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When Is Probate Required in Illinois

Prior to the death of a loved one few people have any familiarity with the Illinois probate process. In fact, most people I speak to have never been to court before – many have never even spoken to a lawyer. For those that have heard of probate, what they have heard isn’t good. The common perception is that it is very slow, very expensive and is to be avoided. Though the common perception is not usually accurate, many people do wish to avoid probate if possible. This article will answer the question: “When is probate required in Illinois?”

Table of contents:

Can probate be avoided;

Is avoiding probate wise; and

Should the family hire a lawyer?

 

Is Avoiding Probate an Option?

In Illinois the primary method for avoiding probate is the use of an Illinois Small Estate Affidavit. There are other possible probate-avoiding processes, but they are seldom used, so this article will focus on the applicability of the affidavit.

The Illinois Small Estate Affidavit was designed by the state legislature to allow the heirs of a person that dies (called the “decedent”) to process a small estate without probate. To be eligible for the use of the Small Estate Affidavit, the following conditions must be met:

  1. The value of the “probate assets” must be less than $100,000.00;
  2. The “probate assets” must not include real estate;
  3. No letters of office have been issued, nor is a petition for such letters contemplated; and
  4. There is no dispute with respect to heirship or a will.

To those unfamiliar with probate, it might not be readily apparent whether the decedent’s estate meets these requirements. Below, I will break each one down into more understandable chunks.

“Probate Asset” Defined

A probate asset is property that will pass via a will or, if no will, under the Illinois rules of intestate succession. Intestate succession is the default process for dividing property among heirs. The easiest way to determine the value of probate assets is adding the value of all assets and subtracting those that are not probate assets. The following are not “probate assets” and are excluded when calculating the value of an estate for Small Estate Affidavit purposes.

Property that is titled in joint tenancy or tenancy by the entirety with at least one surviving tenant

Jointly titled property with the right of survivorship is property that immediately passes to the other tenants when one of the tenants dies. The term “tenant” has nothing to do with a landlord-tenant relationship, it is a technical term used to describe this type of ownership. Basically, if a two people have a joint account at a bank, they are likely joint-tenants. Jointly titled property is most common in real estate and accounts at financial institutions.

Tenancy by the entirety is similar to joint tenancy, but can only exist between spouses. This form of ownership is commonly seen in real estate.

Property owned in joint tenancy and tenancy by the entirety is only a probate asset if there is no surviving tenant. For example, if a two brothers own a house in joint tenancy and one brother dies, the house is not a probate asset and passes immediately to the other brother. However, when the second brother dies, the house will be treated as a probate asset because there is no surviving joint tenant.

Property that has a transfer or payable on death designation

Some financial institutions offer accounts that are “transfer on death.” These accounts are designed to avoid the probate process and ownership of the account immediately transfers to the named beneficiary when the account owner dies.

Recently, Illinois has introduced a transfer on death instrument for real estate. The instrument was also designed for avoiding probate and facilitating the quick transfer of property. These instruments are rarely seen because they are fairly new and some lawyers have concerns about complications that can arise when the instrument is used.

Like jointly-held property, property with a transfer or payable on death designation is not a probate asset so long as there is a living beneficiary.

Accounts with a named beneficiary

Several other types of accounts and property allow for a named beneficiary that is to receive property after death. Most commonly, these are retirement accounts, life insurance, and other investment accounts. This type of property is not a probate asset so long as a beneficiary is named and still living. If the decedent did not name a beneficiary, the account will flow to the decedent’s estate and will be a probate asset.

Property held in trust

A trust is a form of ownership where a nominal owner, called a “trustee” owns property for the benefit of beneficiaries. Though the trustee “owns” the property, it is generally not a probate asset and not part of the trustee’s estate when the trustee dies. Because trusts are very flexible, generalizations are difficult. If an estate involves a trust, the family should seek legal review and advice.

Calculating the Value of Probate Assets

To calculate the value of probate assets, the family of the decedent must determine the value of all assets in the estate and subtract the value of the non-probate assets discussed above. In most cases, it will be readily apparent whether the assets exceed the $100,000.00 threshold. In fact, the Small Estate Affidavit is typically only used in very small estates, since probate has advantages that are discussed below.

If the decedent owned property that is difficult to value, such as collections, a business, or intellectual property, an expert appraiser may be necessary.

The Probate Assets Must Not Include Real Estate

The second requirement, that the probate assets must not include real estate, is the reason many estates of limited value do not qualify for the Small Estate Affidavit.

