Justia Trusts & Estates Opinion Summaries

The Kivers retained C&T, an Illinois law firm, to prepare trusts to benefit their daughters, Diane and Maureen, among others. Maureen and Diane each served as trustee of various trusts. Maureen died in 2007. Her husband, Minor, represents Maureen’s estate, which filed suit against C&T, alleging that C&T failed to disclose the existence and terms of certain trusts to Maureen, to her detriment, and failed to make distributions to her. The estate filed a separate state court suit against Diane, alleging that Diane breached her duties as trustee by failing to disclose the existence of certain trusts to Maureen or make distributions to her. Diane was a client of C&T during the relevant period. The district court entered an agreed protective order governing discovery disclosure to deal with privilege issues and denied the estate’s motion to compel production. The estate violated the protective order. The district court imposed sanctions and dismissed several of the estate’s claims. The Seventh Circuit affirmed, stating that “The complexity of the multiple trusts … the untimely death of Maureen, the pursuit of concurrent state and federal suits … the length of this litigation, and the disorderly nature of the estate’s presentation… evoke a middle installment of Bleak House." View "Scott v. Chuhak & Tecson, PC" on Justia Law

Allen suffered a fatal heart attack in 2009, leaving a wife of three years, Arlene, and three adult children from a previous marriage. At the time of Allen’s death, his daughter and her children lived with Allen and Arlene. Allen had a will bequeathing $100,000, but his assets passed outside of probate, leaving his estate with insufficient funds for the bequest. Allen had designated his children as beneficiaries of assets, including a home, life insurance policies, retirement accounts, and other savings accounts. Allen had one life insurance policy as part of his compensation package as a pharmacist, which provided $74,000 in basic coverage and $341,000 in supplemental coverage. If the policyholder failed to designate a beneficiary by his date of death, the proceeds would pass to the policyholder’s spouse by default. The insurer never received any indication that Allen wished to designate a beneficiary. In the days following Allen’s death, however, the children found a change-of-beneficiary form, allegedly completed by their father more than a year before his death, but never submitted. The district court ruled in Arlene’s favor, finding that even if Allen had filled out a change-of-beneficiary form he had not substantially complied with policy requirements for changing beneficiaries. The Seventh Circuit affirmed. View "Kagan v. Kagan" on Justia Law

In 1998, Hedstrom married Kotter, a real estate agent. The marriage lasted two years, but the two were on good terms when Hedstrom died. There is no evidence that Hedstrom lacked mental capacity. In 2006 Hedstrom purchased two Chicago condominiums. Kotter acted as his real estate agent and Geldes acted as his real estate attorney. Kotter told Geldes that Hedstrom would take title in another name and that Hedstrom could not hear over a phone so she would answer questions for him. Hedstrom died in 2007. Hedstrom’s children from a prior marriage were appointed administrators. Title to one condominium vested fully in Kotter, the other was titled to the Kotter Family Trust. The administrators sued, alleging breach of fiduciary duty by a real estate agent and legal malpractice. Because the administrators failed to timely identify experts, the magistrate barred them from presenting expert testimony encompassing Kotter’s position as a real estate agent and Geldes’ position as an attorney. The district judge affirmed and the administrators did not appeal. The district court granted summary judgment because expert testimony was needed on the standard of care and because undisputed evidence demonstrated the units were titled in accordance with Hedstrom’s intent. The Seventh Circuit affirmed. View "Ball v. Kotter" on Justia Law

In 1968 French founded a successful manufacturing firm that he sold, in 1996, for about $200 million. French executed interlocking irrevocable trusts to benefit his four children upon his death. In 2004 he moved the trust accounts to Wachovia Bank. The trusts held two whole life insurance policies. Wachovia replaced the policies with new ones, providing the same benefit for a significantly lower premium, after months of evaluation and consultation with French and his lawyers. Wachovia received a hefty but industry-standard commission for its insurance-brokerage affiliate. French’s adult children sued Wachovia for breach of fiduciary duty by self-dealing. The district court rejected the claim, based on the trust document’s express conflict-of-interest waiver, and held that the transaction was neither imprudent nor undertaken in bad faith. The court ordered the Frenches to pay the bank’s costs and attorney’s fees. The Seventh Circuit affirmed. The trust documents gave Wachovia broad discretion to invest trust property without regard to risk, conflicts of interest, lack of diversification, or unproductivity. The trust instrument overrides the common-law prohibition against self-dealing and displaces the prudent-investor rule. While there is always a duty to administer the trust in good faith, there was no evidence that the bank acted in bad faith. View "French v. Wachovia Bank, N.A." on Justia Law

