Password Managers

Keeping track of online, password-protected login information has become burdensome and unsecure.  Rather than keeping digital access instructions written and stored in a desk drawer or in a file on a computer’s desktop, there now exists a utility called a password manager.  A password manager can “securely store and recognize passwords, login credentials, credit card information, bank account information, IDs…and any other information you might need” (Illinois Bar Journal, Vol. 106 No. 3, pp. 48).  It keeps all credentials and personal information in one place, automatically fills web forms, generates strong passwords, recommends when weak passwords should be changed, notifies you of any security breaches of your online accounts, and can add an extra layer of security on top of username and password (i.e. two-step authentication).

      A password manager is not affected by getting a new computer, clearing cookies, or using another browser and is a valuable tool for passing along digital access information to fiduciaries as will be needed for estate administration after incapacity or death.  In sum, getting a password manager can be a valuable tool to both your estate plan, as well as the management of your personal and business affairs. The Illinois Bar Journal offers a password manager comparison at: https://acgcompares.com/isba-password-managers-comparison-chart/.

Trusts and Doctrine of Election (Illinois)

By Matthew A. Quick The court in the case of In re Estate of Boyar stated that the doctrine of election applies to testamentary trusts and because the petitioner accepted property under the trust, thus ratifying it, the petitioner is barred from maintaining action to contest last amendment to the trust. The court opined that the rules of will construction apply to testamentary trusts that differ from wills in form but not in purpose or substance. The doctrine of election applies regardless of value of property taken under trust. By taking and retaining property, despite repeated requests for its return, the beneficiary makes a binding election which cannot be negated by later attempting to return the property.

Probate Actions and the Limitation Period (Illinois)

By Matthew A. Quick In the case of Bjork v O'Meara the court held that the limitation period for will contests as provided for in the Probate Act (6 months from notice/publication), applies to an action for tortious interference with testamentary expectancy.

The lesson: when someone has a problem with an estate, don't delay! Be sure to talk with an attorney as soon as possible.

Medicaid Liens and Estate Recovery

By Matthew A. Quick There are two main ways a state can, and in some circumstances must, reclaim expenses paid on behalf of a Medicaid recipient. The first is a Medicaid Lien, which gives states the ability to recover the expenses of long-term care of a Medicaid recipient by placing a lien on the home of the Medicaid recipient. The second is Estate Recovery, which is the process employed by states to recover the expenses of long-term care paid on behalf of a Medicaid recipient where the state acts as a creditor against the Medicaid recipients estate, post-death.

MEDICAID LIENS

Medicaid Liens typically apply only to the homes of permanently institutionalized individuals. A permanently institutionalized individual is one who cannot reasonably be expected to return home. A Medicaid Lien has priority over other people who claim an interest to a Medicaid recipient's home and its priority over other liens is determined by state law.

There are restrictions on the placement of Medicaid Liens. These restrictions are intended to protect homes when they are needed by Medicaid recipients or certain close family members. The restrictions follow: The Medicaid recipient must be deemed permanently institutionalized; and No lien may be placed if any of the following relatives of the Medicaid recipient live in the home: 1. A spouse; 2. A child under 21, or a blind or permanently disabled child of any age; and 3. A sibling with an equity interest in the home who has lawfully resided in the home for at least one year before the Medicaid recipient’s admission to a medical institution.

A Medicaid Lien does not interfere with the Medicaid recipient’s use of the home. However, if a Medicaid recipient attempts to transfer the home that has a Medicaid Lien, states can require the Medicaid recipient's equity in the home be used to pay the expense of the state's Medicaid expenditures.

ESTATE RECOVERY

Estate Recovery occurs after a Medicaid recipient's death, during the settlement of the deceased Medicaid recipient's estate. Estate Recovery can apply to personal property or real estate, but most commonly it involves the Medicaid recipient's home.

