IllInoIs state Bar assocIatIon Trusts & estates

May 2013 Vol. 59, No. 10

Illinois State Bar Association

Trusts & Estates

The newsletter of the Illinois State Bar Association’s Section on Trusts & Estates

In the May issue... Inside

By Darrell Dies & Jacob Frost cussion regarding when to file a probate claim In the May issue. . . . . . . . . . . 1
in light of Water Tower Nursing v. Estate of Weil. Prudent investor rule
This month’s newsletter has several articles chiseled away in
of interest to the estate/trust practitioner. We wish to express sincere thanks to each Carter v. Carter . . . . . . . . . . . . 1
Robert Held has submitted an interesting and every person that has helped make this Reasonable attorney
article about the Prudent Investor Rule in light of newsletter a success by providing informative, fees & ISBA Advisory
the recent case of Carter v. Carter. Thomas Brans- substantive and practical articles. Members of Opinion No. 13-01. . . . . . . . . 3
field and Darrell Dies have an appealing article the Trusts & Estates Section may now comment Illinois adopts
regarding the ISBA Advisory Opinion No. 13-01 on the articles in the newsletter by way of the equitable adoption. . . . . . . . 8
and the reasonableness of attorney fees. Gary online discussion board on the ISBA Web site Reflections on the
Gehlbach provides a fresh perspective regard- at <http://www.isba.org/sections/trustsestates/ Illinois decanting and
ing equitable adoption as decided in the DeHart newsletter> and we welcome any comments directed trusts statutes . . . 10
court. Tim Midura has some unique insights re- from our audience. ■ When to file a probate
garding the new Directed Trust and Decanting claim . . . . . . . . . . . . . . . . . . . . 12
statutes. Finally, Phil Koenig provides a brief dis- Upcoming CLE
programs. . . . . . . . . . . . . . . . 14
Prudent investor rule chiseled away in Carter v. Carter
If you're getting
By Robert S. Held nicipal bonds, she said, “to provide a good, safe this newsletter
income in a highly fluctuating and problematic
The First District, in an opinion last year, ef- market-place.”4 by postal mail
fectively nullified – perhaps inadvertently and would
– an element of the Prudent Investor Rule The decedent’s daughter brought a breach
in Illinois. The ramifications are still being felt, of fiduciary claim arguing that among other prefer electronic
but trust counsel and practitioners alike must be violations, the trustee had breached her duty delivery, just
on notice: the duty of a trustee to remain impar- of impartiality. The trustee’s investment solely
tial when investing marital trust assets has been in bonds favored the trustee; it would provide a send an e-mail to
eviscerated by Carter v. Carter.1 An investment steady income (in nominal dollars) but would al- Ann Boucher at
solely in tax-free municipal bonds for an entire most certainly not grow in value over time. Thus, [email protected]
trust was upheld without dissent in a ruling that the bond portfolio’s purchasing power (after
was not filed under Sup. Ct. Rule 23.2 inflation), when inherited, could be far less than
when the decedent died.
In Carter, the decedent’s surviving spouse
was the trustee and income beneficiary of a mar- The Appellate Court correctly noted that its
ital trust (a sub-trust created at the decedent’s primary concern in interpreting a trust docu-
death to take advantage of the Internal Revenue ment is to ascertain the grantor’s intent. Other
Code’s allowance for the deferral of tax on as- than that observation, there is not a single por-
sets left to a surviving spouse).3 The decedent’s tion of the court’s analysis that is grounded in
daughter was the remainder beneficiary of the the Illinois statutes or relevant case law. The
marital trust who objected to her step-mother’s
singular investment. The surviving spouse had Continued on page 2
invested 100% of the marital trust in tax-free mu-

Trusts & Estates | May 2013, Vol. 59, No. 10

Court, instead, focused almost exclusively interests at a subsequent date.10 [T]he would also be more likely to serve the in-
on one boilerplate provision of the trust. The trustee must act impartially between come beneficiary in the future by protecting
trustee was authorized, as part of the provi- the income and remainder beneficia- the portfolio against inflation. It was in the
sions of the decedent’s living trust“[t]o retain ries in investment transactions.11 income beneficiary’s own interest to ensure
any property transferred to the trustee, re- that if she lives long, her purchasing power
gardless of diversification and regardless of In short, by investing in tax-free munici- from the income is maintained. Ironically, in
whether the property would be considered a pal bonds, the trustee failed to balance the addition to helping herself, such a strategy
proper trust investment.”In the Carter court’s desire for income against the investment risk would also fulfill her husband’s wish that
view, that language superseded (and nulli- then allocated to the remainder beneficiary - the portfolio (not 37% of it) would go to his
fied) the Prudent Investor Rule (the “Rule”) the primary risk of a bond portfolio, inflation. daughter at his wife’s passing. Practitioners,
requiring a trustee to pursue an investment While inflation is currently much lower, over mindful of the Carter opinion, must now con-
strategy consistent with the trustee’s duty of the last 100 years price increases have aver- sider amending existing trust documents or
impartiality because the trustee’s muni strat- aged about 4%. During certain periods, like advising their current clients of the altered
egy was not“arbitrary or unreasonable.”5 the ten-year period between 1972 and 1982, landscape affecting the duties of a trustee. ■
inflation insidiously eroded over one-half __________
The Rule, developed decades ago, stems of the purchasing power of every dollar. As-
from modern portfolio theory—the effort to suming only a 4% inflation rate and a 20-year Robert S Held is a partner at Harrison &
maximize return for a given level of risk of an investment in bonds, a remainder benefi- Held in Chicago, Illinois and can be reached at
entire portfolio. Essentially, a rational inves- ciary could have the same purchasing power 312.332.5530 or at [email protected].
tor should consider how each asset class— as a portfolio worth less than half its initial
and its proportion—affects the portfolio’s value. If the income beneficiary survives 25 1. Carter v. Carter, 2012 IL App (1st) 110855,
expected return for a given level of risk. Effec- years, the purchasing power is 37% of its 965 N.E.2d 1146 appeal denied, 968 N.E.2d 1064
tive in Illinois in 1992, the Rule provides that initial value. And those calculations assume (Ill. 2012)
the trustee should diversify the investments that interest rates are unchanged. In fact, if
of the trust unless the trustee believes it is in interest rates rise, the value of the portfolio 2. An order entered under Rule 23 is not prec-
the interests of the beneficiaries and furthers at the income beneficiary’s passing would edential and may not be cited by any party except
the purposes of the trust not to diversify.6 be even less (as bond prices vary inversely to to support contentions of double jeopardy, res
The Rule also requires that a trustee should interest rates). A prudent investor would not judicata, collateral estoppel or law of the case. Ill.
pursue an investment strategy “consistent invest in a way that ignores the eroding ef- Sup. Ct. R. 23
with the trustee’s duty of impartiality.”7 fects of inflation.
3. 26 USCA 2056
Until the decision in Carter, few thought Further, it is difficult to imagine that the 4. Id.
that the boiler plate language quoted above, settlor contemplated that boilerplate lan- 5. Id.
language in the form documents found guage would allow the trustee to invest in as- 6. IL ST CH 760 § 5/5
in IICLE’s Estate Planning Forms and Com- sets in derogation of her duty of impartiality. 7. Id.
mentary, could nullify a trustee’s duty of im- In the Carter Court’s view, the income benefi- 8. Id. (emphasis supplied)
partiality. In fact, the Rule in Illinois requires ciary’s welfare became foremost; the remain- 9. As the Court in Cent. Nat. Bank of Mattoon v.
a settlor to expressly waive its provision if der beneficiary’s rights, subordinate—and U.S. Dept. of Treasury, 912 F.2d 897, 902 (7th Cir.
that is the settlor’s intent. The Rule includes all based on one standard trust provision. Of 1990), “This leaves the status of the duty to diver-
the following: “The provisions of this Section course, the income beneficiary herself—if sity in Illinois law in a fog . . .”
may be expanded, restricted, eliminated, or she lives long enough—will also discover the 10. The Law Of Trusts And Trustees § 541
otherwise altered by express provisions of disadvantage of an investment exclusively 11. The Law Of Trusts And Trustees § 612
the trust instrument.”8 It appears that an im- in bonds. The income she is receiving today, 12. IL ST CH 760 § 5/5.3
plied waiver in Carter should not have been again assuming a 4% inflation rate, may only
found. buy her one-half of those goods and services Now Every Article Is
20 years down the road. the Start of a Discussion
While it is true that Illinois courts have
consistently failed to understand the duty The old adage to not put all your eggs If you’re an ISBA section
to diversify,9 it is surprising that courts now in one basket comes to mind. By creating a member, you can comment on
are also willing to ignore the duty of impar- portfolio that balanced her desire for income articles in the online version
tiality. A fair reading of the Rule, the Restate- with the need to protect against inflation,
ment of the Law of Trusts or the conclusions the trustee could have fulfilled her duty of of this newsletter
of courts in other states facing similar ques- impartiality, reduced the overall portfolio risk
tions should lead to what Professor Bogert and created a higher expected return. Fur- Visit
and others have said for a century: ther, after creating a balanced portfolio she
could have withdrawn a fixed percentage of to access the archives.
[T]he trustee should endeavor to the portfolio each year regardless of the in-
act in such a way that a fair result is come created by taking advantage of Illinois’
reached with regard to the interests Total Return Trust statute.12
of the current or income beneficiaries
and those who take possession of their A portfolio with several asset classes

