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.

Dear Lenders,

Hey! Hope everything is going well.

I just wanted to write you about an issue that's arisen of late with some of my estate planning clients. These clients are finishing up their estate plans, and are also in the process of refinancing. (Very "on the ball" of them, don't you think?) In both of their cases, their mortgage brokers have told them NOT to transfer their residences into their new living trusts prior to refinancing. In fact, the lenders have said that, if they do re-title their residences in the name of their living trusts, they may lose their loan and not be able to refinance.

In the words of one of my favorite recent SNL skits, I have to ask, "what up with that?" I realize that you guys have been burned in the past, because you essentially made loans with no regard to the risks involved. You remember that, don't you? I know I do -- ah, the heady days of the early aughts. I recall the couple that bought their first house and walked away from the closing with $10,000, because they'd financed 105% of the value of their house. And the guy who got the $100,000 loan despite not having any job or income.

Yes, those were the days. I think we can all agree that you behaved like morons. And I understand the desire to impose some standards. I just don't understand the desire to impose THIS standard. As I'm sure you know (?), owning property in a revocable trust is just like owning property in your own name. There's no asset protection here. In addition, clients can bypass your ridiculous rules by refinancing and then transferring title into their living trusts. And as I talked about here, there's really nothing you can do about it.

You might counter by saying, "then why do you care about this rule -- all it does it postpone the transfer until the refi is complete." And you do have a point. But what if my clients die in the interim? Not likely, but it could happen -- if it does, then we have to have a probate, which is exactly what we were trying to avoid by setting up living trusts. And even if they don't die: why should my clients have to wait to start the re-titling process just because you don't understand anything about the law, or about risk?

Anywho, if you want to discuss, just let me know. I promise I won't even yell at you (very much) if you call.

Your pal,

Joel A. Schoenmeyer

To Kill A Mockingbird was originally published on July 11, 1960, so there has been a fair amount of hoopla surrounding its 50th anniversary. This has included (among other things) the publication of Scout, Atticus & Boo (an examination of the book's cultural and personal impact via interviews with a number of interesting, thoughtful people - and Tom Brokaw).

It's been a few years since I read the book, so I decided it was time for a revisit. (Another reason to revisit: I was thinking about whether it would be appropriate to read to my 8-year-old. It isn't.)

What is there to say about the book that hasn't already been said? Not much, but it is interesting to note that Atticus Finch -- in addition to practicing criminal law by defending Tom Robinson -- is an estate planner. The book alludes to this twice:

The family's friend Miss Maudie Atkinson remarks that Atticus "can make somebody's will so airtight can't anybody meddle with it." (Chapter 10)

The family's miserable neighbor Mrs. Henry Lafayette Dubose called Atticus to make her will just prior to her death. (Chapter 11) At the time she made the Will, Mrs. Dubose was a morphine addict (an addiction she broke prior to her death), which raises a couple of interesting inter-related questions:

1. Does a morphine addict have the necessary capacity to make a Will?

2. If you were to "climb into [Atticus's] skin and walk around in it," would you agree to draft a Will for her, given her addiction?

Twice in one day last week I encountered documents titled "Declaration of Trust Agreement." Let me explain why that title makes no sense, and then discuss a few more confusing sets of terms in estate planning and probate.

When you sign a document establishing a trust, you are doing it in one of two ways:

1. With a third party (a bank or trust company, or a friend or relative of yours) as the trustee. Basically, the document you are signing is an "agreement" between you (as grantor or creator of the trust) and the trustee. You agree to contribute property to the trust; the trustee agrees to handle the property as set forth in the agreement.

2. With yourself as the trustee as well as the grantor. In this case, we don't use the word "agreement" -- instead, we say you are making a "declaration of trust." You are declaring that you as trustee will hold certain property as set forth in the declaration.