There are restrictions on Estate Recovery, which are again intended to protect homes when they are needed by certain close family members. The restrictions follow: 1. When there exists a surviving child who is under age 21, or a blind or disabled child, no matter where he or she lives (Estate Recovery may take place when the child no longer meets these criteria); 2. When a sibling with an equity interest lives in the home who has lawfully resided in the home for at least one year before the Medicaid recipient’s admission to a medical institution and continuously since; 3. When an adult child lives in the home who has lawfully resided in the home for at least two years before the Medicaid recipient’s admission to a medical institution and continuously since and can establish that he or she provided care that may have delayed the recipient’s admission to the nursing home or other medical institution; and 4. During the lifetime of the surviving spouse, no matter where he or she lives.

In these restricted instances, the survivor can typically inherit the home and other assets to use as they wish. However, the state may place a lien or file a claim against the survivor for payment of the Medicaid expenditures upon the death of the survivor.

Medical Records and Deceased Family Members (Illinois)

By Matthew A. Quick A new law, which took effect November 23, 2011, and is codified at 735 ILCS 5/8-2001.5, creates a procedure and a form to allow certain family members access to the medical records of a family member who has passed without being forced to initiate a court proceeding. The new law allows a surviving spouse to make a request for the records or, if there is no surviving spouse, then an adult child, a parent, or an adult sibling may make the request.

Avoid Probate without a Trust (Michigan)

By Matthew A. Quick Avoiding probate seems to be the goal in everyone's mind and, most often, for good reason. Although probate may be necessary at times, it can be time consuming, public and costly (with probate court fees and costs and publication fees alone averaging approximately $800 for an estate with property worth $200,000).

Remember, probate is the court process of distributing the property of someone's estate (what someone owns at death). If there is a will, the probate process distributes property pursuant to it. If there is not a will, the probate process distributes property pursuant to state law. A common misconception is that a will allows an estate to avoid probate. In fact, the opposite is true. In order for a will to be used, it MUST go through the probate process.

There are two main alternatives to relying on probate (that is relying on only a will or nothing at all). The first is the use of a trust, which is an agreement that requires a trustee to hold property for the use and benefit of someone else. Trusts are a great utility for families with loved ones that have special needs or minor children, because of certain protections and distribution provisions that are offered. However, sometimes a trust is not necessary.

If someone has basic wishes for distribution of his or her estate, designating beneficiaries on the titles of the property he or she wish to distribute is the effective and efficient alternative. Beneficiary designation works in the following way: as for a deposit account (checking, savings, investment), a "Transfer on Death" provision can be added allowing the owner of the account to give the funds of the account to another upon his or her death; as for a house, a deed can be written to create an interest for someone else upon death by use of a Lady Bird provision (a provision that states the owner shall own the real estate for his or her life and do with it whatever he or she pleases, but if the owner continues to own the real estate upon death, the real estate shall be transferred to certain beneficiaries); as for vehicles, a form can be filed with the Secretary of State by a spouse or heir (for more info on this click here); and personal property may be transferred before death or entrusted to someone to help distribute it after death.

Ask your attorney to help because beneficiary designation can be a bit daunting, but, if done correctly, it can save time and money.

NOTE: a will should always be prepared as a safety net, even if a trust or beneficiary designation exists. If an estate is planned to avoid probate, and organized appropriately, the will is not used.

Statute of Limitations and Will Contests (Illinois)

By Matthew A. Quick The court in In re Estate of Grace Ellis, Deceased, held that a tort claim for intentional interference with expectancy of inheritance is not limited by the 6 month limitation period of the Probate Act where a charitable entity was unaware of its bequest in prior will until two years after later will had been admitted to probate, and thus did not choose to forgo opportunity to contest probated will, as it never had that opportunity.

Transfer of Vehicle Outside of Probate at Death of Owner (Illinois)

By Matthew A. Quick If you are looking for easy, how about property automatically transferring to a beneficiary upon the owner's death, without probate or any other administration. Deposit accounts (checking, savings) can have transfer on death provisions, so too can individual retirement accounts and life insurance. When it comes to vehicles, state law provides an opportunity to designate a beneficiary right on the title in the event the owner dies. 625 ILCS 5/3-104 provides:

The Secretary of State shall designate on the prescribed application form a space where the owner of a vehicle may designate a beneficiary, to whom ownership of the vehicle shall pass in the event of the owner's death.

