In last month's Illinois Bar Journal, Katarinna McBride and Graham B. Schmidt discuss a couple of new aspects of the Illinois Rules of Professional Conduct (the "Rules"). Their summary (here, but you have to be an ISBA member) is well worth reading.

The Rules were revised effective 1/1/10. The two of particular interest for estate planners are the following (my comments are in italics):

1. Client with Diminished Capacity. Revised Rule 1.14, which now states as follows:

(a) When a client?s capacity to make adequately considered decisions in connection with a representation is diminished, whether because of minority, mental impairment or for some other reason, the lawyer shall, as far as reasonably possible, maintain a normal client-lawyer relationship with the client. (But how can an attorney represent someone with diminished capacity? I don't know how such a client can effectively consent to representation. I also don't know how such a client can change his or her estate planning documents.)

(b) When the lawyer reasonably believes that the client has diminished capacity, is at risk of substantial physical, financial or other harm unless action is taken and cannot adequately act in the client?s own interest, the lawyer may take reasonably necessary protective action, including consulting with individuals or entities that have the ability to take action to protect the client and, in appropriate cases, seeking the appointment of a guardian ad litem, conservator or guardian. (I'm glad the Rule says "may" and not "shall" -- making an attorney have a duty to protect his or her clients, to the point where the attorney would HAVE to initiate a guardianship proceeding, would be a huge mistake.)

(c) Information relating to the representation of a client with diminished capacity is protected by Rule 1.6. When taking protective action pursuant to paragraph (b), the lawyer is impliedly authorized under Rule 1.6(a) to reveal information about the client, but only to the extent reasonably necessary to protect the client?s interests.

2. Duties to Prospective Client. New Rule 1.18, which states:

(a) A person who discusses with a lawyer the possibility of forming a client-lawyer relationship with respect to a matter is a prospective client.

(b) Even when no client-lawyer relationship ensues, a lawyer who has had discussions with a prospective client shall not use or reveal information learned in the consultation, except as Rule 1.9 would permit with respect to information of a former client. (See below for my main concerns. I understand why I have a duty to clients and former clients. I even understand why I have a duty to beneficiaries under my clients' estate planning documents, in the event that I screw up their bequests. I do NOT understand why I would have a duty to people who thought about hiring me, decided not to, and paid me nothing.)

(c) A lawyer subject to paragraph (b) shall not represent a client with interests materially adverse to those of a prospective client in the same or a substantially related matter if the lawyer received information from the prospective client that could be significantly harmful to that person in the matter, except as provided in paragraph (d). If a lawyer is disqualified from representation under this paragraph, no lawyer in a firm with which that lawyer is associated may knowingly undertake or continue representation in such a matter, except as provided in paragraph (d). (As someone who does a fair amount of phone consultations, I'm not thrilled by this Rule. People call for "free legal advice," which I try not to give. But people should also feel like they have a sense of what an attorney can do for them, BEFORE they hire the attorney. Am I supposed to say nothing of value to prospective clients? Am I supposed to stop them from telling me anything about their case, since by doing so I may be disqualified from representing the other side if they decide not to hire me?)

(d) When the lawyer has received disqualifying information as defined in paragraph (c), representation is permissible if:

(1) both the affected client and the prospective client have given informed consent, or

(2) the lawyer who received the information took reasonable measures to avoid exposure to more disqualifying information than was reasonably necessary to determine whether to represent the prospective client; and that lawyer is timely screened from any participation in the matter and is apportioned no part of the fee therefrom. (Basically, this is a loophole for big law firms. If you are a solo practitioner, or practice in a small town, you are out of luck with the new Rule 1.18.)

If you grew up in the 1980's like I did, you know that the question "Who's The Boss?" has a few possible answers: Angela, Tony, or maybe Mona.

But on a more serious note, the question of "Who's the boss?" in a probate or trust context is more difficult to answer. On the one hand, you have the fiduciary (trustee, executor, or administrator); on the other hand, the beneficiaries. If there's a conflict between the two, who wins? Does one always control?

Here's the difficulty: the relationship between fiduciary and beneficiary is not a straightforward one. A fiduciary does have title to property, and handles the administration of the estate or trust. Some fiduciaries think this means that they are "in charge," and they attempt to make beneficiaries feel like second-class citizens. This isn't right. While a fiduciary is in one sense "the boss," they are also required to follow the terms of the Will or trust, and also owe a number of duties to the beneficiaries.

To take an example: a trustee may have title to real estate, but the trustee might be required (under the terms of the trust instrument) to sell the real estate and distribute all or a portion of the net proceeds to the beneficiary. The trustee HAS to do this, or risks running afoul of the law.

That being said, the beneficiaries get the benefit from trust or estate property, but may not be authorized to interfere with the day-to-day administration. A typical Will or trust may allow a trustee to sell real estate without requiring beneficiary consent. (Of course, if the sale is done incorrectly for some reason, the beneficiary may have some legal recourse, via objecting in a court proceeding.)