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May 2013, Vol. 59, No. 10 | Trusts & Estates

Reasonable attorney fees & ISBA Advisory Trusts & Estates
Opinion No. 13-01
Published at least four times per year.
By Thomas Bransfield and Darrell Dies whether it is a violation of the Rules of Pro- Annual subscription rate for ISBA
fessional conduct, governing the reason- members: $25.
For those of you who represent repre- ableness of attorney fees, for an attorney to To subscribe, visit www.isba.org
sentatives of decedent’s estates, the contract with a client for payment of fees in or call 217-525-1760
ISBA Advisory Committee (“Commit- excess of an amount approved2 by the Pro-
tee”) Opinion No. 13-01 issued January 2013 bate Court. Office
(“Opinion”), is a must read. The Committee
issued its opinion “that an agreement that a A. Statute. Illinois Bar Center
client shall pay fees disallowed by the Pro- 424 S. Second Street
bate Court, regardless of the reason for disal- The Committee first examines the Pro- Springfield, IL 62701
lowance, is a violation of the Rules of Profes- bate Act that provides the well known pro- Phones: 217-525-1760 OR 800-252-8908
sional Conduct 1.5.”(emphasis added). vision that the attorney for a representative
is entitled to reasonable compensation for www.isba.org
I. Summary his services.3 The Committee acknowledges
that“while such compensation normally is to Editors
The question posed to the Committee be paid with estate assets, that is not always
was whether it is ethically permissible for a the case.”The Committee also cites In re Elias,4 Darrell E. Dies Raymond W. Prather
lawyer for a representative of a decedent’s “there is no provision in the Probate Act re- 1201 S. Main St., Ste. 3 53 W. Jackson Blvd
estate to enter into a fee agreement, or to quiring that the executor’s attorney fees and Eureka, IL 61530-1736
collect a fee, for an amount in excess of the costs be exclusively paid from the estate.” Ste. 1025
amount of fees allowed by a Probate Court Jacob J. Frost Chicago, IL 60604-3650
as reasonable.1 The Committee cites the Il- The Committee does not discuss the dif- 102 E. Saint Paul Street
linois Probate Act of 1975, several cases, the ferences in the Probate Act provisions be- Spring Valley, IL 61362
Illinois Rules of Professional Conduct, and tween attorney and executor fees. The court
other ethical opinions to support its conclu- in the case In re Elias5 held that unlike attor- Managing Editor/
sion that such an arrangement is a violation ney fees, executor and administrator fees are Production
of the Rule of Professional Conduct 1.5. This limited to being paid from the assets of the
article is designed as an in depth review of estate. The Probate Act does not require an Katie Underwood
the Opinion and the references cited by the attorney fee for an estate representative to [email protected]
Committee to support its conclusion. be paid exclusively from estate assets.
Trusts & Estates Section
II. Committee’s Analysis B. Illinois Case Law. Council

The Committee proposes a hypothetical The Committee returns to In re Elias for Charles G. Brown, Chair
fact scenario between an attorney and client the proposition that a Probate Court, a court Katarinna McBride, Vice Chair
to begin the discussion. Under the facts as- of general jurisdiction, has the authority to
sumed, the attorney is hired by an individual apportion the payment of attorney fees to Mary E. Faupel, Secretary
client to represent the client as representa- other parties, other than just to the estate.6 Ray Koenig III, Ex-Officio
tive of a decedent’s estate. The attorney’s en- The court in Elias first made a determination
gagement letter, accepted by the client, pro- that the attorney fees charged to the estate David A. Berek David M. Lutrey
vides for the attorney to be paid on an hourly were reasonable.7 Then the court examined Sean D. Brady Paul A. Meints
basis from the estate and provides that if any whether it would be fair for the estate ben- Deborah B. Cole Richard P. Miller
part of the attorney fee is disallowed by the eficiaries to bear the burden of the entire fee. Tracy S. Dalton Malcolm L. Morris
Probate Court for any reason, the estate shall Instead of charging the estate the entire fee, Cameron R. DeGuerre James A. Nepple
pay the “allowed portion” and the client shall the court applied the equitable theory of Darrell E. Dies Dwight H. O’Keefe
pay the “disallowed portion” from the client’s equitable contribution and allowed for only Reynolds E. Everett William A. Peithmann
individual funds. The attorney prepares a bill a part of the requested attorney fee to be Jacob J. Frost Thomas A. Polachek
for $10,000 total. The Probate Court allows an charged to the estate. The court ordered the Gregg A. Garofalo Alan R. Press
attorney fee of $7,500 to be paid from the es- “disallowed portion” to be charged to a third Gary R. Gehlbach David R. Reid
tate and disallows the balance of $2,500 for party. Frank M. Greenfield David F. Rolewick
unstated reasons. Pursuant to the engage- Kyle P. Hutson Donald L. Shriver
ment letter, the attorney requests the client The court held that “attorney fees for an Dennis J. Jacknewitz Steven E. Siebers
to pay the“disallowed portion”in the amount executor can be assessed against a party in Edward Jarot, Jr. Cristy A. Tackett-Hunt
of $2,500 from the client’s individual funds. a probate proceeding based on equitable Robert W. Kaufman David C. Thies
contribution or as punitive damages where Philip E. Koenig Lawrence E. Varsek
The Committee poses this question: there was willful or outrageous conduct due William R. Kuehn Lyman W. Welch

Mary M. Grant, Staff Liaison
Jennifer W. Hammer, Board Liaison
William T. Kaplan, CLE Committee Liaison

David A. Berek, CLE Coordinator
Tracy S. Dalton, CLE Coordinator

Disclaimer: This newsletter is for subscribers’personal
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Bar Association. Statements or expressions of opinion appear-
ing herein are those of the authors and not necessarily those
of the Association or Editors, and likewise the publication of
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in the ad that there is such approval or endorsement.

Articles are prepared as an educational service to mem-
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for individual legal research.

The articles in this newsletter are not intended to be
used and may not be relied on for penalty avoidance.

Postmaster: Please send address changes to the Illinois
State Bar Association, 424 S. 2nd St., Springfield, IL 62701-
1779.