If the decedent owned real estate, it is especially important to determine how the property was titled. Real estate is often titled in joint tenancy or tenancy by the entirety, which pass outside of probate so long as one or more owners is still alive. A significant portion of real estate in Illinois is also held in land trusts, where a nominal owner, often Chicago Title and Land Trust Company, is the legal owner of the property. If real estate is held in a land trust and there are living beneficiaries or successor beneficiaries, it is not a probate asset. Finally, Illinois created a transfer on death instrument for real estate, real estate subject to a transfer on death instrument is not a probate asset.

Conversely, real estate owned solely in the decedent’s name or as tenants in common with another person is a probate asset and will typically prevent use of the Small Estate Affidavit and require probate. Likewise, real estate owned jointly or by tenancy in the entirety where there is no living co-owner is a probate asset.

To determine the manner of real estate ownership, the deed and chain of title must be examined. Each county’s recorder of deeds maintains property records and many even make them available online. In Cook County, property deeds can be examined at the Cook County Recorder of Deeds Website.

If the estate contains real estate as a probate asset, it will not meet the requirements of the Small Estate Affidavit.

No Letters of Office Issued or Contemplated

The Small Estate Affidavit is not available if a probate proceeding is opened or if it is contemplated that a probate proceeding will be opened. An administrator or executor in probate court is superior to an affiant under a Small Estate Affidavit, so an affiant cannot undercut the authority of the probate court.

No Disputes as to Heirship or the Will

The Small Estate Affidavit was designed for the simplest of situations. It does not provide a mechanism for challenging the identity of proper heirs or the validity of a will. A will contest or heirship contest will prevent the use of the Small Estate Affidavit.

If the decedent’s family is not on complete harmony with respect to the distribution of assets, a formal probate proceeding should be opened. This is important because if an affiant under a Small Estate Affidavit distributes assets and then an heir successfully challenges the distribution, the results can be disastrous.

When Is Probate Required in Illinois – Conclusion

Probate is required in larger estates. Any estate with probate assets exceeding $100,000.00 must go through the formal probate process.

Additionally, Probate is typically required in Illinois when the probate assets contain real estate. Real estate ownership is by far the most common reason an otherwise eligible estate is required to go through the formal probate process.

Probate is also required once letters of office have been issued. If an administrator or executor has been appointed by the court, the Small Estate Affidavit is not available.

Finally, probate is required when the decedent’s family believes there may be an heirship dispute or will contest. The Small Estate Affidavit does not contain mechanisms for resolving disputes.

Whether an estate can be administered with a Small Estate Affidavit or not, the family should hire a lawyer. Probate law is too complicated and the stakes are too high to handle an estate without formal advice. Click here to fill out our short form to request a free initial consultation.

Is Avoiding Probate Wise

The first part of this article answered the question, “when is probate required in Illinois?” This section will discuss whether avoiding probate is wise. As you will see, probate offers both advantages over the Small Estate Affidavit as well as some disadvantages. The family of the decedent has to determine whether they prefer the speed and typically lower cost of the Small Estate Affidavit or the lower risks of the formal probate process.

Probate Shortens the Creditor Claim Period

In probate court, the representative of the estate publishes notice to creditors and if they do not submit their claims within 6 months they are barred.

In contrast, without probate court claims can be brought against the estate for up to two years.

Probate Allows Claims Disputes

When a person dies their family seldom knows what claims exist against the estate. Probate court provides for a notice procedure to both known and unknown creditors, and, once a claim is filed there is a process for disputing the claim. The Small Estate Affidavit assumes all creditors will be known and paid.

The Affiant Is Personally Liable for Mistakes

Personal liability of the affiant is the biggest deterrent to using the Affidavit. If the affiant misses a claim or distributes the estate improperly, the affiant is personally liable. The liability of the affiant extends not only to the amount of money the claimant/heir should have received if things were done properly, but also to their reasonable attorney’s fees.

This causes two problems. First, if someone claims the affiant distributed incorrectly, the risk of fighting can be very high – attorney’s fees for the challenger could be many times the amount in dispute and if the challenger wins the affiant must personally pay all of it. Second, because of there is no 6-month claims bar, distributions are risky. If the estate is distributed and a creditor appears within two years of the death, the creditor will need to be paid. Though the affiant can attempt to recover distributions to pay the creditor, that may be difficult and the affiant will be left footing the bill.

