January 17

International Estate Plans

Having an office in Naperville, IL, I frequently see clients with global ties.  With our proximity to O’Hare International Airport, our community is home to many multinational technology, finance, consulting, and other companies.  Frequently, skilled employees of these businesses have family ties overseas, or have worked for their companies in other countries.

Below, I will discuss a hypothetical family of four that emigrated from the United Kingdom to work at an engineering firm in Naperville.  Families like this, which are increasingly common in today’s world, require careful estate planning services, often from an international team of experts.

Our Hypothetical Family

Imagine our hypothetical family owns a half-million pound house in London, a half-million pound UK bank account, a half-million dollar house in Naperville, and a half-million dollars worth of stocks in US brokerage accounts.  The family has lived in the US for two years.  All family members are dual UK-US citizens.  Every summer the family goes back to London for a month for the children to visit their grandparents, but spends the rest of the year in Naperville.  The family may one day return to the UK or live in a third country, depending on where the company sends them next.

The Local Component

Because the family is living in Illinois, it is extremely important that the parents work with an estate planning attorney licensed to practice law in Illinois.  If either or both parents became disabled or die, Illinois powers of attorney (in the event of disability) or well-drafted trusts (in the event of disability or death) would help ensure the family is properly cared for.   Many families with this level of assets also plan ahead to avoid the difficulties of probate, typically through the use of a living trust.  Perhaps most importantly, the family should name guardians for their children in the event of their deaths, as an Illinois judge would ultimately decide who should serve as guardians.  Without instructions from parents, a judge may pick someone the parents would not have chosen.
So far, the family’s discussion with an Illinois attorney is similar to the discussion any typical Illinois family might have with their attorney.  However, the family’s ties to the UK add a layer of complexity.

UK Estate Plans

Only a lawyer licensed to practice law in the UK is qualified to give advice about an estate plan in that country.  The ideal time for a family to create an estate plan for its overseas property is at the same time as when dealing with US property.
If the US and UK lawyer are working on their respective pieces of the estate plan at the same time, the family would be wise to ask the two lawyers to coordinate.  Some potential reasons:
Probate is aggravating, expensive, and time consuming enough in one country.  It would be unfortunate if the family ultimately had to go through the process in two countries, due to a lack of planning.  A conservative estimate would be $6,000 in legal fees per probate estate, per country.  Therefore, dual nation, dual parent probate could result in $24,000 in legal fees.
-Inheritance tax laws vary greatly from country to country.  While the hypothetical family above does not come close to the threshold of having to worry about federal inheritance tax in the US ($5.43 million per individual; $10.86 million per couple),  its UK assets exceed the inheritance tax threshold in the UK (£650K per couple).  This means they could be facing a 40% tax bill on some of their UK property at death.  Depending on the advice of the UK attorney (in coordination with the Illinois attorney), it may be wise to shift some assets to the US to avoid taxation.
-Local counsel in the UK can properly advise on the formalities of UK will execution.  While the US and the UK are both signatories to the Washington Convention, meaning they agree in principal to respect a will that meets the standards of an “international will,” only UK counsel can advise on the practical realities of probating a UK estate.  Note also that due to the federal nature of the United States, it is up to individual states to adopt (or not) the Washington Convention.  In short, it is a complicated area.  Additionally, only UK counsel would be qualified to advise on probate avoidance mechanisms, like UK trusts.
-If the family has overseas relatives, there is a chance it will inherit further overseas property after drafting its estate plan.  This could exacerbate foreign estate tax and probate problems.  Planning ahead with UK counsel would be wise.


The successor trustee of a living trust ensures that its terms are carried out after the death or disability of the settlor (the person who created the trust).  Typically this means distributing funds, maintaining accounts, ensuring children are financially cared for, etc.  Similarly, the executor of a will closes out the estate in probate, if probate is necessary.
In Illinois, an executor may be anyone who  “has attained the age of 18 years, is a resident of the United States, is not of unsound mind, is not an adjudged disabled person as defined in this Act and has not been convicted of a felony, is qualified to act” in this position.  See 755 ILCS 5/9-1.  So for the family in question, it is important the executor appointed in any will be a US resident, not a relative in the UK.
For different reasons, all successor trustees of a living trust should ideally be US residents.  Under IRS regulations, allowing a non-US resident to serve as trustee will cause the trust to be classified as a “foreign trust” and incur much more burdensome tax reporting obligations. 