3

Trusts & Estates | May 2013, Vol. 59, No. 10
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May 2013, Vol. 59, No. 10 | Trusts & Estates

to evil motive or a reckless indifference to the when it is mandatory, and, even when reasonable compensation for his services.”19
rights of others.”8 In re Elias therefore stands it is voluntary, the lawyer should con-
for the proposition that a reasonable attor- scientiously consider submitting to it. D. Assumptions
ney fee may be allocated by a court between Law may prescribe a procedure for de-
an “allowed portion” to be charge to the es- termining a lawyer’s fee, for example, The Committee then makes two assump-
tate and a“disallowed portion”to be charged in representation of an executor or ad- tions in the Opinion regarding attorney fees
to an individual, over that individual’s objec- ministrator, a class or a person entitled for executors and administrators:
tions. to a reasonable fee as part of the mea-
sure of damages. The lawyer entitled 1. In order for a lawyer to collect any
Similarly, in Roe v. Estate of Farrell,9 the to such a fee and a lawyer represent- fee at all for work on behalf of an
Supreme Court allocated an attorney fee be- ing another party concerned with the executor, the lawyer must apply to
tween and “allowed portion” to be charged fee should comply with the prescribed a Probate Court.
to the estate, with the“disallowed portion”to procedure. (“Comment 9”)12
be charged to the owner of joint asset that 2. It is evident that the required judi-
passed outside the estate. The trial court allo- Comment 9 directs attorneys to use pro- cial scrutiny is designed to prevent
cated the fee based evidence concerning the cedures, established by laws or rules, for overreaching, as in Rule 1.5.
time and service required by the attorney of resolution of fee disputes, such as arbitration
the administrator to attend to jointly held as- or mediation. However, neither the Probate The Probate Act, under Independent Ad-
sets.10 Using its equitable powers the court Act, nor the Probate Court, offers such pro- ministration, does not require a lawyer to
entered an order directing the “disallowed cedures to resolve fee disputes. In fact, if two apply to the Probate Court before collecting
portion”of the attorney fee to be paid by the parties disagree on the attorney fee asserted fees on behalf of an executor. In fact, the ex-
individual receiving the joint property, over by the representative, the only option is to act opposite is true. The Probate Act allows
that individual’s objections. litigate the issue in Probate Court. the attorney to collect a fee for representing
an executor if all interested parties approve
Both cases support the position that a Comment 9 also directs attorneys to the fee requested.20 If all parties consent to
“disallowed portion” of attorney fees may be comply with any prescribed procedure to the attorney fee requested, the attorney fee
reasonable, but as a matter of fairness and determine the amount of the lawyer’s fee is not subject to judicial review.
equity, the “disallowed portion” was charged in representing an estate representative.
to a third party, not to the estate. Neither of However, the Probate Act does not provide Even Supervised Administration has a
the individuals responsible for payment of a procedure that governs the determination procedure of avoiding judicial review of at-
the “disallowed portion” consented to the of a lawyer’s fee in representing an estate torney fees. If the parties can agree to all
payment of the representative’s attorney fee. representative. The lawyer is only entitled to disputed matters, the representative may
a “reasonable” fee based on all the relevant convert the Supervised Administration to
The Committee also cites In re Estate of facts and circumstances of the estate.13 Independent Administration for purposes of
Bitoy11 for the premise that a retainer agree- closing the estate, without filing an account
ment between a lawyer and representative Unlike the Probate Act, other areas of or petition for attorney fees. Probate Court
is irrelevant to the determination as to the practice have statutes that set forth detailed judges routinely grant this petition if all par-
“reasonableness” of an attorney fee. In other procedures for addressing attorney fees. See ties consent.21 By converting the adminis-
words, a properly executed engagement the provisions for attorney fees set forth in tration to Independent, the representative
letter between an attorney and client is not The Illinois Marriage and Dissolution of Mar- avoids judicial review of attorney fees and of
controlling if the fee charged were not rea- riage Act14 and Workers’Compensation Act15 the accounting.
sonable. An attorney fee must always be rea- as examples of detailed statutory provisions
sonable under case law as well as under the governing attorney fees for these areas. Cer- The Committee’s rationale is difficult to
Rules of Professional Conduct, regardless of tain states like Florida and California also follow. The Committee does not cite any au-
the terms of the engagement letter. have detailed statutes that determine estate thority nor does it offer an argument to sup-
attorney fees based on formulas incorporat- port its conclusion that “the required judicial
C. Ethics Opinions (IL) ing the value of probate and non-probate scrutiny is designed to prevent overreach-
assets.16 Both Florida and California statutes ing.”If overreaching were a concern, then the
The Committee then incorporates the Il- also include provisions for attorneys to seek statute and judiciary actions that allow for
linois Rule of Professional Conduct Number additional compensation in supplementing beneficiaries to approve attorney fees with-
1.5(a) (“Rule 1.5”) and the subsequent com- the statutory fee schedule for extraordinary out any judicial review are not consistent
ments into its analysis. Rule 1.5 states that an services rendered by the attorney for the es- with this concern. In fact, the only time the
attorney may not charge or collect an unrea- tate representative.17 judiciary is involved in reviewing attorney
sonable attorney fee. The Committee cites fees in a decedent’s estate is when an inter-
comment 9 of Rule 1.5 to support several However, neither the Probate Act, nor the ested party files a timely objection, compel-
propositions: Probate Court, set forth procedures to deter- ling the court to be involved. Otherwise, the
mine the amount of an attorney fee for ser- judiciary exercises absolutely no oversight of
[9] Disputes over Fees: If a pro- vices rendered in a decedent’s estate.18 The attorney fees.
cedure has been established for Probate Act’s only provision addressing at-
resolution of fee disputes, such as an torney fees is contained in one sentence: “[A] E. Ethics Opinions
arbitration or mediation procedure n attorney for a representative is entitled to
established by law or rule, the law- After these assumptions, the Committee
yer must comply with the procedure 5 then turns to citing other ethics opinions to
support its position.