Probate Makes It More Difficult for Others to Seize Control

If an heir executes the Small Estate Affidavit, that doesn’t preclude another family member or creditor from petitioning to open a probate estate. Though small creditors rarely open a probate estate, a family member could force the estate into probate and potentially even take over the administration of the estate.

Probate Avoids Competing Affidavits

Ideally, the small estate process is orderly and led by one person taking charge. However, chaos could ensue if numerous interested people execute affidavits and start collecting assets. This could result in mass confusion, double payment of claims, conflicting distributions and personal liability. Probate grants authority to a specific representative and no others are allowed to administer the estate without probate court authorization.

A Probate Judge Will Decide Disputes

Though most probate estates are administered without conflict, when one arises a probate court can decide the dispute. Additionally, if there is a reason to believe the representative is acting improperly, supervised administration can be requested (judge reviews most decisions). The Small Estate Affidavit procedure lacks judicial oversight.

Probate Is Not Always Expensive

If an estate is simple, it is not going to be that expensive or time consuming to go through probate. As discussed below, due to the personal liability imposed by the Small Estate Affidavit, the affiant should have an attorney represent them. The amount of attorney’s fees in a simple probate case is modest.

Probate Is Not Always Slow

Probate always takes longer than six months due to the claims bar period. If an estate is simple, it can be wrapped up shortly after that.

Administration under the Small Estate Affidavit can be quicker, but there is also more risk. A rush to distribute assets can lead to lingering claims presented after distribution, so a careful affiant might actually take more than six months to make sure he or she will not be personally responsible for claims. Under Small Estate Affidavit Administration, the estate is not truly finalized until the two year statute of limitations on claims has elapsed.

Why Should You Hire a Lawyer?

When taking charge of an estate, many people wonder if an attorney is really necessary. The administrator, executor, or affiant is not legally required to hire an attorney. That said, estate law is complex and there is no do-it-yourself guide that can properly prepare you for successful administration (the reference used by attorneys is nearly 1000 pages long). Some good reasons for hiring an attorney are discussed below.

Protect Your Personal Assets

The biggest risk in the Small Estate Affidavit procedure is making a mistake and distributing assets in the wrong order of priority or missing a claim. A mistake like this will result in the affiant being on the hook for the amount that should have been paid to that heir/legatee/creditor plus their reasonable attorney fees. This alone is reason enough to hire a lawyer.

Your Time Is Valuable

Most people looking to take charge of an estate already have a day job. Do you want to spend all your free time for the next six months to a year reading about probate law and hoping you got it right? Most people don’t.

Advice on the Proper Procedure

Should you use probate, the small estate affidavit or another less common process not discussed here? A lawyer’s expertise is key to making these decisions. Even if you had the time to read all the relevant statues and had access to all the publications an attorney has, you don’t have the experience to determine the best fit for the estate.

Close the Estate as Fast as Reasonably Possible

Mistakes cost time and money. In the area of estate law a minor mistake can take months or more to correct. Your lawyer’s goal is to guide you through the process as quickly as possible so you fulfill your duty without mistakes and close the estate quickly.

Get Your Questions Answered

If you are trying to use the Small Estate Affidavit without an attorney and you are having trouble finding assets, discovering creditors, locating heirs or understanding the distribution rules and timing, you have nobody to guide you. With an attorney, you simply pick up the telephone and your questions are answered by an expert.

Help Handling Disgruntled Family Members

Family conflict is common, especially when it comes to money. Your brother may think you should refuse to pay a claim or your sister might insist on her distribution immediately. Worse yet, a family member may think you are stealing or encourage you to try to cut someone out. With a lawyer you have a voice of authority to quell discontent and even a person to interject themselves into the dispute if necessary.

Costs of Administration Are Paid by the Estate

Illinois probate law provides that the costs of administration are paid by the estate, including reasonable attorney fees. Though the person taking charge may have to pay an initial retainer, they will be reimbursed from the estate since fairness requires all benefiting from the estate to share in the costs of administering it.

The Fees Charged Are Reasonable

Popular media exaggerates the cost of hiring an attorney and only focuses on the most extreme cases since that is what attracts viewers. Simple estates incur very reasonable attorney fees, especially if the person in charge of the estate handles most duties associated with administration. During your consultation with an attorney an estimate of fees can be provided based on the facts of your case. In simple estates, the primary causes of higher-than-average legal fees are family disputes and representatives that choose to delegate many of their duties. I have written an article on the cost of probate in Illinois if you would like more information on attorney fees and costs of administration.

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