A Will with Unintended Consequences

A recent Florida court case illustrates what can result from a poorly drafted Will.  

The case describes how a woman wrote a Will using an “EZ-Legal Form.” Her Will contained a very specific list of her real estate and bank accounts and left that property to her sister and brother.  The Will did not contain what is known as a residuary clause, which states what happens to property not specifically listed in the Will.

The problem occurred when the woman’s sister died before her leaving the woman the sister’s land and cash.  The woman did not revise her Will after her sister’s death.  When the woman died her brother, as the sole beneficiary under her Will, claimed that property the woman inherited from their sister should be given to him even though it wasn’t listed in the Will.  

The woman’s nieces claimed that since the “EZ-Legal Form” did not contain a clause stating where property should go that was not specifically listed in the Will then the property the woman inherited from her sister should go to them.  Basically the nieces were claiming that the property the woman inherited from her sister should be treated as though the woman had no Will.  The court agreed with the nieces.

This case illustrates the risks of using a do-it-yourself Will.  The woman thought she was being very detailed and very careful. Unfortunately she did not understand some of the important elements that should be in every Will.

Disclaimer This is a passive blog and the materials contained herein are provided for informational purposes only. Nothing contained in this blog should be interpreted as a solicitation of business and none of the information contained herein constitutes legal advice. The law is subject to change without notice, and the local laws of your residence may be different from the general information displayed on this blog. You should not rely on the information provided on this blog without first consulting an attorney. Contacting this website does not establish and attorney/client relationship between you and its publisher Christopher W. Matern. An attorney/client relationship can only be established with Christopher Matern by engaging in direct person-to-person contact with Christopher Matern. Christopher Matern does not intend to practice law in any jurisdiction in which he is not licensed.

Powers of Attorney for Property Should be Taken Seriously

In the Chicago Tribune a letter to columnist “Dear Annie” illustrates important concerns about Powers of Attorney for Property. Below is a link to the story.

Her children sold her house and possessions

Briefly, an 80 year old woman was in the hospital for a very serious illness and she was not expected to survive. Fortunately, she did recover.  Unfortunately, she learned that her children - acting under a Power of Attorney for Property she had given them - sold her house, took her possessions they wanted and then sold rest.

Many people think of a Power of Attorney for Property as a simple, standard, routine document that is part of their estate plan.  As this story illustrates it is not simple, not routine and shouldn’t be standard. A Power of Attorney for Property can have serious implications.
 
The implications can be limited.  For example, a Power of Attorney for Property can be narrowed to limit the authority to very specific types of transactions.  This might be appropriate if the purpose is to give someone only the authority to pay bills while you incapacitated but not sell your house or other possessions.

Depending upon your personal situation a broad Power of Attorney might be appropriate.  In the story the woman complains about how her children sold her house at an auction.  It is possible that the woman did not have any other significant assets besides her house; that her medical expenses were large and the only way to pay them was to sell the house quickly.  

In the situation where the only way to pay the bills is to sell the house then a very limited Power of Attorney would not have worked well.  In that situation the children would have needed to ask a judge to appoint a guardian.  A guardianship proceeding is neither quick nor inexpensive.
 
Another concern is trust.  The person you give Power of Attorney obviously should be someone you trust to act in your best interest - even when it is contrary to their self interest.  If you are not fortunate enough to have someone who meets that standard then that is another reason to consider limiting the scope of the Power of Attorney for Property.

A Power of Attorney for Property is not a simple “fill in the blank” document.  It should be tailored to a person’s individual needs.


Disclaimer This is a passive blog and the materials contained herein are provided for informational purposes only. Nothing contained in this blog should be interpreted as a solicitation of business and none of the information contained herein constitutes legal advice. The law is subject to change without notice, and the local laws of your residence may be different from the general information displayed on this blog. You should not rely on the information provided on this blog without first consulting an attorney. Contacting this website does not establish and attorney/client relationship between you and its publisher Christopher W. Matern. An attorney/client relationship can only be established with Christopher Matern by engaging in direct person-to-person contact with Christopher Matern. Christopher Matern does not intend to practice law in any jurisdiction in which he is not licensed.