Ideally, the family would name US resident family or friends to serve as guardians of their children in the event of the parents’ death.   755 ILCS 5/11-3 specifically requires that any court-appointed guardian of a child be a US resident.
For a family with a very close relationship to overseas relatives (like our hypothetical family), this could create issues.  Our hypothetical family may have no blood relatives or even close friends in the US, and the children may even have been raised for some time by their grandparents in Great Britain.  Many reasonable people would believe it to be in the best interests of such children to be raised by their relatives, as opposed to non-relatives in Illinois or even in the foster care system.
The US Supreme Court has even declared that parents have a “constitutional, fundamental right to the care, custody, and control of their child.”  Potentially, a situation like the hypothetical one above could create a conflict between the parents’ constitutional right to select guardians, and the Illinois law which forbids them from selecting the UK grandparents.  There could be much debate about what is in the best interests of the child, which is what courts ultimately strive to achieve.
While there is no easy answer to this situation, a few possibilities exist:  If the parents are adamant about naming UK proposed guardians, they should at least name temporary short-term guardians in the US to watch after the children while the longer-term guardianship question is sorted out.  The parents should also clearly state their intentions about who they want raising their children, and where, in their wills (possibly in both countries).  Maintaining dual citizenship for the children may be wise.

Ultimately, it may require the UK family going to a court in the UK to adopt the children or get some form of guardianship, and then trying to get the children travel clearance to the UK through diplomatic channels.  If this type of international adoption/guardianship process is followed, an Illinois judge might be persuaded to release the child from Illinois and allow the international adoption/guardianship to go through.  However, there is no guarantee this process will work, so it would be wise for the family to name local guardians to serve in the event that their preferred guardians cannot take custody of the children.  If any reader has experience with this situation, feel free to send me a message and I’m happy to share with the community.

Published by Ian Holzhauer, Esq. of Nagle Obarski PC in Naperville, IL.   
Note:  The information above is not legal advice and is not the basis of an attorney-client relationship.  If you need assistance, you can hire an attorney to assist you with your individual legal needs. 
January 3

Some Hospitals use Dying Patients for Publicity; how to Protect Yourself

Image Courtesy of Jeffrey M. Vinocur

Today’s New York Times features a troubling story about a hospital that allowed reality TV camera crews to film Mr. Mark Chanko, a trauma patient’s dying moments after he was rushed to the hospital after being struck by a truck.  The hospital acted without Mr. Chanko’s consent, and never notified his family that Mr. Chanko’s death was filmed, or might be broadcast on television.  One night, completely unexpectedly, his wife, Mrs. Anita Chanko, was distressed to hear her deceased husband’s anguished voice crying out in his final moments, on an ABC reality show.  The couple’s daughter, Pamela, who also saw the show, suffered emotional distress after witnessing the graphic details of her father’s gruesome death.

The hospital’s prior vice president of public affairs once said of the show, “You can’t buy this kind of publicity, an eight-part series on a major broadcast network.”  In this blog post, I will discuss legal steps you can take to protect your rights, and to avoid your family’s anguish being used for publicity.

The Chanko family sued the hospital and ABC, but has faced an uphill battle in court.  Recently, the family’s case was thrown out at the appellate level.  A key defense for the hospital has been that the patient was not identifiable to the public because his face was blurred out, and that in any event, his privacy rights were extinguished upon his death.  Further, the defendants are asserting that the First Amendment protects their free expression of the patient’s dying images.  

