Illinois 2015 Estate Planning Law Changes - Caregiver Transfers
This is our third post on changes to Illinois law for 2015 affecting estate planning. The first covered the amended Health Care Power of Attorney act and the second addressed the amended "Small Estate Affidavit" found in the Probate Act. A new Article IVa was also added to the Probate Act for 2015, on "Presumptively Void Transfers."
The new section seeks to prevent fraud or undue influence by a caregiver inducing their ward to pay the caregiver a significant legacy/bequest payable on or after the death of the ward, due to the vulnerability of the ward. The statute is carefully drafted to exclude certain family members of the ward, but does include as a "caregiver" the spouse, cohabitant, child, or employee of the person actually providing the care. Thus a caregiver could not circumvent the statute by asking the ward to name the caregiver's spouse in the ward's will, instead of the caregiver herself.
The significance of the bequest is set in the statute at a threshold of $20,000 - if the fair market value of the exceeds $20,000, then the statute is triggered. The effect in that case is that, in a civil action challenging the transfer instrument (wills, trusts, deeds, payable on death forms, beneficiary designations, etc.), there is a rebuttable presumption that the transfer is void. To overcome this presumption, the caregiver would need to show either (1) that the bequest in question is no more than would have been the case under a transfer instrument made by the ward before the person became caregiver (for example, a previous will), by a preponderance of the evidence; or (2) that the transfer was not the product of fraud, duress, or undue influence, by clear and convincing evidence. The latter is of course a much harder standard of proof to meet than a mere preponderance of evidence.
The statute further provides a one-sided attorney's fees recovery clause - if the caregiver attempts to overcome the above presumptions, and fails, then the caregiver "shall bear the costs of the proceedings, including without limitation, reasonable attorney's fees." 755 ILCS 5/4a-25. Illinois follows the "American Rule," that each side bears its own attorney's fees, except as specifically provided by contract or statute. Although one common contractual provision could provide for "the prevailing party" to recover its attorney's fees, it is not unusual to have a provision that says Party A can recover its fees, but is silent as to Party B, with the result being that Party B cannot recover its fees. Barring something outside of the statute, this would potentially be the effect here.
The effectiveness of this new provision remains to be seen but hopefully will help as a tool against elder abuse and fraud, while not proving a stumbling block to legitimate estate planning wishes made by a competent testator. In the latter circumstance, good and timely estate planning can be helpful in protecting both the testator's wishes and the honest ward's interests against a challenge. It is noteworthy that the statute includes POD designations and non-probate beneficiary designations as transfers. In other words, although some may not think anything of changing these on their own, so long as their will or trust is unchanged, at least when this statute could potentially be implicated, it would be prudent to consult your attorney before doing so.
The new section seeks to prevent fraud or undue influence by a caregiver inducing their ward to pay the caregiver a significant legacy/bequest payable on or after the death of the ward, due to the vulnerability of the ward. The statute is carefully drafted to exclude certain family members of the ward, but does include as a "caregiver" the spouse, cohabitant, child, or employee of the person actually providing the care. Thus a caregiver could not circumvent the statute by asking the ward to name the caregiver's spouse in the ward's will, instead of the caregiver herself.
The significance of the bequest is set in the statute at a threshold of $20,000 - if the fair market value of the exceeds $20,000, then the statute is triggered. The effect in that case is that, in a civil action challenging the transfer instrument (wills, trusts, deeds, payable on death forms, beneficiary designations, etc.), there is a rebuttable presumption that the transfer is void. To overcome this presumption, the caregiver would need to show either (1) that the bequest in question is no more than would have been the case under a transfer instrument made by the ward before the person became caregiver (for example, a previous will), by a preponderance of the evidence; or (2) that the transfer was not the product of fraud, duress, or undue influence, by clear and convincing evidence. The latter is of course a much harder standard of proof to meet than a mere preponderance of evidence.
The statute further provides a one-sided attorney's fees recovery clause - if the caregiver attempts to overcome the above presumptions, and fails, then the caregiver "shall bear the costs of the proceedings, including without limitation, reasonable attorney's fees." 755 ILCS 5/4a-25. Illinois follows the "American Rule," that each side bears its own attorney's fees, except as specifically provided by contract or statute. Although one common contractual provision could provide for "the prevailing party" to recover its attorney's fees, it is not unusual to have a provision that says Party A can recover its fees, but is silent as to Party B, with the result being that Party B cannot recover its fees. Barring something outside of the statute, this would potentially be the effect here.
The effectiveness of this new provision remains to be seen but hopefully will help as a tool against elder abuse and fraud, while not proving a stumbling block to legitimate estate planning wishes made by a competent testator. In the latter circumstance, good and timely estate planning can be helpful in protecting both the testator's wishes and the honest ward's interests against a challenge. It is noteworthy that the statute includes POD designations and non-probate beneficiary designations as transfers. In other words, although some may not think anything of changing these on their own, so long as their will or trust is unchanged, at least when this statute could potentially be implicated, it would be prudent to consult your attorney before doing so.
Nate Hinch is an attorney and partner at the law firm of Mueller, Reece & Hinch, LLC. He has offices at 404 N. Hershey Road, Suite C, Bloomington, IL 61704, and 809 Detweiller Drive, Peoria, IL 61615, and can be reached by phone at (309) 827-4055 and email at nhinch@mrh-law.com.
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