Further, 625 ILCS 5/3-107 provides:

The Secretary of State shall designate on a certificate of title a space where the owner of a vehicle may designate a beneficiary, to whom ownership of the vehicle shall pass in the event of the owner's death.

If it fits into your estate plan, visit the Secretary of State to designate a beneficiary on your title. This process provides a great alternative to placing a vehicle in trust or having joint vehicle owners (too much liability!).

If, however, a beneficiary was not designated prior to the passing of a decent, consider the use of a small estate affidavit or attorney's affidavit. More information can be found by clicking here: Vehicle Title Transfers . Here is the Illinois Secretary of State Small Estate Affidavit.

The lesson: There are easier alternatives to transferring a vehicle than opening a probate estate. Please contact me with any questions.

Waiver of Spouse's Right to Property (Michigan)

By Matthew A. Quick Michigan law provides for a waiver of certain property rights that are normally automatically afforded a surviving spouse. When considering premarital (prenuptial) or postmarital (postnuptial) planning, estate and succession planning should be a very large part of the consideration. MCL 700.2205 states the following:

The rights of the surviving spouse to a share under intestate succession, homestead allowance, election, dower, exempt property, or family allowance may be waived, wholly or partially, before or after marriage, by a written contract, agreement, or waiver signed by the party waiving after fair disclosure. Unless it provides to the contrary, a waiver of "all rights" in the property or estate of a present or prospective spouse or a complete property settlement entered into after or in anticipation of separate maintenance is a waiver of all rights to homestead allowance, election, dower, exempt property, and family allowance by the spouse in the property of the other and is an irrevocable renunciation by the spouse of all benefits that would otherwise pass to the spouse from the other spouse by intestate succession or by virtue of a will executed before the waiver or property settlement.

Living Trust and Spouse's Interest (Michigan)

By Matthew A. Quick A question that comes up frequently: If one spouse sets up a trust in his or her name only, and funds it with marital property does the other spouse have any right to the property in the trust upon death?

Upon death, the other spouse does not have an interest in the trust and there is nothing under the Estate and Protected Individuals Code (the law that controls this area) that gives him or her any rights under the trust. Not even elective rights may be made against the trust.

Deceased Joint Tenant Affidavit (Illinois)

By Matthew A. Quick If real estate is owned jointly (joint tenancy, tenancy by the entirety (husband and wife)) and one of the joint owners dies, a Deceased Joint Tenant Affidavit, along with the decedent's Death Certificate, is required to be filed with the recorder in the county in which the real estate lies in order to transfer the real estate.

The Deceased Joint Tenant Affidavit ("affidavit") is a written, sworn statement that the decedent has passed and was the joint owner of the real estate. The affidavit must be completed by a person who was acquainted with the decedent (not necessarily an owner of the property), contain certain information, and be signed and notarized.

Probate and Taxes (Illinois)

By Matthew A. Quick In a recent decision, the court in the case of In re Estate of Matthews, Deceased (1-10-1427; March 24, 2011; Cook County) ruled when a testator bequeaths real estate, the will must specifically provide for the estate to assume responsibility for real estate tax obligations, including delinquent taxes from years prior to testator's death, if the testator intends to give the real estate free of encumbrances. Although a testator need not use the precise statutory language of Section 20-19 of Probate Act, the testator must still include an express provision directing estate to assume responsibility for real estate taxes to shift tax obligation from a beneficiary to the estate.

The Estate, Issue Nine

By Matthew A. Quick Probate

Probate is the legal process of settling the estate of a deceased person. Settling a decedent’s estate involves making claims on behalf of the estate (collecting money owed to the decedent, bringing medical malpractice claims, etc.), resolving all claims against the estate (paying creditors, responding to lawsuits, etc.), distributing the property in the estate after all claims are made and resolved (distributions are made pursuant to a Will or the statutory rules of intestate succession), and addressing the guardianship of any minor children or other dependents (guardians are appointed in a Will or determined by statutory rules of guardianship).