Carrying the hospital’s legal defense to its logical conclusion, you could be filmed without your consent while undergoing intensive care, for no medically justifiable reason other than building publicity for the hospital.  Scarily, hospitals are claiming you have no right to keep those images private after your death, and the trend toward publicizing these graphic cases is growing.
To fight back against the argument that a hospital can publish images of you without your knowledge or consent, consider addressing the issue in your living will and durable power of attorney for healthcare.  Specifically demand that your hospital not use your images in any type of public release after your death, even if your face is blurred or other steps are taken to mask your identity.  The hospital’s legal argument to publicize would probably be more difficult if it overrode a patient’s express desires not to be filmed, especially since it has no legitimate medical reason to do so in the first place.
Interestingly, the New York Times article describes the legal difficulties of families arguing privacy rights in court, but does not describe any argument about property rights.  Consider adding a line to your healthcare directives stating that you and your heirs do not release ownership of the property rights to any image taken of you at the hospital. By expressly telling the hospital that you are claiming ownership of your own image, they may be on notice that any use of your image would be infringing on your family’s intellectual property rights after your death.  While it is an unusual argument, note that privacy rights might extinguish at death, but it is well established that property rights do not.  That gives your family a much better chance of getting its case before a jury if a hospital goes against your wishes and broadcasts your death on TV.

It is unfortunate that in of all places, we have to worry about trusting the confidentiality of our most private moments in a hospital.  However, an estate planning attorney can help you clarify in your medical directives that you don’t want to be used for hospital publicity.  If nothing else, planning ahead will give your family’s argument some teeth in court if your images are exploited after your death.
Published by Ian Holzhauer, Esq. of Nagle Obarski PC in Naperville, IL.  
Note:  The information above is not legal advice and is not the basis of an attorney-client relationship.  If you need assistance, you can hire an attorney to assist you with your individual legal needs. 
December 23

Encouraging Behavior with Incentive Trusts

Courtesy of Mediaphoto.org

Virtually all parents have at some point worried about their children’s future choices in life, whether they be educational, career-related, or moral.  This article will describe how some parents use “incentive trusts” to try to nudge their children toward a certain path in life, long after the parents are in the grave.

There is no question that a large inheritance can transform a young person’s life, positively or negatively.  Bill Gates and some other tycoons from his generation are so concerned about the potential of a large inheritance to destroy their children’s will to work, that some are severely limiting the size of their children’s inheritance, giving the majority of their fortunes to charity.  But it is not just technology billionaires that have to worry about the effect of a sudden windfall of money for their children.

Even an inheritance of $100,000 could be a lot for a 19-year old to handle all at once.  This money, put to good use, could fund a college education or provide capital to start a new business.  On the other hand, it could also be used to for an expensive car, luxury handbags, or even drugs.  In this way, the money could actually stunt a young person’s development, rather than assist it.

One way parents try to prevent their money from corrupting their children is through incentive trusts.  After the parents die, their money is held by a trustee for the benefit of their children.  In a typical setup, the trustee will only be permitted to distribute money to the children if they cross certain life hurdles.  For example, trust documents often state that children must earn a bachelors degree before receiving their share of the estate.  Other trusts might require a child to work a full-time job for a number of years to receive their full share.  The possibilities for trying to control children’s behavior are almost limitless.

There are many tools available in incentive trusts.  Some trusts encourage children to pursue high wage careers, for example by matching every dollar earned with a  dollar distributed from the trust.  Other trusts might encourage a child to pursue a career in charitable work, possibly providing a large stipend for every month spent working for a charitable organization.  A trust could also encourage a struggling child to turn his or her life around, perhaps paying out money if a child completes a course of drug rehabilitation.  As noble as many of these goals sound, there are downsides to incentive trusts.

Incentive trusts carry risks.  One risk is that you will fail to foresee  your children’s future needs, in spite of your best intentions now.  For example, you may perceive that your son will need some motivation to finish college in the future, and restrict his inheritance unless he achieves a bachelor’s degree in four years.  However, after your death, your son may discover a health condition that needs his immediate attention, which is more important than graduating college in four years.  Perhaps your son will get an incredible offer to take a break from college to work with a profitable internet startup, causing a conflict between what is best for his professional development and what you planned in your trust.

An incentive trust may cause deep resentment in your family, as your relatives feel they are being controlled from the grave.  Additionally, some types of incentive trusts may be unenforceable in court, if they violate public policy.  Examples would be trusts that encourage divorce or require a child to marry someone of a certain religion.