In Illinois, you can avoid a probate proceeding so long as the assets you owned in your own name at your death (that is, assets OTHER THAN joint assets, assets with a beneficiary, or assets in trust) have a value of less than $100,000.

But what if you are over that amount, yet your only asset is Illinois real estate? Is there a way to transfer your house to your heirs or legatees without a probate? The answer is (surprisingly) "yes." You can do this by a process called "bond in lieu of probate," by which the heirs or legatees can transfer title to a buyer (maybe one of them, maybe a third party) via a valid deed. Basically, the process requires you to have:

1. Agreement by the heirs (and legatees, if any) to use this process; and

2. A title company that will agree to handle the transaction itself.

What are the concerns with transferring title to a decedent's real estate without a probate? The big one is creditors. Probate exists to transfer the decedent's property to his or her heirs (or, if there was a Will, to the legatees under the Will). But it also exists to allow creditors to be paid money they are owed by the decedent or his or her estate. If there's no probate, how are the claims paid? This is where the title company comes in to the picture. Here's Chicago-area attorney Cary A. Lind's take on the situation:

The title company is concerned about creditors claiming against the purchaser or other insured party because claims were not paid. In order to protect itself, the title company takes two different routes. First, it requires a personal undertaking from all distributees, whereby the distributees agree jointly and severally to indemnify the title company against all claims, fees, expenses, etc., from any claims which may be asserted against it. That is well and good, but what if a legatee skips town, blows the money, and is uncollectible? The title company's second requirement is a bond to insure its risk, thus the phrase "bond in lieu of Probate." The bond for Chicago Title Insurance Company is two percent of the value of the decedent's interest in the real estate during the first twelve months after death and one percent during the second twelve months. After two years, all claims are barred, so no bond is necessary.

I don't know if those rates are still applicable (Mr. Lind's article is from 2002), but let's assume they are, and we're talking about the transfer of a $500,000 house. In that case, the bond will be $10,000 (if the transaction is done in the first year after death). That's pretty expensive, I think, especially since the heirs are still required to sign a personal undertaking. I typically handle probate estates for far less than $10,000, and you get the probate "seal of approval" (disallowing claims once the claims period in probate has passed) thrown in for free.

Does this mean a "bond in lieu of probate" is always a bad idea? Not at all. I recently closed a transaction where dad died in 2005, leaving no Will and two heirs (son and daughter, who get along well). Son and daughter worked together in handling the property over the five years after dad's death, but then the two of them agreed that son would purchase daughter's interest. No bond was needed because the time for filing claims had passed, and the transaction was completed for much less than than the cost of a probate. (It happened pretty quickly to boot.)

A line in my baby book reads: "Joel is afraid of animals, clowns, and men with beards." That's still pretty much true; in other words, I'm not an animal lover (although I'm not as bad as this guy). But, obviously, I'm in the minority -- lots of Americans have pets that are a big part of their lives.

What happens to a deceased person's pets? Usually a family member or friend takes them in. But how are the pets provided for? For a long time, you couldn't create a trust for your pets because a trust must have a human beneficiary. How to get around that?

Enter the pet trust, and pet trust laws -- the Illinois law is here. What do you need to know/consider in setting up a pet trust? Two main things, really:

1. There are two people who are carrying out your wishes with respect to pets: a caretaker and a trustee. The division of labor is similar to guardianships for minors (where there's a guardian of the person and a guardian of the estate). The caretaker has physical possession of the pets, and the trustee invests the trust money and uses it for the benefit of the pets. You will of course want to name caretakers and trustees who can work together, since the caretaker may be requesting money from the trustee.

2. You have to name a clear contingent beneficiary, to inherit the trust property if (a) you die without owning pets, (b) your pets survive you but subsequently die, or (c) a court reduces the amount of the trust due to a determination that it "substantially exceeds the amount required for the intended use." (Note re. (c) -- this would probably happen if, for instance, you left $10 million for Dickens Thor Meow-Meow Face*, your cat.)

*This is the actual name my wife would give our cat if we owned one. Luckily, she's allergic to cats.

Robert S. Held has a nice article in this month's Illinois Bar Journal (registration required -- but it's here) regarding the doctrine of election. What is the doctrine of election? According to the author, it's a "common law doctrine... which prevents a beneficiary from accepting benefits under a will and then challenging that same document." So, if you're left $5,000 under your dad's Will (with the rest going to your ugly stepsisters), you can't accept the $5,000 and then contest the Will. It's an either/or proposition. Mr. Held also indicates that the doctrine probably applies to bequests under a trust as well as bequests under a Will.

Putting on my probate litigation hat, the above makes me think about new ways to deal with potential Will contests. Let's say you represent Son (who is left 99% of Mom's estate and who is her executor) -- Daughter is left only 1%, and may challenge the Will. Upon Mom's death, get in touch with Daughter ASAP and try to give her the 1% to which she's entitled. If she accepts, then you don't have to worry about a Will contest.