Trusts & Estates | May 2013, Vol. 59, No. 10

1. Minnesota. value of the services, the attorney is free to Rules of Professional Conduct. An engage-
The Committee cites In re Dvorak,22 to negotiate an additional fee from the wife, ment letter with a client agreeing to pay any
support the proposition that a fee in excess provided that she is fully informed of the “disallowed portion” is not relevant, as the
of the amount authorized by court order is Court’s order and that the aggregate fee is disallowed portion is excessive by definition.
unreasonable. Dvorak was an attorney be- not excessive.”
fore the Supreme Court in Minnesota for mis- Since the Committee views the “disal-
conduct. In one matter, Dvorak represented Like the KBA, the NYSB also allows an at- lowed portion” as per se unreasonable, the
clients in a bankruptcy proceeding. She torney to bill his client an amount in excess Committee rendered the opinion that a pro-
charged the bankrupt estate over $11,000, of the court order, as long as the client is fully bate attorney is prohibited from entering
even though the Bankruptcy Court only au- informed of the court’s order and the fee is into an agreement with a client that would
thorized her to charge $10,000. not unreasonable. It is difficult to follow the obligate the client to pay a “disallowed por-
Charging a bankrupt estate more than al- Committee’s argument that these bar associ- tion”of an attorney fee.
lowed by court order is obviously an ethical ation opinions support the Committee’s con-
problem. These facts are not related to the clusion, as both opinions expressly bless the IV. Authors’ Analysis
hypothetical considered by the Committee, arrangement that the Committee condemns.
as Dvorak was in direct contempt of a court The question posed to the Committee
order. III. Committee’s Conclusion was whether it is ethically permissible for a
lawyer for a representative of a decedent’s
2. Kentucky Bar Association. The Committee concludes its Opinion by estate to enter into a fee agreement, or to
finding: collect a fee, for an amount in excess of the
The Committee then cites a 1962 Ken- amount of fees allowed by a Probate Court
tucky Bar Association (“KBA”) ethics opinion 1. [A]n agreement that the client shall as reasonable. As referenced in the question
dealing with an attorney representing clients pay legal fees disallowed by a Pro- posed, the Court must determine whether
under the Kentucky Workmen Compensa- bate Court, regardless of the reason the fee requested is reasonable and whether
tion Act.23 Attorney fees in workman com- for the disallowance is violative of the fee requested will be allowed as a claim
pensation cases in Kentucky are fixed by RPC 1.5; against the estate assets.
statute. The KBA opined that a lawyer who is
practicing in this area may not charge more 2. A lawyer may not enter into an The first determination of whether the at-
than is allowable by this statute. agreement intended to provide torney fee for the executor is reasonable, is
fees to the lawyer in excess of the generally in response to the opposing party’s
However, the KBA opinion also makes an amount found reasonable by a Pro- objections. If the fee requested were not rea-
exception, “[w]hen the judgment is ’towards’ bate Court; sonable, then neither the estate, nor the cli-
[the total] attorney fee, [then] there is noth- ent would be responsible for payment.
ing to preclude a lawyer from charging the 3. The opinion is limited to circum-
client a fee in excess of that ordered by the stances involving excessive legal The second determination is whether
judge ‘toward’ the total fee, as long as the to- fees for probate work and is not the entire attorney fee may be “allowed” or
tal fee is reasonable.” In other words, the KBA addressed to other situations, such “disallowed” as a claim against the estate.25
expressly allows an attorney to charge a cli- as those involving fee agreements In making this determination, the court has
ent an additional amount, in excess of the fee of litigation in which a fee shifting broad discretionary powers in awarding at-
awarded by the court, as long as the total fee statute is applicable. torney fees for a representative.26 Inherent
is reasonable. in the process of deciding whether to allow
The universal application of the Opinion attorney fees to be charged to the estate, is
3. New York State Bar Association. set forth in the first paragraph above to all a determination of whether it would be fair
fees disallowed“regardless of the reason”ap- and equitable for the beneficiaries of the es-
The Committee also cites a New York pears to conflict with the limitation set forth tate to have to bear the entire burden of at-
State Bar Association (“NYSB”) opinion from in the third paragraph, that this Opinion ap- torney fees requested.
1972.24 The NYSB considered the situation of plies only to “circumstances involving exces-
an attorney representing a wife in a divorce sive legal fees for probate work.” However, These two determinations are sepa-
action. The court entered an order allowing if the Committee assumed that any portion rate and distinct. For example, a Court may
a certain amount of the wife’s attorney fee to of an attorney fee not allowed by a Probate make a determination that the attorney fee
be charged against the husband. The wife’s Court is by definition“unreasonable,”the two requested is reasonable, but disallow a por-
attorney then charged the wife the balance provisions may be read harmoniously. tion of the fee from being charged against
due. The NYSB opined that, “[w]here a court the estate. However, an order disallowing a
fixes a fee as reasonable, it is improper to The Committee arrives at that conclusion portion of the total fee requested, does not
make an additional charge.” by following this line of reasoning. The repre- necessarily render that “disallowed portion”
sentative’s attorney is entitled to“reasonable” to be excessive or unreasonable.27
The very next sentence limits this opinion attorney fees under the Probate Act. By disal-
to certain circumstances, “[t]his rule applies lowing a portion of the total fee requested, In Elias28 and Roe,29 both courts deter-
only in the event the Court intended by its the court has ruled that a portion of the fee is mined that the attorney fees requested were
order to determine what was a reasonable unreasonable or excessive. Since an attorney reasonable, but neither court “allowed” the
fee for the services performed.” The NYSB may not charge his client an unreasonable entire fee to be charged against the estate.
concludes its opinion by stating “[since] the fee, an attorney charging a client this “disal- Both courts determined that it would not
Court does not purport to fix the reasonable lowed portion” would be a violation of the be fair and equitable for the estate benefi-
ciaries to have to bear the entire burden of
6

May 2013, Vol. 59, No. 10 | Trusts & Estates

the attorney fee for different reasons. Using of any “disallowed portion” of a fee petition, 9. Roe v. Estate of Farrell, 69 Ill.2d 525, 372 N.E.2d
equitable powers, both courts apportioned even if the fee is reasonable and the client is 662,14 Ill. Dec. 466 (1978) In re Estate of Elias, 408
the total attorney fee between an “allowed willing to pay. This prohibition conflicts with Ill. App. 3d 301, 946 N.E. 2d 1015, 349 Ill.Dec. 519
portion” charged against the assets of the the Probate Act that entitles attorneys to be (1st Dist. 2011)
estate and a “disallowed portion” charged paid reasonable compensation for services.30
to third party, notably over that third party’s 10. Id at 533
objection. These cases highlight the two- Part II of this article will be published in 11. In re Estate of Bitoy, 395 Ill.App.3d 262, 917
step judicial review of attorney fees and that the June 2013 Trusts & Estates Newsletter N.E.2d 74, 334 Ill. Dec. 477 (1st Dist. 2009)
a disallowance of a portion of a fee, does not and shall address the ramifications of this 12. Illinois Rule of Professional Conduct Num-
render that “disallowed portion” unreason- Opinion and suggestions for attorneys to ber 1.5, comment 9
able per se. implement in their practice in response to 13. 755 ILCS 5/27-2(a)
this opinion. 14. 750 ILCS 5/508
In the hypothetical examined by the __________ 15. 820 ILCS 305/16a
Committee, the client of the representative 16. Florida Statute Chapter 733.6171 and See
willingly agreed to be responsible for any Thomas Bransfield practices with his brother, California Statute Probate Section 10810
“disallowed portion” of the attorney fee, re- John Bransfield, at the law firm of Bransfield & 17. See Florida Statutes Chapter 733.6171(4)
gardless of the reason for disallowance. If the Bransfield, P.C. in Chicago, Illinois and can be con- and California Probate Code Section 10811
court disallowed a portion of the total fee, on tacted at [email protected]. 18. Query whether this reference in Comment
the basis the fee was unreasonable or exces- 9 is a hold over from a bygone era when some
sive, then the attorney would be prohibited Darrell Dies is a member of the ISBA Trusts & Judges used a sliding scale to determine fees?
from seeking payment from the client or the Estates Section Council with a practice in Eureka, 19. 755 ILCS 5/27-2(a)
estate, regardless of the terms of the agree- Illinois and can be contacted at dies@darrelldies. 20. 755 ILCS 5/28-11 (b)
ment. This ethical prohibition applied well com or by phone at 309.282.9112. 21. The procedure is so common that the Cook
before the issuance of the Opinion. County Clerk offers an official form CCP 1013 set-
1. The Opinion only discusses the attorney for ting forth this request.
Prior to the Opinion, an attorney could the decedent’s representative in probate, it does 22. In re Dvorak, 554 N.W. 2d 399 (Minn. 1996)
ethically seek payment from the client for not mention representation of a disabled adult or 23. Kentucky Bar Association, Ethics Opinion
this “disallowed portion,” as long as the to- minor representative, nor any other relationship KBA E282 (January 1984)
tal amount requested was reasonable. The that may give rise to the right to petition for at- 24. New York State Bar Association, Opinion
Opinion expands the general prohibition of torney fees, so our discussion is limited to the an #251 (May 24, 1972)
charging unreasonable fees, to a prohibition executor/attorney relationship 25. The terms “allowed” and “disallowed” are
of charging fees disallowed by the Probate terms of art in Probate Court referring to the treat-
Court. As attorneys in this area well know, 2. Attorney fees are generally “allowed” or ment of claims. The terms do not necessarily fol-
the reasons for disallowance are as varied as “disallowed” as a claim against the estate. The low the determination of reasonableness.
the personalities of the judges who hear pro- Committee uses the term “approved” which is 26. In re Elias 946 N.E.2d 1035
bate cases. In fact, not every fee disallowed synonymous with and included in the Black Law 27. See Roe v. Estate of Farrell, 69 Ill.2d 525, 372
is unreasonable or excessive, like in Elias and Dictionary definition of“allowed.” N.E.2d 662,14 Ill. Dec. 466 (1978) In re Estate of Elias,
Roe. However after the Opinion, even if a“dis- 408 Ill.App.3d 301, 946 N.E.2d 1015, 349 Ill.Dec.
allowed portion” of an attorney fee were de- 3. 755 ILCS 5/27-2(a) 519 (1st Dist. 2011)
termined to be reasonable and a client were 4. In re Estate of Elias, 408 Ill.App.3d 301, 946 28. In re Estate of Elias, 408 Ill.App.3d 301, 946
willing to pay the fee as agreed, the Commit- N.E.2d 1015, 349 Ill. Dec. 519 (1st Dist. 2011) N.E.2d 1015, 349 Ill. Dec. 519 (1st Dist. 2011)
tee’s Opinion effectively prohibits the attor- 5. Id at 1035 29. Roe v. Estate of Farrell, 69 Ill.2d 525, 372
ney from seeking payment. As a result, the 6. Id at 1035 N.E.2d 662,14 Ill. Dec. 466 (1978)
“disallowed portion” of the total bill, even if 7. Id at 1035 30. 755 ILCS 5/27-2(a)
it were considered reasonable, would be a 8. Id at 1038
reasonable fee that the attorney would be
prohibited from seeking payment. Target your message!