Probate can be costly and time consuming, but it is not the same process with all decedent’s estates. Some estates do not require probate if there is no property to be distributed. An estate can be left with no property to be distributed, thus avoid probate, if the decedent’s property is not owned solely by the decedent upon his or her passing. Instead of the deceased owning property solely, he or she could hold property in a trust, jointly with another person, or provide a pay-on-death (referred to as “P.O.D.”) or transfer-on-death (referred to as “T.O.D.”) designation.

To own property in a trust, the person setting up the trust (referred to as the “Settlor”) transfers ownership of property to a Trustee based upon certain terms and conditions that are listed in a Trust Declaration. The terms and conditions of a Trust Declaration are instructions that the Trustee is bound to follow in maintaining or investing the Trust Property. One of the terms of the Trust Declaration is how the property that is being held in the Trust is distributed after the Settlor’s passing. Since the Trustee, not the Settlor, owns the property when the Settlor passes, the Settlor will have no property to be distributed through probate, thus negating the need for probate.

Joint ownership is another effective way to avoid probate. Joint ownership occurs when more than one person owns property at the same time, but each has a right of survivorship. Therefore, when one of the owners passes the other owners continue to own the property without the need for probate. Typically, we see joint ownership with real estate and deposit accounts (checking accounts, savings account, etc.).

Probate can also be avoided by setting up P.O.D. or T.O.D. designations on bank accounts, shares of stock, brokerage accounts, 401ks, IRAs, automobiles and life insurance. Any property that has a P.O.D. or T.O.D. designation will pass automatically to designated beneficiaries upon the passing of the owner of the property. P.O.D and T.O.D. designations differ from joint ownership because once someone is made a joint owner they are an owner and have equal right to control the property. Conversely, if P.O.D. and T.O.D. designations are used, the owner of the property retains control of the property until the date of his or her demise, at which time the property is transferred.

If property is owned solely by the decedent upon his or her passing, then the property must be distributed through probate. Estates that must endure probate will follow one of three general processes: (1) that of a testate estate; (2) that of an intestate estate; or (3) that of a small estate. A testate estate is one that follows directions of a valid Will when being administered. An intestate estate is one that does not follow the directions of a Will, but follows statutory rules of administration. A small estate is one that the legislature considers small enough to administer through a summary proceeding, which typically involves very limited, if any, contact with a court. In Michigan, the threshold for a small estate is $15,000 remaining in the estate after debts and expenses have been paid. In Illinois, the threshold for a small estate is $100,000.

The first step to probate a testate estate is to start a case with the Probate Court, which has special jurisdiction over cases involving estates and guardianship. The Probate Court will determine the validity of the Will and appoint a Personal Representative for the estate. The Personal Representative is typically nominated in the Will (when dealing with a testate estate the personal representative is also called an executor (male) or executrix (female)). Through, and with the power of, the Probate Court, the Personal Representative collects and inventories all of the property in the estate, pays any debts, taxes and expenses, follows the instructions of the Will regarding guardianship of any dependents and distribution of property, and adjudicates the interests of interested parties who may have claims for or against the estate.

The first step to probate an intestate estate is to also start a case with the Probate Court, but instead of determining the validity of a Will (since there isn’t one) the Probate Court will nominate and appoint a Personal Representative for the estate (when dealing with an intestate estate the personal representative is also called an administrator (male) or administratrix (female)). Like testate estates, the Personal Representative will act through and with the power of the Probate Court, however, rather than following the instructions of a Will, the Personal Representative must administer the estate in accordance with the laws of the state where the decedent resided at his or her death. This means that the estate must be distributed to the heirs named by the laws regardless of their relationship or kinship to the decedent. In sum, the intestate process takes all control out of the hands of the decedent’s family to distribute property or decide which person should be named guardian of minor children.