For the reasons listed above, incentive trusts are attractive to some parents, but carry significant risk.  Consult an estate planning attorney about these and other methods, like spendthrift trusts, to ensure your children’s inheritance actually helps them in the way you intend.

Published by Ian Holzhauer, Esq. of Nagle Obarski PC in Naperville, IL.  
Note:  The information above is not legal advice and is not the basis of an attorney-client relationship.  If you need assistance, you can hire an attorney to assist you with your individual legal needs. 

December 13

Estate Planning re: Online Accounts

Courtesy of Sofiaperesoa

One of the hottest topics in estate planning right now is “digital estate planning,” which involves managing your online legacy after your death.  In this post, I will focus on three topics:  1) Inventorying your online assets, 2) managing your passwords, and 3) making instructions for the handling of your social media and other online accounts.

Inventorying your Digital Assets

Our society has become so accustomed to conducting business online that many of us have a staggering number of online accounts.  In the unexpected event of your death, it will be difficult for your executor to properly close out your affairs without being able to gain access to an inventory of all your online accounts.  Indeed, even while you are alive, you may have so many accounts that it is difficult for you to make a full inventory!  However, doing so is a good first step to getting control over your digital legacy.

Here are a some of the digital accounts you should include in your inventory, from the obvious to the easily forgettable:

  • Bank
  • Brokerage
  • IRA
  • Pension
  • Credit card
  • Insurance
  • Utilities
  • Cell phone
  • Toll transponder (iPass, EZPass, etc)
  • Magazine subscriptions
  • Amazon, ebay, etc.
  • Hotel rewards, frequent flyer, etc.
  • File storage
  • Social media
  • Web hosting
  • E-mail
  • Blogs

Making an inventory will better help you prepare you to meet with an estate planning attorney, to discuss strategies to deal with your digital assets.  For security reasons, you may not choose to share this list with family members while you are alive, but it will be useful to have when discussing a digital estate planning strategy with your attorney.

Managing Passwords

Good password management can be the difference between having your death wishes enacted, or frustrated by online security features.  If, for example, I give written instructions for my executor to post a memorial article on my blog after my death, it would be important for my executor to have access to my password.  On the other hand, I may not wish to share my password while I am living.  Even if I trusted someone with my password now, I would not easily be able to update this person each time I updated my password (which is a good idea for security purposes).
Password management is a difficult problem in today’s society.  I have at least 20 separate passwords for various online accounts, and the number only seems to grow every year.  Some online services, like onepassword, offer to store all your passwords in a digital vault, accessible only with one master password.  Some questions I would ask before using one of these services are, “what happens to my passwords if the company goes bankrupt?” and “what security precautions are in place to prevent a hacker or disgruntled employee from breaking into the digital vault?”  
Some people prefer more old school methods, like writing down all passwords on a sheet of paper and storing that in a bank safe deposit box, or a house safe, and giving the executor the power to access the documents after their death.  Of course this method is not foolproof if the document is not updated or its location is forgotten.
At the end of the day, there may not be a 100% perfect solution.  However, an attorney can help you weigh the pros and cons of various password management systems for your estate planning purposes.

Instructions for your Social Media and Other Online Accounts

Each internet company has its own policy for dealing with an account after its owner’s death.  An overview of these policies can be found here and here.
Your loved ones have some options for how to handle your social media and other online accounts after your death.  If you would prefer your Facebook page show a memorial video after your death, leave instructions to your executor explicitly stating that.  If you prefer that your blog, online pictures, and other assets be taken down after your death, make those wishes known.  
My personal wish is that my blog and other resources I put online be available for people to view after my death.  That means I need to leave instructions to my executor and loved ones to preserve this site, and not let the account expire.  This may take some active management, so I need to leave specific instructions.
Remember that just because you post something online, you do not necessarily lose all rights over it.  For example, the information in this blog is copyrighted, and I would expect my executor to take reasonable steps to protect it if someone tried to improperly copy the material.  By alerting him or her to a full profile of my digital assets, I better ensure that my online accounts are taken care of the way I would have wanted.  Whether you have a blog, Facebook page, email account, or other account, it is better to have a plan in place than to leave your family struggling to take care of your online presence after your death.