V. Authors’ Conclusion • Reach the exact practice area you need with no wasted circulation
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7

Trusts & Estates | May 2013, Vol. 59, No. 10

Illinois adopts equitable adoption

By Gary R. Gehlbach

PHeirship Affidavits Expanded also pled that Donald lacked testamentary familial relationship, even vacationing to-
reparing an Heirship Affidavit just be- capacity, that Blanca had unduly influenced gether, and Donald had prepared a will pro-
came more involved. In addition to Donald to disinherit him, that Blanca had viding for James and his family.
natural born heirs, since 1955 Illinois fraudulently induced Donald to disregard
has had a presumption that an adopted James in his estate plan, and that Blanca had However, in the spring of 2005 Donald
child is deemed a child born to the adopt- tortuously interfered with his lawful expec- met Blanca, 29 years his junior, and they were
ing parent unless a contrary intent is clearly tancy—the very claims designed to ensure married in December 2005. A year later Don-
demonstrated.1 Accordingly, the affidavit of that he receive no further birthday cards ald signed a new will, this time at a different
heirship should include adopted children as from Blanca. law office than he had used for his first will,
well as children of a predeceased adopted with the new will reciting his marriage to
child. The Pleadings Blanca and asserting that he had no children.
James alleged that Blanca maintained a posi-
Practice Tip This case is essentially a pleadings case. tion of trust and confidence with Donald and
The Will County Circuit Court dismissed all of was thus in a fiduciary relationship with him,
Now, however, the affidavit should also James’ counts with prejudice. However, the and that she convinced Donald that James
include a putative adopted child, or the chil- appellate court reversed all of those dismiss- was not his son and otherwise misrepre-
dren of a putative adopted child that prede- als unanimously, except that one judge dis- sented his character, and essentially cut off
ceased the decedent. Our estate adminis- sented on the reinstatement of the contract- contact between Donald and James and his
tration questionnaires should be expanded for-adoption count. family.
to inquire whether the decedent intended
someone to be legally adopted or treated The Facts Contract to Adopt
someone as if he or she had been legally ad-
opted when in fact no adoption took place. James alleged the following. For more Before addressing James’equitable adop-
than 60 years Donald held James out to be his tion argument, the court addressed his claim
The basis for this development is the Illi- biological son. In planning his funeral a cou- that a contract to adopt had existed. Relying
nois Supreme Court’s decision, James DeHart ple years before he died, Donald listed James on Monahan v. Monahan, a 1958 Illinois Su-
v. Blanca DeHart,2 filed March 21, 2013. While as his son and listed James’ children and preme Court decision,8 the court found that
recognizing that no Illinois court had ever grandchildren as Donald’s own grandchil- James had pled sufficient facts to avoid a
“expressly recognized the concept of equi- dren and great-grandchildren. Donald had motion to dismiss.
table adoption…,” neither had any Illinois even given James a birth certificate listing
court rejected this theory. Rather, a number Donald as his father. James successfully used In Monahan, when the plaintiff was two
of Illinois cases have found that an adoption this birth certificate “to conduct the affairs of years old his mother boarded him with the
should be deemed to exist even though no life.”6 However, in 2000 James tried to use the Monahans, paying for his keep. The lad’s fa-
formal adoption in fact took place, based on birth certificate to obtain a passport. When ther soon left for good. A few years later the
the theory that a contract had been formed.3 his application was rejected, he obtained a mother’s payments ceased and she consent-
In its ruling in the DeHart case, however, the certified copy of his birth certificate from the ed to his adoption. The Monahans thereafter
court, by adopting the holding in a California Cook County Office of Vital Statistics, finding raised the plaintiff, had him baptized, and
case,4 expressly found that a person may es- that his surname was Staley rather than De- sought legal advice about adoption. How-
tablish an equitable adoption without hav- Hart. When confronted with this information, ever, believing that the plaintiff’s father’s
ing to prove all of the elements of an enforce- Donald responded that Staley was indeed consent was required and being unable to
able contract.5 James’ biological father but that he, Donald, locate him, the Monahans never proceeded
had adopted James when he was two years with the adoption. Nonetheless, they raised
The DeHart case old. He and James’ mother, whom Donald the plaintiff, referring to him as their son and
had then married, had agreed to keep the holding him out to relatives and the com-
In an all-too-familiar scenario, the case adoption secret. Donald also assured James munity as their son. The Monahan court
involved a dispute between the decedent’s that he had hired an attorney to handle the thus found that the facts were sufficient to
son and his father’s new wife who was sev- adoption and that “it was all legal.”7 These prove by clear and convincing, albeit circum-
eral years younger than the son (and con- events occurred in 2000. James’ mother and stantial, evidence that a contract to adopt
siderably younger than her husband). The Donald’s wife, Virginia, passed away in April existed.
case was essentially a will contest brought 2001. However, she had dementia and ap-
by James against Blanca, individually and as parently was not able to shed any light on In the DeHart case, the court similarly
executor of the estate of James’ father and the situation. “found that the well-pled facts, viewed in the
Blanca’s new husband, Donald. In addition light most favorable to [James], sufficiently
to pleading that a contract had been formed Through at least 2005 Donald, James and inferred that a contract to adopt existed be-
for Donald to adopt him or, in the alternative, James’ wife and children maintained a close tween Donald and [James’] mother Virginia
that he had been equitably adopted, James and that [James] was a third-party benefi-

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May 2013, Vol. 59, No. 10 | Trusts & Estates