After all of the claims against the estate are paid, the claims for the estate are made, and the property that made up the estate is distributed, the case involving the estate is closed. From opening the case to closing the case, probate generally lasts several months, in some instances over a year, and incurs substantial court and attorney costs. To avoid the time, cost and publicity involved with probate it is imperative to organize an estate in a manner that will not require a lengthy court case, but will allow for a seamless transfer of ownership.

Insanity and the Slayer Statute (Illinois)

By Matthew A. Quick In the case of Dougherty v Cole, Jr. the Defendant was convicted of first degree murder of his mother, by reason of insanity. His sister filed a petition to bar him from taking property under mother's estate per Slayer Statute, and filed wrongful death action against him. Slayer Statute contains no exception for mental illness, thus Defendant's conduct excluded him from inheriting from the mother's estate. A beneficiary's intentional and unjustifiable causing of death, regardless of criminality of the act, is sufficient to bar inheritance.

Adoption Records (Illinois)

By Matthew A. Quick Public Act 96-895, as of May 21, 2010, gives adults that were adopted access to their original birth certificates. For those born before January 1, 1946, they may access their original birth certificates immediately and for those born after January 1, 1946, they may access their original birth certificates after November 15, 2011. Birth parents have the right to remain anonymous.

Mutual Wills (Illinois)

By Matthew A. Quick In the case of Ernest v Chumley, step-children filed a complaint against their step-mother to determine their rights under a mutual will. A mutual will is generally regarded as one of two reciprocal wills that makes promises regarding the distribution of property upon the death of one of the spouses. This type of will is usually only used in situations where one of the spouses has children from a previous marriage and wants property to be distributed to them.

In this case, the mutual wills did not have any provision controlling the use of property during the lifetime of the surviving spouse. However, when the surviving spouse attempted to transfer proceeds from the sale of the home she owned with the deceased into certificates of deposit held jointly with her current spouse, the court opined that she breached the expressed intent of her mutual will by removing property from her estate.

In essence, the surviving spouse is welcome to use the funds from the estate of the deceased spouse in a situation involving mutual wills. However, the funds cannot be directed outside of the surviving spouses estate. In the interest of honoring the mutual wills, a surviving spouse must keep the funds within her estate.

Transfer of Vehicle Outside of Probate at Death of Owner (Michigan)

By Matthew A. Quick Michigan law allows for the transfer of vehicles of deceased owners outside of the probate process with Secretary of State Form TR-29. The controlling law, MCL 257.236(2), provides:

If an owner of 1 or more vehicles, which vehicles do not have a total value of more than $60,000.00, dies and the owner does not leave other property that requires issuance of letters as provided in section 3103 of the estates and protected individuals code, 1998 PA 386, M.C.L. 700.3103, the owner's surviving spouse, or an heir of the owner in the order specified in section 2103 of the estates and protected individuals code, 1998 PA 386, M.C.L. 700.2103, may apply for a title, after furnishing the secretary of state with proper proof of the death of the registered owner, attaching to the proof a certification setting forth the fact that the applicant is the surviving spouse or an heir. Upon proper petition, the secretary of state shall furnish the applicant with a certificate of title.

Will Depository (Illinois)

By Matthew A. Quick Public Act 96-137 authorizes the Secretary of State to act as a depository for wills and trust documents that a lawyer is safekeeping, but does not know how to contact the person who created the will or trust. In order to deposit the will or trust, the attorney must certify that the person who created the documents cannot be located after a diligent search. The cost of this service may be up to $15 per document. This Act become effective January 1, 2010.

Do-Not-Resuscitate Orders (Illinois)

By Matthew A. Quick The Health Care Surrogate Act with regard to a Do-Not-Resuscitate Order (also known as a "DNR"), to wit, Chapter 755 of the Illinois Compiled Statutes, Act 40, Section 65, now only requires one witness to the signing of the Do-Not-Resuscitate Order instead of two witnesses; but requires the witness to attest that the person executing the Do-Not-Resuscitate Order had the opportunity to read the Do-Not-Resuscitate Order. These changes shall become effective January 1, 2010.