Published by Ian Holzhauer, Esq. of Nagle Obarski PC in Naperville, IL.  
Note:  The information above is not legal advice and is not the basis of an attorney-client relationship.  If you need assistance, you can hire an attorney to assist you with your individual legal needs. 

December 12

Prepare for your Attorney Meeting

My wife and I will be seeing an attorney tomorrow to update our estate plan.  In theory we could prepare the plan ourselves, but there is an old adage that, “an attorney who represents him/herself has a fool for a client.”  Knowing this, we value the outside perspective of a different estate planner taking a fresh look at our situation.

I thought this would be a good time to cover my next blog topic:  How to prepare for your first meeting with your estate planning attorney.  Some basic tips follow:

First, obtain detailed written information about everyone you expect to name in your estate plan.  Make a list of everyone who you might want to raise your kids, receive money or property, serve as your executor or trustee, etc.   You should know how to correctly spell each of their full names, and have their addresses and phone numbers.  This may sound basic, but just yesterday, I realized I did not know the middle initial of the person we plan to name as the alternate executor of our estate, and could not remember if he was a “Jr.” or “III.”  Imagine sitting in an attorney’s office, spending time on your cell phone scrambling to reach friends to get this kind of information…it happens all the time.  Also don’t forget to bring information about your primary care physician for advanced medical directives.

Second, do a thorough scrub of your records to find every single asset you own, and anything you might come to own through inheritance or other means.  Bring paper copies of these records to your attorney’s office, so you can properly reference these assets in your estate plan.  Recently, a relative of mine discovered her family had purchased oil rights to some rural property in the early 20th Century.  This property was almost lost to the sands of time, as it was not referenced in an estate plan.  By properly referencing your property, you can ensure it actually passes to your loved ones.

Finally, even though “the clock” may be running (if your attorney bills by the hour), I would not recommend rushing through your meeting.  Of course, spend the time productively, not on administrative matters (see above).  However, I would not rush through the “get to know you” phase of the meeting.  As an attorney, I have been amazed by how different each family is, and how unique the dynamics of every relationship can be.  A big part of good lawyering is building a relationship with your client.  By letting your attorney know a little bit about yourself, your background, how you met your significant other, and even your hobbies, values, etc, you establish a relationship where your attorney knows the right questions to ask.  Just as importantly, you become more comfortable sharing important details with your attorney.  Hopefully this gives you, the client, a sense of understanding and ownership of the end product, your estate plan.

Published by the Law Office of Ian Holzhauer in Naperville, IL.  
Note:  The information above is not legal advice and is not the basis of an attorney-client relationship.  If you need assistance, you can hire an attorney to assist you with your individual legal needs. 

Source: Tailored Estate Planning

December 7

A Well-Drafted Living Trust does not have to create “Trust Fund Kids”; Learn from Philip Seymour Hoffman’s Estate Plan

Courtesy Justin Hoch

In the months following Philip Seymour Hoffman‘s untimely death this year, details of his estate plan began to emerge.  Hoffman was beloved in his craft, and had noble intentions in his estate plan.  Specifically, the acclaimed actor desired that his children not become “trust fund kids,” and reportedly rejected the advice of his attorney to create a living trust for their benefit.

While it is certainly understandable that people of great wealth would not want their children to become part of the “idle wealthy,” ending up as reality TV caricatures, it is not correct to assume that a living trust per se will spoil them. On the contrary, a living trust typically offers far greater flexibility in planning the distribution of one’s property than an ordinary will:

A living trust can be structured so that children never receive too large a share of money (or money at all) at one time.  It can also be structured to give money to charity, or in almost any other conceivable fashion.  Spendthrift trusts are often used by wealthy people to ensure their children do not spend their inheritance on gambling, drugs, or alcohol habits.  These are common concerns in celebrity estate plans.  Further, properly-drafted living trusts can cut down the risk of nasty probate litigation, which can destroy the family.

