A recent decision in the Appellate Court of the Fourth District of Illinois leaves us with several lessons, particularly the importance of reviewing your estate planning documents in the event of a significant change in your family or financial situations (In re Estate of Johnson, 2023 IL App (4th) 220488).
Glen and his brother, Ray, had a farming business. According to the court, Ray stated in an affidavit, that he believed that Glen “felt” that each of the two brothers would name the other as the sole beneficiary of his Will in order for the farming operations to pass to the surviving brother. In 2001, Glen, age 43, executed a Will naming his brother as the sole beneficiary of his estate. At that time, Glen was in a relationship with Patricia but had never married and had no children.
Glen and Patricia, who had adult children from a previous relationship, married in 2004. Regarding Glen’s relationship to Patricia’s children, Ray’s affidavit described it as “strained, not active,” adding that Glen “did not feel that the children wanted anything to do with him unless they wanted money” and that Patricia had threatened to divorce him several times.
In 2012, for reasons unknown, Glen adopted Patricia’s four adult children. Included in the adoption order was a provision that stated “[f]or purposes of inheritance and all other legal incidents and consequences it shall be the same as if [Patricia’s children] had been born” to Glen and Patricia.
Glen died in 2020. Ray filed Glen’s 2001 Will with the probate court and was appointed executor of the estate. As Glen’s surviving spouse, Patricia renounced his Will to claim her elective share. Her children then followed by petitioning the court for their shares as Glen’s “children.”
Since Glen left only a Will rather than a Revocable Living Trust and Patricia had the legal right to renounce his Will, the circuit court ruled in favor of Patricia and her children by granting their motion for summary judgment. The appellate court affirmed the lower court’s ruling.
The “elective share” is a fraction, percentage or amount of the deceased spouse’s estate, as legislated by state law, to which the surviving spouse is entitled in order to prevent an individual from completely disinheriting the surviving spouse. Under Illinois law, the fraction to which the surviving spouse is entitled is one-half of the probate estate if the decedent left no surviving descendants and one-third of the probate estate if the decedent did leave surviving descendants.
In Glen’s case, the court determined that although Patricia’s children were adopted after age 18 and never resided with him—two standards that would have to be met for them to inherit from Glen’s lineal or collateral kin, they were still to be treated as Glen’s heirs for purposes of inheriting from him. Further, because they were not provided for in his Will nor were they explicitly disinherited, they have the right under Illinois law to elect to receive the share of Glen’s estate they would have received in the case of intestacy (an estate probated without a valid Will), which would be one-third of his probate estate.
Reviewing Your Existing Estate Planning Documents
A common question from clients is whether and when their existing estate planning documents should be reviewed. In the past, the answer was fairly simple—documents should be reviewed when there is a significant change in your family or financial situation, but at least every five to ten years. However, today there is a third event that should alert you to have your existing documents reviewed—changes in the law.
Changes in your family situation, such as marriage, divorce, birth of a child or grandchild or death of a beneficiary or trustee should alert you to consult an estate planning attorney and have your documents reviewed. If drafted properly, your documents will provide alternate provisions for most of these situations, but it is impossible to provide for all possible changes in a legal document. Thus, it is imperative that any changes that such an event may necessitate are clearly reflected in your documents. Additionally, if you have minor children, it is important to keep your guardians and successors updated in accordance with your wishes. For example, if you named a couple that has since divorced, your Will may need to be amended.
In Glen’s case, both his marriage and adoption of Patricia’s children should have triggered a review of his estate plan. Establishing and funding a Revocable Living Trust would have prevented Patricia and her children from contesting or renouncing Glen’s wishes. On the other hand, if it was his intent to provide for Patricia and her children, his estate plan should have reflected his updated wishes.
Changes in your financial situation can cause additional tax liabilities which must be considered in your planning. Furthermore, significant changes in your assets may cause you to change the way that you wish to provide for your beneficiaries. For example, if your estate is modest and your beneficiaries are responsible adults, you may be comfortable with the assets being distributed outright to your beneficiaries at your death. However, if your estate grows, you may prefer that the assets be held in trust until your beneficiaries reach certain ages or you may consider providing for additional beneficiaries, such as grandchildren. Gift Tax and Generation-Skipping Transfer Tax considerations should also be considered under these circumstances. Also, for a variety of reasons, you may have chosen to only have a Simple Will prepared at the time that your estate planning documents were drafted, but a Revocable Living Trust may now be necessary to serve your family and financial situations.
Changes in the Federal and Illinois Estate Tax laws have become more frequent due to the prevalence of tax-deferred retirement accounts. Most of these changes, such as exemption amounts, are forecast in advance and can be planned for through flexible language in the documents themselves. However, it is crucial that flexibility not be assumed and existing documents be reviewed when such a change occurs. Even if changes are not required, it is beneficial to communicate with an estate planning attorney to ensure that your documents are serving your goals and that available tax exemptions are being leveraged to the maximum extent possible.
The result of an estate planning document review can take one of three forms: (1) no changes; (2) an amendment to the documents to make minor changes, or (3) a completely new set of documents. Amendments are generally appropriate when the changes are limited to names, beneficiaries or trustees. A significant law change or changes to numerous sections of the Trust will more likely require a restatement of the Trust document and possibly a new Will and Powers of Attorney as well.