Retirement accounts are exempt from creditors’ claims in bankruptcy, 11 U.S.C. 22(b)(3)(C) and (d)(12). The debtor inherited, from her mother, a non-spousal individual retirement account worth about $300,000. The bankruptcy court held that the inherited IRA was not exempt from claims by the debtor’s creditors. The district court reversed. Noting a conflict with other circuits, the Seventh Circuit reversed, reinstating the bankruptcy court holding. The court noted that while it remains sheltered from taxation until the money is withdrawn, many of the account’s other attributes changed. No new contributions can be made, and the balance cannot be rolled over or merged with any other account. 26 U.S.C. 408(d)(3)(C); instead of being dedicated to the debtor/heir’s retirement years, the inherited IRA must begin distributing its assets within a year of the original owner’s death. 26 U.S.C. 402(c)(11)(A). View "Rameker v. Clark" on Justia Law

Four defendants were convicted of conspiring to defraud the U.S. by impeding the functions of the IRS and of related fraud and tax offenses in connection with abusive trusts promoted by two Illinois companies. Although the system of trusts was portrayed as a legitimate, sophisticated means of tax minimization grounded in the common law, the system was in essence a sham, designed solely to conceal a trust purchaser’s assets and income from the IRS. It was promoted through a network of corrupt promoters, managers, attorneys, and accountants, but prospective customers who sought independent advice were routinely warned of its flaws. Defendants were sentenced to prison terms of 120 to 223 months. The Seventh Circuit affirmed. View "United States v. Vallone" on Justia Law

In 2000, husband and wife, with an estate valued at $3 to $4 million, revised their estate plan with the assistance of their Illinois lawyer, a Minnesota lawyer, and a law partner of their son-in-law. The plan included a trust that treated their son and his daughter, India, less favorably than their two daughters and other grandchildren. When they died within a month of each other in 2004, their son and India sued the three lawyers, alleging malpractice and breach of fiduciary duty. The district court rejected a conflict-of-interest argument and dismissed most of the claims as untimely or barred. India's minor status tolled the limitations period, but the court dismissed her claim as premature. The Seventh Circuit affirmed and held that India's claim should have been dismissed with prejudice. The district court properly chose Illinois's statute of limitations over Minnesota's; and properly rejected waiver and equitable-tolling arguments. The court properly dismissed the fiduciary-duty claims as barred by res judicata; there had been state court litigation concerning sale of the family home. There was no evidence to support India’s contention that her grandparents intended her to receive more than the documents provide. View "Ennenga v. Starns" on Justia Law

As part of a retention package, the bank purchased a split dollar life policy for plaintiff's trust with cash value of more than $662,000. The bank paid part of the premiums and had a senior interest in the policy to the extent of those premiums. To safeguard this interest, the trust assigned the policy to the bank as collateral. The bank paid $421,890 of the premiums. The trust interest was about $240,000. In 2009, the bank failed and was placed under FDIC receivership. The Insurer surrendered the entire cash value of the policy to the FDIC. The trustee demanded return of the value of the policy; the insurer refused. The trustee first contacted the FDIC receiver after expiration of the 90-day period for claims under the Financial Institutions Reform, Recovery, and Enforcement Act, 12 U.S.C. 1821(d)(13)(D), although he received notice 12 days before expiration of the period. The district court dismissed for lack of jurisdiction. The Seventh Circuit affirmed. It would be possible for a claim to arise so close to the bar date as to deprive a claimant of due process, but this case did not present that situation. View "Campbell v. Fed. Deposit Ins. Corp." on Justia Law

The current beneficiary of several discretionary trusts brought claims of legal malpractice and breach of fiduciary duty against the trustee and her lawyers. The district court dismissed with prejudice for lack of standing because she did not allege a likelihood that the trusts' corpus were insufficient to pay her discretionary distributions. The Seventh Circuit reversed. Looking to Illinois law, the court reasoned that plaintiff has an equitable interest in the trust property that gives her standing to enforce the trusts. There is a fiduciary relationship between her and the trustee that gives rise to equitable remedies. View "Scanlan v. Eisenberg" on Justia Law

Decedent was arrested for contempt of court and was treated for alcohol withdrawal before being jailed. After he was jailed, his repeated requests for medication were denied. He was assigned high risk status and scheduled to be observed every fifteen minutes. A doctor prescribed Haldol and Libruim after observing that he was disoriented. He died soon after, on September 27, 2007. In August 2006, decedent's ex-wife was named administrator of the estate and filed a claim under 42 U.S.C. 1983. The district court dismissed as time-barred by the two-year Illinois statute of limitations for personal injury actions. The Seventh Circuit affirmed, rejecting an argument that the court should have tolled the limitations period because the sole beneficiary of the estate was a minor when the cause of action arose.