Unfortunately, Hoffman’s decision not to use a living trust may have substantial negative tax consequences.  By leaving money directly to his girlfriend in a will (rather than in trust, for the benefit of his children), a large sum of money will likely be subject to double estate tax (once because of Hoffman’s death, and also when his girlfriend dies, if she gives the money to his children).  His girlfriend also has far less creditor protection than she would have had, if the money had been held in trust.

It is worth nothing that living trusts have just as many benefits for those of modest means as those with Hollywood estates.  These benefits include keeping one’s estate plan private after death (a benefit Mr. Hoffman’s will did not confer), faster disposition of property, more flexibility, avoidance of expensive probate court proceedings, etc.  For additional information on these benefits, review my previous blog post on living trusts.

For the full story about Philip Seymour Hoffman’s estate plan, see this Forbes magazine article.

Published by Ian Holzhauer, Esq. of Nagle Obarski PC in Naperville, IL.  
Note:  The information above is not legal advice and is not the basis of an attorney-client relationship.  If you need assistance, you can hire an attorney to assist you with your individual legal needs. 

December 2

Giving to Loved Ones with Money Problems

Courtesy of Ralf Roletschek
If you have a family member who struggles with addiction, gambling, a controlling spouse, a party lifestyle, or bad financial planning, estate planning can be a dilemma.  On one hand, you may wish to provide the family member a share of your estate to show that he or she is loved just the same as other members of the family.  On the other hand, you worry that any inheritance will end up in the hands of creditors, a manipulative partner, at the casino, or fueling a drug addiction.  This post will discuss how spendthrift trusts are used to responsibly provide for family members who may not be able to manage an outright inheritance:

In many wills or living trusts, all property destined for adult family members is given outright, with no strings attached.  It is often best for these adult family members to receive the full share of the estate quickly, and with as little hassle as possible.  In fact, avoiding legaland administrative hurdles to speedy distribution of property is one of the main reasons people hire estate planning attorneys.  However, there are instances where you may need to protect the ones you love from receiving too much money at once.
If you have a son who is in severe financial trouble, an outright inheritance may simply be consumed in bankruptcy proceedings and end up in the hands of creditors.  Perhaps you have a daughter recovering from a drug problem; a sudden influx of a hundred thousand dollars may tempt her to revert to a dangerous habit.  The best way to take care of children in situations like these is often to ensure that they are provided a stream of financial support when needed, but not given control over the management of their inheritance.  The mechanism for doing this is a spendthrift trust.
Let’s say in an ideal world, you would like to give your son a stock portfolio, but cannot do that for the reasons above.  In your estate plan, put the stock portfolio into a spendthrift trust.  After you die, the trustee you named for the spendthrift trust will control the stock portfolio for the benefit of your son.  You might name a family member, a financial institution (or both), or any other trustworthy person or entity to serve as trustee.  Importantly, creditors cannot reach the money while it is still in the spendthrift trust because your son does not have the power to withdraw funds from the trust himself.  The trustee is in control.
In this example, you would likely give specific instructions to your trustee about when to distribute money to your son and for what reasons.  For example, you could leave instructions for the trustee that he or she is to use the funds to buy food and clothing for your son only.  You may also give the trustee discretion not to make distributions to your son, which may be particularly desirable at times when creditors are likely to seize any property that is distributed.

Some caveats:  You cannot create a spendthrift trust for the benefit of yourself, to avoid your creditors.  Also, spendthrift trusts add layers of complication to an estate plan.  Consider carefully the consequences of tying up an inheritance for years after your death.  Talk to an estate planning attorney if you think a spendthrift trust might be right for you.

Published by Ian Holzhauer, Esq. of Nagle Obarski PC in Naperville, IL.  
Note:  The information above is not legal advice and is not the basis of an attorney-client relationship.  If you need assistance, you can hire an attorney to assist you with your individual legal needs. 