New Real Estate Transfer on Death Deed - a Solution or a Problem

The Illinois legislature recently passed a bill allowing a homeowner to name a beneficiary  who will receive the property when the owner dies.  The hope was that this new type of real estate deed would simplify estate planning for people with smaller estates.  Unfortunately, it may create more problems than it solves.

The bill will become law on January 1, 2012.  This a link to the full text of the bill. http://www.ilga.gov/legislation/publicacts/fulltext.asp?Name=097-0555&GA=97

How this would work is that a homeowner would prepare a new deed naming one or more people as beneficiaries.  Those beneficiaries would receive ownership of the house when the owner died.  The new deed would have to be signed in the same way that a Will is signed.  So, the homeowner would sign the new deed in front of two witnesses and the witnesses, at the same time, would need to sign the deed too.  

This new deed would have to be recorded with Recorder of Deeds office in the county where the home was located (just like other deeds are now recorded).

When the current owner died, the beneficiaries would need to prepare an affidavit saying that the owner had died and acknowledging that they accept the real estate.  This affidavit would also need to be recorded with the local county recorder of deeds.

This sounds like a great way to avoid the time and expense of probate for people who have very few assets other than their house.  But the legislation has some important restrictions.

Those restrictions may significantly limit the effectiveness of this new deed.  This deed can be challenged anytime within two years after the homeowner dies unless a probate estate has been opened and then the time limit is six months.

Practically what does this mean.  It depends upon how title insurance companies treat this situation. Today, no one can sell a house unless they can provide the buyer with a title insurance policy.  So, how the title companies treat transfer on death deeds will have a large effect on whether such a deed is practical.

I have spoken to underwriters and and attorneys with two of the largest Illinois title insurance companies.  Both of them are analyzing the situation, but neither one of them has adopted formal guidelines. One title insurance company indicated that they anticipate reviewing each situation separately and making individual decisions on whether to issue title insurance.  Another title insurance company indicated that they might charge an additional premium equal to 2% of the sale price for sales within 1 year after the person’s death and a 1% premium for sales more than one year, but less than two years after a person’s death.  

In comparison, a Will  and the cost of probating the Will probably would cost significantly less than a the extra premium on the title insurance policy.

Disclaimer This is a passive blog and the materials contained herein are provided for informational purposes only. Nothing contained in this blog should be interpreted as a solicitation of business and none of the information contained herein constitutes legal advice. The law is subject to change without notice, and the local laws of your residence may be different from the general information displayed on this blog. You should not rely on the information provided on this blog without first consulting an attorney. Contacting this website does not establish and attorney/client relationship between you and its publisher Christopher W. Matern. An attorney/client relationship can only be established with Christopher Matern by engaging in direct person-to-person contact with Christopher Matern. Christopher Matern does not intend to practice law in any jurisdiction in which he is not licensed.

New Requirement for Illinois Landlords

Landlords in Illinois will be required next year to change or “rekey” the locks before a new tenant moves in. Here is link to the new lock changing law. http://www.ilga.gov/legislation/publicacts/97/PDF/097-0470.pdf
 
There are only limited exceptions to this law including rooming houses and buildings with four or fewer units where the owner lives in one of the units.  

If the landlord does not comply with this new law and there is a theft that is attributable to failing to change the locks, then the landlord will be responsible for the tenant's losses.  

I foresee a potential for possible fraud and abuse caused by the law’s requirement that the “theft that is attributable to failing to change the locks.”  Some examples are that the new tenant forgets to lock the apartment door and a burglar walks in the unlocked door.  Alternatively, the new tenant files a fraudulent police report about an alleged burglary and then claims that the door was locked.  If the tenant then sues the landlord for damages and claims that the tenant locked the door before the burglary how will the landlord effectively be able to disapprove that story.

So Illinois landlords to protect themselves from claims by tenants for stolen merchandise will need to change the locks each time they get a new tenant.  

For landlords the current rental market should make it easier to pass this new expense along to tenants.