Some other sets of terms that are confusing:

Living Trust vs. Declaration of Trust vs. Revocable Trust. These are really just different names for the same thing. You set up a trust with yourself as trustee. It applies during your lifetime (it's "living"). It's a declaration, as I described above (although you can do a living trust agreement, where a third party is the trustee during your lifetime -- but it's rare). And it's revocable (you can revoke it - or amend it - during your lifetime). Note that there are some types of trusts that you can't revoke (irrevocable trusts) -- these are set up for tax reasons, and are always trust agreements (the grantor is not the trustee).

Living Will vs. Will. A "Will" is where you give away property upon your death. A "living will" is a health care-related document -- it sets forth circumstances in which you want to be taken off life support.

Power of Attorney vs. Power of Appointment. A "power of attorney" is similar to a living will -- it's a document meant to apply if you become disabled and can't make decisions for yourself. In Illinois, there are two types of powers of attorney: for health care decisions, and for property decisions. In each case, you name an agent to make decisions on your behalf. A "power of appointment" is a power given to a beneficiary of a trust, enabling the beneficiary to give away (or appoint) his or her interest in the trust to someone else (sometimes a charity or another person).

Probate vs. Non-Probate. "Probate" is a court proceeding, to transfer certain property from a deceased person to his or her beneficiaries. What type of property is subject to probate? Property owned by a deceased person in his or her own name at death. That means "non-probate" property is everything else: property owned jointly with another person, property with a beneficiary designation, and property held in trust. Non-probate property passes outside of the probate process.

Heirs vs. Legatees. "Heirs" are a deceased person's closest relatives -- they are set forth in a long portion of the Illinois Probate Act. For instance, if I am married and have two kids, then my wife and kids are my heirs. If I'm unmarried and have no kids, my heirs would be my parents and siblings. "Legatees" are the beneficiaries I name under my Will. Note that heirs and legatees may not be the same thing, but they may have similar rights (like the right to contest your Will, and the right to get notice of probate proceedings) under Illinois law. If I am married and have two kids, and leave all of my property to my wife and kids, then they are my heirs and legatees. If I am married and have two kids, and leave all of my property to my mistress, then (a) I'm a very bad man, (b) my mistress is my legatee (but not my heir), and (c) my wife and kids are my heirs (but not my legatees).

Today's Wall Street Journal has an interesting article (here) entitled "Jackson Estate Steers to Next Crisis." There are a few points here, some of which relate to most probate estates and some of which are specific to Mr. Jackson's estate.

The rich and famous are just like everyone else in the sense that their bills have to be paid. Mr. Jackson had a LOT of outstanding obligations at the time of his death -- many of them large, but some of them relatively small (like an AT&T bill in the amount of $1,300). His co-executors are doing exactly what co-executors should do: use estate assets to pay off his debts (and to pay ongoing expenses of administration).

Here's an uncomfortable but true statement from the article: "Mr. Jackson's absence from the equation has eliminated the chaos and out-of-control spending that reigned during his life." Estate and trust administration appeals to me because it's very orderly. You have assets and you have bills -- you then use the assets to pay the bills. If the assets are insufficient to do so, there's even a mechanism (similar to bankruptcy) by which creditors are placed in order to get paid. The co-executors here are obviously operating on a much grander scale (at present, trying to figure out how to pay back or refinance a $300 million loan due at the end of this year), but the issue is pretty much the same one you'd see in more typical estates.

There certainly are new expenses caused by death (funeral expenses, expenses for lawyers and accountants, etc.), but those should be easy to get a handle on. The main problem with Mr. Jackson's finances was Mr. Jackson (or, more specifically, his inability to live on a budget). That problem died with Mr. Jackson. Also, my impression is that Mr. Jackson gave a LOT of money to various family members -- the co-executors certainly aren't going to continue that practice unless ordered to by a court (sorry, Tito).

One thing that isn't typical here: Mr. Jackson's co-executors "are aggressively managing Mr. Jackson's affairs as a going concern." That's as it should be, but it's fairly unprecedented. There was interest in Mr. Jackson's work before his death, and that interest has ballooned since his passing. The co-executors have a lot of experience in the music industry, and are in a great position to maximize the value of Mr. Jackson's assets. But I'll be curious to see how the estate is eventually wound up. Will the assets simply be turned over to a company run by or for the beneficiaries?