ciary of that contract.”9 The fact that James’ the decedent’s natural child.”17 Finally, the Sustaining a cause of action for fraudulent
father was not a party to the contract was ir- DeHart court rejected the requirement that inducement, however, does not adversely af-
relevant, as he had abandoned James.10 proof of a contract to adopt is a prerequisite fect the decedent’s will but rather results in
to an equitable adoption.18 a monetary judgment against the defendant
Equitable Adoption personally.
Lack of Testamentary Capacity
James also pled that he had been equi- Interference with Expectancy
tably adopted, regardless of whether an ex- James also sustained an allegation that
pressed or implied contract to adopt could Donald lacked testamentary capacity, that is, Finally, James asserted that Blanca in-
be proved. The court noted, however, that that his will in question “was the product of terfered with his expectancy, which would
where the doctrine of “‘equitable adoption’ an unsound mind or memory.”19 “The stan- require him to prove “(1) the existence of
is recognized, the most important prerequi- dard test of testamentary capacity…is that his expectancy; (2) defendant’s intentional
site…is proof that a contract of adoption was ‘the testator must be capable of knowing interference therewith; (3) tortious conduct
entered into between the foster parents and what his property is, who are the natural ob- such as undue influence, fraud or duress; (4)
the natural parents or someone standing in jects of his bounty, and…be able to under- a reasonable certainty that the expectancy
loco parentis.”11 stand the nature, consequence, and effect of would have been realized but for the inter-
the act of executing a will.’”20 “The absence ference; and (5) damages.”27 Again, the rem-
A California case in 2004, Estate of Ford v. of any one of these requirements would in- edy would be a judgment against Blanca in-
Ford,12 deviated from this requirement. That dicate a lack of testamentary capacity.”21 dividually rather than setting aside Donald’s
court ruled that “if a claimant can, by clear, will.
cogent and convincing evidence, prove suf- Undue Influence
ficient facts to convince the trier of fact that Conclusion
his status is identical to that of a formally James also alleged that Blanca asserted
adopted child, except only for the absence such undue influence on Donald as to invali- The DeHart case provides a useful primer
of a formal order of the adoption, a finding date his will. Citing a 1993 Illinois Supreme on the requirements for setting aside a will or
of an equitable adoption is proper without Court decision,22 the DeHart court stated asserting that someone tortuously interfered
proof of an adoption contract.”13 A familial that “undue influence which will invalidate with an economic expectancy. More impor-
relationship by itself would not be adequate; a will is ‘ “any improper…urgency of persua- tantly, the decision establishes a new cause
rather, “a claimant ‘must demonstrate the sion whereby the will of a person is over- of action, equitable adoption. ■
existence of some direct expression, on the powered and he is indeed induced to do __________
decedent’s part, of an intent to adopt the or forebear an act which he would not do
claimant.’”14 “[T]his intent may be shown by or would do if left to act freely” [citation].’ To Gary R. Gehlbach is a member of the ISBATrusts
an unperformed agreement or promise to constitute undue influence, the influence ‘ & Estates Section Council and practices in Dixon, Il-
adopt, but…it also may be shown by ‘proof “must be of such a nature as to destroy the linois with the firm of Ehrmann Gehlbach Badger
of other acts or statements directly showing testator’s freedom concerning the disposi- Lee & Considine, LLC and can be reached at gehl-
that the decedent intended the child to be, tion of his estate and render his will that of [email protected].
or to be treated as, a legally adopted child,… another.”’23 “[A] presumption of undue in-
the decedent’s statement of his or her intent fluence will arise [for example]…where (1) 1. 755 ILCS 5/2-4(e).
to adopt,…or the decedent’s representation a fiduciary relationship exists between the 2. James DeHart v. Blanca DeHart, 2013 IL
to the claimant or to the community at large testator and a person who receives a sub- 114137.
that the claimant was the decedent’s natural stantial benefit from the will, (2) the testa- 3. DeHart ¶ 52.
or legally adopted child.’”15 tor is the dependent and the beneficiary 4. Estate of Ford v. Ford, 82 P.3d 747(Cal. 2004).
the dominant party, (3) the testator reposes 5. DeHart ¶ 53.
The Illinois Supreme Court found that the trust and confidence in the beneficiary, and 6. DeHart ¶ 3.
Ford decision“struck the proper balance”and (4) the will is prepared by or its preparation 7. DeHart ¶ 5.
adopted its holding and rationale, adding procured by such beneficiary.”24 8. Monahan v. Monahan, 14 Ill. 2d 449 (1958).
that a claimant must also “show that the de- 9. DeHart ¶ 47.
cedent acted consistently with that intent by “As a matter of law, a power of attorney 10. DeHart ¶ 48.
forming with the plaintiff a close and endear- gives rise to a general fiduciary relationship 11. DeHart ¶ 52.
ing familial relationship.”16 The proof must be between the grantor and the grantee.”25 12. Estate of Ford v. Ford, supra.
“by clear and convincing evidence…[and] 13. Id. at 374.
the decedent’s intent to adopt and form a Fraudulent Inducement 14. Id.
close and endearing familial relationship 15. Id.
must be clear and conclusive….[I]t must James also alleged that Blanca had fraud- 16. DeHart ¶ 65.
not be just as readily harmonizable with the ulently induced Donald to execute a new 17. DeHart ¶ 65.
mere intention to provide a good home, but will, omitting any reference to or provision 18. DeHart ¶ 66.
must instead indicate a clear intent to adopt for James or his family. “To constitute fraud 19. DeHart ¶ 20 (Citation omitted).
or to continuously represent to the plaintiff in the inducement, the defendant must have 20. DeHart ¶ 20(Citations omitted).
and the world at large that the plaintiff was made a false representation of material fact, 21. DeHart ¶ 20 (Citation omitted).
knowing or believing it to be false and doing 22. In re Estate of Hoover, 155 Ill. 2d 402, 411-12
it for the purpose of inducing one to act.”26 (1993).
23. DeHart ¶ 27.
9 24. DeHart ¶ 30 (Citations omitted).
25. DeHart ¶ 31 (Citation omitted).
26. DeHart ¶ 39 (Citation omitted).
27. DeHart ¶ 39 (Citation omitted).

Trusts & Estates | May 2013, Vol. 59, No. 10

Reflections on the Illinois decanting and directed trusts statutes

By Timothy S. Midura to distribute in further trust. This Sec- to be thinking “decanting” as (1) just one
tion shall not be construed to abridge method of trust modification, and (2) it has
The Illinois directed trusts statute, 760 the right of any trustee to distribute two possible options of either statutory de-
ILCS 5/16.3 and 16.7, and the Illinois property in further trust that arises canting or non-statutory decanting – and we
distribution of trust principal in further under the terms of the governing in- can start to proactively create the availability
trust statute (or commonly the decanting strument of a trust, any provision of of those options.
statute), 750 ILCS 5/16.4, became effective applicable law, or a court order. In ad-
January 1, 2013. Having anticipated them dition, distribution of trust principal Trust
and then studied them academically and to a second trust may be made by Responsiveness
worked with them practically, I now make agreement between a trustee and all
some reflections and offer some tips. primary beneficiaries of a first trust, Non-Statutory Statutory
acting either individually or by their re- Decanting and Decanting
When these statutes were first realized, I spective representatives in accordance Other Trustee
thought that the decanting statute was go- with Section 16.1 of this Act.
ing to be a profound new tool in the trust Discretions Other
modification arsenal; and that the directed In our past practices we have tried, and Remedies
trusts statute was fairly pedestrian without practically succeeded, in drafting for bifur-
much affect. I anticipated that since for many cation of trustee responsibilities. The Illinois Exhibit A lists some considerations
years I’ve been drafting for trust protectors, directed trusts statute brings clarity and en- for drafting for directed trusts statu-
distribution advisors, investment advisors, dorsement to our efforts. But with the statu- tory application.
and the like that the directed trusts statute tory clarity, it also illuminates the dark cor-
was merely a legal affirmation of what we all ners of lurking ambiguities. Exhibit B lists some considerations
have in practice been doing for quite some for drafting for decanting statutory ap-
time. As I continue to study and apply these Construed or Strict Directed Trust: In plication.
statutes, my developed thinking has crystal- the context of the directed trusts statute, we
lized and flip flopped. now have trusts that we can view as “con- Exhibit C lists eight prima facie
strued” application or “strict” application. If questions when analyzing the use of
I now view the directed trusts statute as you have an “Illinois trust” with some kind of statutory decanting.
fundamentally changing the way I draft my directing party, the directed trusts statute is
documents for trust protectors and other mandated to be construed onto that trust Should you want the author’s separate
advisors. Since I often use these roles, this along with a probable cloud of ambiguity. papers that extensively cover Illinois directed
means a high percentage of my documents So the new best practice is to expressly draft trusts and Illinois decanting, you may request
are drafted differently. The Holy Grail of a trusts so the statute is “strictly” applied to them by writing Tim Midura at tmidura@
trustee is to be classified as an “excluded fi- the trust and inherent ambiguities are mini- huckbouma.com.
duciary.” Narrowing the possibility of ambi- mized.
guities and coordination of efforts between Exhibit A
the trust’s acting parties actually takes a lot Directed Trust
of precise drafting. Drafting Considerations and the Directed
Construed Ambiguities Strict Trusts Statutory Application
I now view the decanting statute as inci- Application Drafting 1. Expressly empower the directing party
dental to other methods of trust modifica-
tions. Yes, it is a new tool—especially for old- Statutory or Non-Statutory Decanting: with detailed powers (whether all ex-
er and poorly drafted documents. However, In the context of the decanting statute, we pressed in the governing instrument [rec-
going forward the decanting statute further can look to the statutory decanting process ommended] or partially incorporated by
encourages me to draft my documents for in- or look to a variety of other equivalencies (in- reference to the statute). It can be further
ternal flexibility that will not require statutory cluding non-statutory decanting) and modi- expressed that it is the settlor’s intention
decanting.This too brings greater meaning to fication methods. Thus, we may be able to that this person be a directing party [as
empowering directing parties. The most pro- pick and choose whether statutory decant- applicable: distribution trust advisor, in-
found aspect of the Illinois decanting statute ing or non-statutory decanting better suits vestment trust advisor, or trust protector]
is that it expressly recognizes non-statutory the particular case. In other words, we need within the meaning of 760 ILCS 5/16.3.
decanting equivalencies, such as decanting Note: Distribution trust advisors and in-
by trust instrument provision, non-judicial vestment trust advisors (but not a trust
settlement agreement, and court order.1 It protector) have default powers under the
appears that we have always had decanting statute, unless the terms of the governing
in Illinois! The Illinois decanting statute pro- instrument provide otherwise.
vides a bright line statutory path and also en- 2. Direct the trustee and other directing
dorses other decanting equivalencies.

