the nature and extent of the person's disability and, at a minimum but subject to the extent of the assets available, shall be in amounts set forth in the statute, ranging from $100,000 for a person who has 100% disability to $25,000 for a person who has 25% disability.
CLAIMS IN PROBATE III -- MARITAL AND FAMILY RIGHTS
Spouses, ex-spouses, and children of divorced parents present peculiar problems when Estates are not able to pay all of their bills. Those claims usually fall into one of three classes. First Class Claims
To the extent the spouse pays funeral or related expenses or expenses of administration, he or she is entitled to reimbursement of those payments as a First Class Claim. An issue sometimes arises as to whether certain expenses are properly "administrative expenses", e.g., payments to maintain the Decedent's real estate where the spouse continues to reside there. Otherwise, this category does not usually cause disputes regarding marital and family rights.
Second Class Claims
Second Class Claims are the Surviving Spouse Award and Dependent Child's Award. The minimum award to a spouse is $10,000.00. The minimum award is $5,000.00 per child for each dependent (not necessarily "minor") child of the Decedent (plus $10,000.00 for all children combined if there is no surviving spouse). The goal of both awards is to provide support for a period of nine months after the death of the decedent in a manner suited to the condition and life of the surviving spouse and/or child and to the condition of the estate. Minimum awards can be paid without authorization by the Court. If any amounts are sought beyond the minimums, it may be necessary to give notice to parties whose interest will be affected and to obtain an award from the Court.
Note that these awards have priority over even debts due to the Federal government and that they are exempt from the claims of creditors. Remaining marital and family rights are not so favored.
Marital Rights After Divorce
A Settlement Agreement or Judgment of Dissolution of Marriage may contain terms or conditions that have not been fully completed or complied with prior to the death of the Decedent. Under 750 ILCS 5/510(d) and (e), the death of the obligor parent does not necessarily terminate obligations of the deceased parent under the divorce judgment or agreement or by law. Those obligations specifically include child support and educational expenses and can be brought as claims in the Probate proceeding. Other obligations arising out of divorce can also be raised in the Probate proceeding as "contract" claims, such as obligations to maintain life insurance coverage or to convey property.
Seventh Class Claims
A claim of an ex-spouse for anything other than a First or Second Class Claim is a Seventh Class Claim. Those include claims for child support, educational expenses, and maintenance. Similarly, if a Decedent died with substantial unpaid medical bills for which a surviving spouse is liable under the Family Expense Act, any claims by the surviving spouse (as well as those bills themselves) are only Seventh Class Claims. Those claims are thus on a par with all other non-priority claims against the Estate, such as charge account balances, magazine and newspaper subscriptions, rent and utilities, business debts, and so on. Where there are large unpaid bills and where the Estate is insufficient to pay all of the claims in full, this situation can work a hardship on the spouse or ex-spouse. Apart from the Surviving Spouse Award and the Dependent Child's Award, current law does not give the family any other priority over other Seventh Class Claimants.
Practical Suggestions
- Have your client (spouse or guardian for dependent children) keep track of actual living expenses for nine months following the date of death. If the actual expenses are greater than the minimum Surviving Spouse Award or Dependent Child's Award, you can petition the Court accordingly with the proof in hand to substantiate the claim. It is better to have a Second Class Claim than a Seventh Class Claim.
- Maximize Claims wherever possible. Claims for future child support payments and future educational expenses due from the deceased parent coupled with increases for expected inflation can come to a substantial amount. If Seventh Class Claims are paid pro-rata, the greater the amount of the client's claim, the greater the amount that will actually be paid to the client.
- Where possible, insulate obligations under divorce judgments against the death of the obligor parent, e.g., by making the obligations direct liens against assets. That way, those obligations come before any claims, and there is no risk (other than inadequate security) that the obligations will not be paid because of a shortfall in the obligor's Estate.
Final Observation
In general, Illinois and Federal Law go to great lengths to protect the rights of divorced spouses and the children of divorce. Most marital obligations are not dischargeable in Bankruptcy. Child support is withheld directly from wages to the potential detriment of other creditors. Child support obligations become judgments when not paid. There are many similar protections. HOWEVER, child support, educational expenses, medical expenses, maintenance, and all other similar rights become mere Seventh Class Claims against decedent's Estates. They are treated the same as all other "general" debts of the decedent. There should really be another class of claims between Sixth and Seventh Class to cover marital rights. Until that happens, however, the best we can do is to protect our clients at the time of divorce.