Disclaimer This is a passive blog and the materials contained herein are provided for informational purposes only. Nothing contained in this blog should be interpreted as a solicitation of business and none of the information contained herein constitutes legal advice. The law is subject to change without notice, and the local laws of your residence may be different from the general information displayed on this blog. You should not rely on the information provided on this blog without first consulting an attorney. Contacting this website does not establish and attorney/client relationship between you and its publisher Christopher W. Matern. An attorney/client relationship can only be established with Christopher Matern by engaging in direct person-to-person contact with Christopher Matern. Christopher Matern does not intend to practice law in any jurisdiction in which he is not licensed.

Interns - A Benefit or a Liability - Update

Last week, on April 28th a Federal appellate court issued a decision on whether students working in a school affiliated nursing home should be considered employees.  The court’s ruling disregarded the Department of Labor’s six factor test about whether an student serving an internship should be classified as an employee.  Last June, I wrote an article about the six factor test titled Summer Interns A Benefit or a Liability.   

The court in Solis v. Laurelbrook Sanitarium said a different analysis should be used.  The court said “We find the WHD's test to be a poor method for determining employee status in a training or educational setting. For starters, it is overly rigid and inconsistent with a totality-of-the-circumstances approach, where no one factor (or the absence of one factor) controls."

The court focused on who receives the primary benefit - the intern or the business.  To make that determination who receives the primary benefit,  “Factors such as whether the relationship displaces paid employees and whether there is educational value derived from the relationship are relevant considerations that can guide the inquiry. Additional factors that bear on the inquiry should also be considered insofar as they shed light on which party primarily benefits from the relationship.”

For people using interns, the good news is that you don’t have to meet all six factors in Department of Labor test.  However, in looking at all the circumstances the experience needs to be a greater benefit to the student rather than to the business.

Disclaimer This is a passive blog and the materials contained herein are provided for informational purposes only. Nothing contained in this blog should be interpreted as a solicitation of business and none of the information contained herein constitutes legal advice. The law is subject to change without notice, and the local laws of your residence may be different from the general information displayed on this blog. You should not rely on the information provided on this blog without first consulting an attorney. Contacting this website does not establish and attorney/client relationship between you and its publisher Christopher W. Matern. An attorney/client relationship can only be established with Christopher Matern by engaging in direct person-to-person contact with Christopher Matern. Christopher Matern does not intend to practice law in any jurisdiction in which he is not licensed.

Government Targets Business Owners for Employee Work Eligibility

Business owners, particularly in the food service industry may want to review their employee work eligibility status.  

A recent article in the Wall Street Journal titled Immigration Crackdown Widens With Criminal Probe and Arrests at Restaurant Chains highlights recent government investigations and in one case criminal prosecution relating to hiring illegal immigrants.

As the article notes the government’s focus previously had been on just arresting and deporting illegal immigrants, but now the government is focusing on prosecuting the business owners.

A recent story in QSR Magazine titled Who’s Working in Your Kitchen? reported “Recent government crackdowns on Chipotle and Pei Wei that forced both concepts to at least temporarily close locations have reminded restaurant operators that the government is taking illegal immigration very seriously.”

Illinois business owners can use the E-Verify system.  One advantage of using the system is that it creates a “rebuttable presumption” that the employer has complied with immigration laws. However, Illinois state government is not a fan of the E-Verify system.  In fact,Illinois attempted to block private employers from using the E-Verify system, but lost a lawsuit brought by the Department of Homeland Security.

Even though the Illinois state government failed in its attempt to prevent private business owners from using E-Verify, Illinois has placed significant restrictions on its use.  Therefore, an Illinois employer should review those restrictions carefully before using the E-Verify system.  Illinois employers are required to complete I-9 forms for each of their employees.

It is these I-9 records that the government is auditing and which are being used as the basis for prosecutions.

To avoid being the federal government’s next target business owners may want to review their personnel files to make sure that they are in compliance.