760 ILCS 5/16.4(j)—Other authority

10

May 2013, Vol. 59, No. 10 | Trusts & Estates

parties to follow (act or omit to act only risk and additional need to coordinate tionary power to distribute principal?
upon) the directions of the subject di- with the directing party. Merely authoriz- 2. Is decanting in furtherance of the purpos-
recting party. It can be further expressed ing reasonable fees and expense reim-
that it is the settlor’s intention that this bursement should be sufficient. Consider es of the trust?
non-directing person is to be (and other whether the trust boilerplate states that 3. Are there bars or restrictions to decant-
directing parties are also by application) a corporate trustee shall be paid based
an excluded fiduciary within the meaning on its fee schedule, but now its responsi- ing?
of 760 ILCS 5/16.3. bilities are lessened due to the directing 4. Who can decant?
3. Express whether the directing party is act- party bifurcations. 5. Which decanting pathway can be fol-
ing in a fiduciary capacity or non-fiduciary 12. Have the directing party acknowledge ac-
capacity. This could differ for each kind of ceptance of his or her role by signing the lowed: absolute discretion or non-ab-
directing party. For example, the invest- instrument—just as the trustee does. solute? This depends on the trust distri-
ment trust advisor could be a fiduciary 13. Consider whether the governing instru- bution provisions and who can be the
while the nonfiduciary capacity being ment should expressly opt out of the ap- “authorized trustee.”
assigned to the distribution trust advisor plication of “the provisions of § 16.3 of 6. What procedures are required for the cir-
and trust protector. the Trusts and Trustees Act and any cor- cumstances?
4. Provide for different trustees and direct- responding provision of future law.” 7. What are the tax implications? How is the
ing parties for various sub-trusts. second trust settled for tax purposes? Are
5. Provide for succession of the directing Exhibit B there any adverse tax consequences lurk-
party—just as is done for trustees. ing in the decanting transaction?
6. Provide for the vacancy of the directing Drafting Considerations for the 8. Should statutory decanting be pursued
party (of role or bifurcated power) – that Decanting Statutory Application or either (a) non-statutory decanting or
the trustee, in default, assumes those re- (b) some other remedy? ■
sponsibilities and duties or some other 1. Should decanting be explained to each __________
procedure for successor appointment. In client and expressly opting out of decant- Timothy S. Midura, C.P.A., J.D., LL.M practices in
certain cases and powers, the successor ing be a decided drafting option? Wheaton, Illinois with the firm of Huck Bouma PC,
should always be an independent new di- and can be reached at [email protected].
recting party. In other cases and powers, 2. Should all trusts now waive the Rule
the successor could be the trustee. Against Perpetuities and use perpetuity 1. See 760 ILCS 5/16.4(j)
7. Provide for handling the circumstances trusts?
in which the directing party is not being Support the
timely responsive (say, within 20 days of 3. Should the trustee, distribution trust ad- Illinois Bar
when the trustee sends written notice) to visor, or trust protectors be given express Foundation—
the requests or needs of the trustee., i.e., powers to decant outside of the decant- the charitable
succession trigger or the trustee acting. ing statute? arm of your
Visa versa for the trustee being responsive Association.
to the directing party. 4. The trustee-beneficiary has increased gift
8. Provide for any necessary tax or other fail- tax exposure via decanting. Therefore, To receive an
safe or cutback provisions for the direct- proactive use of independent trustees, application, call
ing party (and also for the trustee should independent distribution trust advisors, 1-800-252-8908.
for any reason the trustee needs to act and independent trust protectors along
due to a vacancy of role or bifurcated with greater care in “interested trustee”
power). drafting is in order. There should be great-
9. Express the directing party’s compensa- er usage of “failsafe” provision drafting
tion and ability to hire independent coun- for the interested trustee and interested
sel or agents at the expense of the trust(s) directing party along with the ability of
involved. Merely authorizing reasonable the interested trustee and interested di-
fees and expense reimbursement should recting party to appointment an inde-
be sufficient. This should extend beyond pendent substitute to act in events the
the directing party’s activity should the interested trustee’s or interested directing
directing party be dragged back into trust party’s inability to act.
matters.
10. Express the directing party’s entitlement 5. One should be mindfully drafting trusts in
to seek judicial remedy or direction at the a fashion where Illinois statutory decant-
expense of the trust. ing is a secondary option (such as the pru-
11. Express the trustee’s compensation, con- dent and empowered usage of trust pro-
sidering any relief of responsibilities and tectors) and statutory decanting should
not be necessary.

Exhibit C

Eight Prima Facie Questions When
Analyzing the Use of Statutory Decanting

1. Does an authorized trustee have a discre-

11

May 2013, Vol. 59, No. 10 | Trusts & Estates

When to file a probate claim

By Phil Koenig ant does not file his claim on or before the ing initiated.2
date set forth in the notice. Despite recogniz- Further, the court rejected the Plaintiff’s
The First District Court of Appeals de- ing the unfavorable result the court held the
cided the case of Water Tower Nursing plain language of the statute requires actual argument that a claim cannot be“disallowed”
v. Estate of Weil1 thereby affirming the filing of the claim, not merely service of the until it is first filed. Thus, when attempting to
holding of the trial court that merely mailing claim. The court pointed out that if merely bar a claim, it is may be helpful to “jump the
a copy of a claim to the court or the repre- mailing notice of the claim were sufficient, gun”and disallow a known claim even before
sentative of an estate does not necessarily section 18-11 and 18-12 would be meaning- filed. This could also shorten administration
constitute timely filing. less. time for the estate. When representing claim-
ants if actual filing is required, be sure to do
Claimant, Water Tower Nursing, provided The court’s decision provides a clear ex- so. ■
home health care services to Frederic Weil, ception to “mailing constitutes filing”. Under __________
the decedent. At the time of Weil’s death, certain circumstances, a filing date is the
there was an unpaid balance owed by the date on which pleadings are mailed. See Phil Koenig is a member of the ISBA Trusts &
decedent to the claimant. The executor of for instance Supreme Court Rule 373 which Estates Section Council with an office in Rock Is-
the estate mailed a letter to Water Tower stat- holds that mailing of a notice of appeal by land, Illinois and can be reached at pkoenig@koe-
ing that in accordance with 755 ILCS 5/18-3 the date by which the notice must be filed is niglawfirm.com.
that any claim had to be filed within three timely filing even if the notice does not arrive
months from the date of the notice. In ad- on the date required. The mailbox rule does 1. Water Tower Nursing v. Estate of Weil, 2013 IL
dition, the letter stated that Water Tower’s not apply in instances where actions are be- App. 1st 122681.
claim had been disallowed and that Water
Tower had to file its claim with the court by 2. See Wilkins v. Dellenback, 149 Ill.App3d
a certain date (here six months later), in ac- 549,500 NE2d 692, 102 Ill Dec 799, 801 (Second
cordance with the procedure set forth in 755 District, 1986).
ILCS 5/18-11.
MAKE THE MOST OF
On the date set forth in the notice as the YOUR ISBA MEMBERSHIP.
date by which a claim must be filed, Water
Tower mailed its claim to the court, the ex- Now Available
ecutor and the attorney for the executor.
Claimant did not file its claim prior to the FASTCLE FREE CLE
expiration date, however. The executor move CHANNEL
to dismiss the claim, stating that because the Meet your MCLE requirement for FREE over a 2 year period.
claim had been disallowed under 755 ILCS
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tice of disallowance is given, and the claim-