December 1

Estate Planning Without Borders

This week my family and I moved back to my hometown of Naperville, Illinois, after seven years in the Air Force.  During that time, I frequently drafted estate plans for military members with property in multiple states.  Today’s post will discuss what happens when people die with property outside their state of residence.  I will use my family’s story as an example:

As an Air Force officer, I lived in three US jurisdictions:  North Dakota, Ohio, and Guam (a US territory in the Western Pacific – see picture above).  In 2010, we purchased a home in Guam, while maintaining Illinois residency, an arrangement that is common in the military.  We loved owning our little slice of paradise in the tropics.  But what would have happened if we had died with some property in Illinois and a house in Guam?

In general, for personal property (bank accounts, investments, personal belongings, etc), a will is probated in the state of residence.  In our case, if we died with an Illinois will, an Illinois court would oversee the disposition of our personal property.  However, when it comes to real property, generally the jurisdiction where the real property is located handles the probate process. 
If we died with just an Illinois will, and no other estate plan in place, our survivors would likely have to go to court in two separate jurisdictions:  Guam, and Illinois, to probate the will.  The real estate would be probated in Guam, and the rest of the estate in Illinois.  This could greatly increase the legal fees to close our estate.  Additionally, it might take a year or more to complete the process.
However, like many couples, my wife and I held title to our Guam house as joint tenants with right of survivorship.  If just one of us died, the other would automatically take ownership of the whole property.  There would be no need to probate our will in Guam, because joint tenancy bypasses entirely the probate process.  Our remaining personal property could be handled through our Illinois will in Illinois probate court.
Unfortunately, joint tenancy is not foolproof.  If my wife and I both died, the joint tenancy would extinguish.  By default, our house would then have to be probated in Guam.  This would put us back in the unfavorable situation of multiple-state probate.
However, there is a fix:  A living trust allows property in multiple states (even real property) to pass entirely outside of the probate court process.   The mechanism is relatively straightforward.  First, we would put all of our property (real and personal) into a living trust, where we remained the trustees and beneficiaries during our lives.  We would name a successor trustee in the document to take over the role of managing our property after our death or incapacity.  Once our attorney drafted the document and we retitled our assets, we would essentially go on living our lives as normal.  When we died or became incapacitated, the successor trustee would automatically take title to the property and distribute it according to our estate plan, largely bypassing the probate process.

A living trust can greatly decrease the length of time it takes to distribute property, and cost much less in the long run than extensive probate.  Talk to an estate planning attorney in your state to see if a living trust would be appropriate for your family. 

Published by Ian Holzhauer, Esq. of Nagle Obarski PC in Naperville, IL.  
Note:  The information above is not legal advice and is not the basis of an attorney-client relationship.  If you need assistance, you can hire an attorney to assist you with your individual legal needs. 

November 13

Avoid Accidentally Cutting Someone out of your Will — Ademption and Abatement Explained

Some wills lump together all property in the estate, and simply divide it amongst the beneficiaries.  An example would be a clause in a will saying, “I give all my property, real and personal, to my two children, to be divided in equal shares, per stripes.”  In contrast, other wills break out specific pieces of property, which is known as making specific devises.  For example, “I give my 2014 Ford Fusion to my son, John; I give my house at 123 Main St, Naperville, IL, to my daughter, Erica.”  However, making specific devises carries risks, especially to those who do not frequently review their estate plans:

The first major risk associated with making specific devises arises if the property referenced in the will no longer exists at your death.  Imagine that years after you write your will, you sell your Ford Fusion or lose your wedding ring.   In those cases, the doctrine of ademption could apply, depending on state law.  Ademption means that the property named in the will is no longer in the possession of your estate, so the gift fails.  In other words, a beneficiary named in your will may be entirely cut out because of a legal doctrine.  The beneficiary who was cut out may end up arguing that you would have intended him or her to receive a substitute piece of property, even though the original gift failed.  Imagine the family strife and litigation such a fight could cause.

A second risk associated with making specific devises arises if you end up dying with less overall wealth than you anticipated.  Let’s say when you write your will, you have $1 million in savings.  Your will makes specific devises of $10,000 to the humane society, $10,000 to your best friend Michael, and the rest (the residuary estate) to your children.  At the time you draft your will, you expect your children will receive the remaining $980,000 of your estate, the vast majority of your wealth.