The Prudent Investor Rule (Michigan)

By Matthew A. Quick The actions of a personal representative, guardian, conservator or trustee, or a successor of them, are governed by the Michigan Prudent Investor Rule, unless specifically excepted or restricted. MCL 700.1501, et seq; MCL 700.1104(e); MCL 700.1502. The Michigan Prudent Investor Rule, to wit, MCL 700.1502(1), provides:

A fiduciary shall invest and manage assets held in a fiduciary capacity as a prudent investor would, taking into account the purposes, terms, distribution requirements expressed in the governing instrument, and other circumstances of the fiduciary estate. To satisfy this standard, the fiduciary must exercise reasonable care, skill, and caution.

The Michigan Prudent Investor Rule continues:

A fiduciary's investment and management decisions with respect to individual assets shall be evaluated not in isolation, but rather in the context of the fiduciary estate portfolio as a whole and as a part of an overall investment strategy having risk and return objectives reasonably suited to the fiduciary estate. MCL 700.1503(1).

To achieve this goal, the following considerations are encouraged: (1) The present general economic conditions; (2) Any possible effect of inflation or deflation; (3) The expected tax consequences of an investment decision or strategy; (4) The role that each investment or course of action plays within the overall portfolio, which may include financial assets, interests in closely-held enterprises, tangible and intangible personal property and real property; (5) The expected total return from income and the appreciation of capital; (6) Other resources of the beneficiaries; (7) The need for liquidity, regularity of income, and preservation or appreciation of capital; and (8) An asset's special relationship or special value, if any, to the purposes of the fiduciary estate or to one or more of the beneficiaries. MCL 700.1503(2). In light of these considerations, a person who is subject to the Michigan Prudent Investor Rule must (1) Make a reasonable effort to verify facts relevant to the investment and management of fiduciary assets; and (2) Invest in any kind of property or type of investment consistent with the standards of the Michigan Prudent Investor Rule. MCL 700.1503(3) and (4). In addition, those with a special skill or expertise, or those that are appointed to act because they represented a special skill or expertise, must use that special skill or expertise when investing or managing assets. MCL 700.1503(5).

Once appointed as a personal representative, guardian, conservator or trustee, or a successor of them, one must inventory the assets over which he or she has control and implement a plan to bring the assets into compliance with the wishes of the owner of the property, or court order, as well as any other requirements of the Michigan Prudent Investor Rule concerning the retention and disposition of the assets. MCL 700.1505. In implementing a plan, one must invest and manage the assets solely in the interest of the beneficiaries. MCL 700.1506. This requires diversification of the assets (unless it is determined that, because of special circumstances, the purposes of the fiduciary estate are better served without diversifying) and, in the event there are two or more beneficiaries, impartiality between the beneficiaries (the investment and management of the assets must reflect any differing interests of the beneficiaries). MCL 700.1504 and MCL 700.1507.

The prudence of a particular investment is not inherent. MCL 700.1503(4). Compliance with the Michigan Prudent Investor Rule is determined in light of the facts and circumstances that exist at the time of the decision or action, and not by hindsight. The Michigan Prudent Investor Rule requires a standard of conduct, not outcome or performance. MCL 700.1509.

One that has been appointed a personal representative, guardian, conservator or trustee, or a successor them, may delegate the power to invest and manage the assets, so long as delegation has not been restricted. In the event one wishes to delegate his or her appointed duties, he or she must exercise reasonable care, skill, and caution in all of the following: (1) Selecting an agent; (2) Establishing the scope and terms of the delegation, consistent with the purposes and terms of the property owner's wishes or court order; and (3) Periodically reviewing the actions of the person that received the power to monitor his or her performance and compliance with the terms of the delegation. MCL 700.1510. If one who delegates his or her appointed power does so with the required care, skill and caution, he or she is not liable to the beneficiaries, or to the owner of the property, for a poor decision or action of the person who received the delegated power.

Please note: If a question arises regarding whether a contemplated investment decision is permissible under the Michigan Prudent Investor Rule, a petition to the Probate Court for authorization may be made.