12

May 2013, Vol. 59, No. 10 | Trusts & Estates
Don’t Miss This Quick Reference Guide of Deadlines and Court Interpretations of Illinois Statutes

Guide to Illinois STATUTES of LIMITATION 2012 Edition A “MUST HAVE”
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This guide covers Illinois civil statutes of limitation, and amendments to
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13

May 2013, Vol. 59, No. 10 | Trusts & Estates

Upcoming CLE programs

To register, go to www.isba.org/cle or call the ISBA registrar at 800-252-8908 or 217-525-1760.

June by the ISBA Animal Law Section. 8:30 a.m. - Part 1. Presented by the Illinois State Bar As-
4:45 p.m. sociation. 12-1.
Monday, 6/3/13- Teleseminar—Asset
Purchase Deals- Securing Value & Limiting Friday, 6/7/13 – Bloomington, Double- Wednessday, 6/19/13- Teleseminar—
Liability, Part 1- Live Replay from 2/11/13. Tree by Hilton—Criminal Law Back to Basics. Planning & Drafting LLC Operating Agree-
Presented by the Illinois State Bar Associa- Presented by the ISBA Criminal Justice Sec- ments, Part 2. Presented by the Illinois State
tion. 12-1. tion. 8:30 – 4:00. Bar Association. 12-1.

Tuesday, 6/4/13- Teleseminar—Asset Monday, 6/10/2013 – Live Studio Web- Wednesday, 6/19/13 – Webinar—Intro-
Purchase Deals- Securing Value & Limiting cast (STUDIO only)—Getting Paid in Com- duction to Boolean (Keyword) Search. Pre-
Liability, Part 2- Live Replay from 2/11/13. mercial Cases – Fee Arrangements from A to sented by the Illinois State Bar Association –
Presented by the Illinois State Bar Associa- Z. Presented by the ISBA Commercial Bank- Complimentary to ISBA Members Only. 10:00
tion. 12-1. ing, Collections and Banking Section. Noon – 11:00 a.m. CST.
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tion to Legal Research on Fastcase. Presented Monday, 6/10/13- Teleseminar—Li- Geneva Resort and Spa (Annual Meet-
by the Illinois State Bar Association – Com- quidity Planning in Estates and Trusts- Live ing)—Legal Ethics and Social Media. Pre-
plimentary to ISBA Members Only. 10:00 – Replay from 2/8/13. Presented by the Illinois sented by the ISBA Standing Committee on
11:00 a.m. CST. State Bar Association. 12-1. Law Office Management and Economics.

Wednesday, 6/5/13- Teleseminar—Life Tuesday, 6/11/13- Teleseminar—2013 Friday, 6/21/13- Lake Geneva, Grand
Insurance and Estate Planning. Presented by Estate & Trust Planning Update, Part 1. Pre- Geneva Resort and Spa (Annual Meet-
the Illinois State Bar Association. 12-1. sented by the Illinois State Bar Association. ing)—Deliver Knockout Presentations Your
12-1. Audience Won’t Forget. ISBA’s Law Ed Fac-
Thursday, 6/6/13 – Chicago, ISBA Re- ulty Development Series: The Art of Effective
gional Office—Introduction to Public Pri- Wednesday, 6/12/13- Telesemi- Communication. Exclusively for ISBA Law Ed
vate Partnerships (P3s). Presented by the nar—2013 Estate & Trust Planning Update, Faculty (and for those who want to become
ISBA Construction Law Section, Co-spon- Part 2. Presented by the Illinois State Bar As- Law Ed Faculty). 8:30am-11:45am.
sored by the ISBA Local Government Section. sociation. 12-1.
8:30 am – 12:30 pm. Friday, 6/21/13- Lake Geneva, Grand
Thursday, 6/13/13- Teleseminar— Geneva Resort and Spa (Annual Meet-
Thursday, 6/6/13- Live Studio Webcast Drafting Confidentiality and Non-disclosure ing)—Introduction to Legal Research.
(Studio only)—The Style Manual: A Webcast Agreements- Live Replay from 3/14/13. Pre- Presented by the Illinois State Bar Associa-
on Writing in the Illinois Courts. Presented by sented by the Illinois State Bar Association. tion- Complimentary to ISBA Members Only.
the ISBA Bench and Bar Section. 1:55-3:00. 12-1. 9:00-10:00am.

Thursday, 6/6/13 – Webinar—Advanced Thursday, 6/13-14/12- Chicago, Sofitel Friday, 6/21/13- Lake Geneva, Grand
Tips for Enhanced Legal Research on Fast- Chicago Water Tower—Great Lakes Bene- Geneva Resort and Spa (Annual Meet-
case. Presented by the Illinois State Bar As- fits Conference. Presented by the ASPPA and ing)—Advanced Tips for Enhanced Legal Re-
sociation – Complimentary to ISBA Members the IRS; co-sponsored by the ISBA Employee search on Fastcase. Presented by the Illinois
Only. 10:00 – 11:00 a.m. CST. Benefits Section. State Bar Association- Complimentary to
ISBA Members Only. 10:15-11:15am.
Thursday, 6/6/13- Springfield, Hilton Thursday, 6/13/13- Live Studio Web-
Hotel—The Intersection of Social Media cast—Medicare and its Impact on Tort Prac- Friday, 6/21/13- Lake Geneva, Grand
and the Practice of Law. Presented by the titioners. Presented by the ISBA Tort Law Sec- Geneva Resort and Spa (Annual Meet-
ISBA and Sangamon County Bar Association. tion. 9:30-11:30. ing)—ISBA’s Reel MCLE Series: Flight- How
1-4:15. Many Ethical Dilemmas Can You Spot? Mas-
Friday, 6/14/2013 – Chicago, ISBA Re- ter Series Presented by the Illinois State Bar
Friday, 6/7/2013 – Chicago, ISBA Chi- gional Office—Ethics of Persuasion. Master Association. 1:00-5:15pm.
cago Regional Office—5th Annual Animal Series Presented by the Illinois State Bar As-
Law Conference. Presented by the ISBA Ani- sociation. 9:00 – 3:00 Monday, 6/24/13- Teleseminar—Struc-
mal Law Section. 8:30 a.m. - 4:45 p.m. turing Preferred Stock and Preferred Returns
Tuesday, 6/18/13- Teleseminar—Plan- in Business- Live Replay from 4/16/13. Pre-
Friday, 6/7/2013 – Live Webcast—5th ning & Drafting LLC Operating Agreements, sented by the Illinois State Bar Association.
Annual Animal Law Conference. Presented 12-1. ■
14

May 2013, Vol. 59, No. 10 | Trusts & Estates

ILLINOIS STATE BAR ASSOCIATION

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