Imagine that due to some expensive medical condition, you die with only $20,000 in your estate.  Under the doctrine of abatement, state law may presume that the highest priority in your estate plan was making specific devises ($10,000 to the humane society, and $10,000 to your friend Michael).  The residuary devise (all remaining property) to your children is secondary to the specific devises.  So, even though you may have intended for your children to receive $980,000, they may end up receiving nothing because they are lower on the priority list than the non-relatives who received specific devises.  Again, the beneficiaries who are shortchanged may feel slighted, or commence expensive litigation against other family members arguing your intent was not met.

An experienced estate planning attorney can help you avoid ademption or abatement problems in your estate.

Published by Ian Holzhauer, Esq. of Nagle Obarski PC in Naperville, IL.  
Note:  The information above is not legal advice and is not the basis of an attorney-client relationship.  If you need assistance, you can hire an attorney to assist you with your individual legal needs. 

November 12

Controversial Estate Plans: Can you Legally Encourage Divorce? Disinherit a Spouse? Make Religious Restrictions?

“Testamentary freedom” is a terms lawyers use to describe a person’s freedom to dispose of his or her own property at death.  While American law generally supports the idea of testamentary freedom, this power is not limitless.  In this article, I will discuss controversial estate planning provisions, such as provisions that disinherit spouses, encourage divorce, or make religious restrictions.

A prime example of the limits on testamentary freedom arises in situations where one spouse disinherits the other spouse in a will.  In a world of unlimited testamentary freedom, a wealthy businessperson could disinherit his or her spouse and leave that person destitute and on public assistance for the rest of his or her life.  To avoid this, states have created spousal elective share laws, giving the surviving spouse the right to a set percentage of the estate, no matter what the estate plan says.  For obvious reasons, state legislatures have reasoned that “public policy” favors ensuring that surviving spouses (who are often elderly) are provided for.

Most people do not take issue with spousal elective share laws.  However, let’s discuss some more controversial will provisions.  Imagine that you really dislike your son-in-law, and want to encourage your daughter to divorce him.  You may have excellent reasons.  However, is it advisable to put a provision in your will or trust stating that your daughter will be disinherited if she does not divorce him within a certain amount of time after your death?

Don’t count on a will provision that actively encourages divorce being upheld in court — many states consider anti-marriage provisions to be highly suspect, or automatically void against public policy.  In Illinois, there has historically been a distinction between conditioning an inheritance on the completion of a divorce that is already in progress (possibly legal), and requiring a potential beneficiary to begin divorce proceedings that were not already happening (void against public policy).   However, a provision that in any way encourages divorce is likely to spark expensive probate litigation after your death, and the state of the law in the future is never guaranteed.

Finally, let’s turn to an issue the Illinois Supreme Court wrestled with in 2009:  Will provisions that disinherit family members that marry outside the faith.  In the case of In re Estate of Max Feinberg, the court dealt with a will clause that sought to disinherit any descendant that married outside the Jewish faith.  A provision of this nature pits testamentary freedom against other rights, such as religious freedom and freedom to marry.

Ultimately, the Feinberg court did not invalidate the religious restriction (overturning a lower court decision), finding that testamentary freedom prevailed.  But it limited its finding essentially to the facts of this case.  In non-legalese, this means the court ruled a certain way in this specific case, but was careful to avoid making broad pronouncements about the state of the law regarding religious restrictions in general.  I would not read too much into this one result.

As this article from the American College of Trust and Estate Counsel notes, the Feinberg litigation was so expensive for the family, that there was no longer enough money left in the estate for the religious restriction clause to even matter.  Tread carefully when putting any type of restriction in your estate plan that comes close to violating public policy, or your estate may also end up in unproductive litigation.

Published by Ian Holzhauer, Esq. of Nagle Obarski PC in Naperville, IL.   
Note:  The information above is not legal advice and is not the basis of an attorney-client relationship.  If you need assistance, you can hire an attorney to assist you with your individual legal needs.