Disclaimer This is a passive blog and the materials contained herein are provided for informational purposes only. Nothing contained in this blog should be interpreted as a solicitation of business and none of the information contained herein constitutes legal advice. The law is subject to change without notice, and the local laws of your residence may be different from the general information displayed on this blog. You should not rely on the information provided on this blog without first consulting an attorney. Contacting this website does not establish and attorney/client relationship between you and its publisher Christopher W. Matern. An attorney/client relationship can only be established with Christopher Matern by engaging in direct person-to-person contact with Christopher Matern. Christopher Matern does not intend to practice law in any jurisdiction in which he is not licensed.

Will Your Trust Work

Will your Trust work the way you intend it.  Many people have created Revocable Trusts, which are also known as Living Trusts. They have done so for a number of reasons (avoiding probate, avoiding court guardianship, tax planning).  But if your Trust is not funded it may not work the way you want.

A recent post on an trust and estate planning e-mail list illustrates what happens if a trust is not properly funded.

Dear Listmates:

Can a revocable trust be properly funded by simply attaching a schedule to the trust document that states that the settlor “hereby sells, transfers, and conveys” to himself the property listed therein? The listed property includes real estate and bank accounts.  The real estate is identified by address and tax ID. The bank accounts are identified simply by bank name and address. The schedule containing the listed property is signed by the settler and one witness but is not notarized. The main trust document, to which the schedule is attached, is notarized.

This was the answer posted to those questions.

The short answer is no.

The reply to that answer illustrates the terrible consequences that can occur from not properly funding the Trust.

The settlor [the person who set up the Trust] passed away. If this trust is not upheld, then the settlor's estate will pass to the very persons he intended to disinherit.

So how do you fund a Trust to avoid this terrible result.  A Trust is funded by transferring assets to the Trust.  The procedure for legally transferring assets to a Trust depends upon the type of asset.

For a bank account or a stock brokerage account, the name of person who owns the account needs to be changed to the name of the current trustee as trustee of the trust identified by its proper name.  For example, if John Smith has a Revocable/Living Trust and he is the current trustee then account needs to be changed from John Smith to John Smith as Trustee of the John Smith Trust (what ever the Trust designates as the proper name of the Trust).

For real estate, a Deed needs to be prepared transferring the real estate to the Trust.  For example, John Smith would need to Deed his property from John Smith to John Smith as trustee of the John Smith Trust. This Deed would need to be recorded in the County where the real estate was located with the County Recorder of Deeds.  Also, you may need to obtain an endorsement to your title insurance policy to cover the trust.  Whether this needs to be done will depend upon the specific language in your title insurance policy.

You can transfer personal property such as airplanes, automobiles and boats by transferring the title with the Secretary of State to the Trustee (John Smith as Trustee of the John Smith Trust).  Unless this property is of significant value most people deal with this property through their Pour Over Will.

A Pour Over Will is a Will that includes a provision stating that any property that I own, which I have not specifically provided for at my death is to be transferred to to my Trust.

A Pour Over Will will not be effective if the property is held in joint tenancy or if a payable on death beneficiary has been named. Property that it is held in joint tenancy automatically passes to the surviving joint tenant.  It is not part of a person’s estate.  Therefore, the Pour Over Will would not be effective to transfer the joint tenancy property.  Likewise an account that has a payable on death beneficiary designation like a bank account, life insurance policy, stock brokerage account, pension plan will also pass directly to the beneficiary.  It too will not be included in your probate estate.

So, it is a good idea to check the beneficiary designations on your accounts to make sure that they list the people that you intend to receive the money.  The same is true for any accounts that you hold in joint tenancy.

If you have gone through the effort and expense of creating a Recovable/Living Trust you should make sure that it is properly funded.


Disclaimer This is a passive blog and the materials contained herein are provided for informational purposes only. Nothing contained in this blog should be interpreted as a solicitation of business and none of the information contained herein constitutes legal advice. The law is subject to change without notice, and the local laws of your residence may be different from the general information displayed on this blog. You should not rely on the information provided on this blog without first consulting an attorney. Contacting this website does not establish and attorney/client relationship between you and its publisher Christopher W. Matern. An attorney/client relationship can only be established with Christopher Matern by engaging in direct person-to-person contact with Christopher Matern. Christopher Matern does not intend to practice law in any jurisdiction in which he is not licensed.