Presumptively Void Transfers: Should this Illinois law be changed?

                                                                                                                © 2016 Joan E. Emery
         Drafting legislation can be difficult.  Often, once a bill becomes a law, it takes several amendments to produce a law which is reasonably satisfactory.  Although Article IVa of the Illinois Probate Act became effective on January 1, 2015, there are problems with this Article which should be addressed by the Illinois legislature. 
          When evaluating a law, it’s often helpful to ask, What have other states done?  At least 3 other states have laws regarding financial abuse of elders by caregivers (and sometimes by others).  California enacted a prohibition against gifts to people in fiduciary relationships with elders in 1993 and that prohibition has been expanded in several respects since 1993.  The California statutory plan now protects dependent adults, not just elders.  Nevada’s statutory plan also protects dependent adults.  Maine has a statutory plan which only protects elderly, dependent persons.  Each state has unique aspects to that state’s statutory plan to limit and, ideally, to prevent financial abuse of those who are not able to adequately protect their own financial interests. 
           Two key aspects of the California, Nevada and Maine statutes will be considered.  The first aspect is, Does the statutory plan provide a specific way to negate the presumption of wrongdoing by the presumed financial abuser?
         California has the most elaborate statutory plan for dealing with presumptively void transfers.  Section 21382 of the California Probate Code excludes transfers to certain persons or entities and certain types of property transfers.  A significant exception to presumption of wrongdoing is contained in Section 21384 of the California Probate Act, which provides that presumption does not apply if the transfer instrument is reviewed by an independent attorney who counsels the transferor regarding various aspects of the proposed transfer, attempts to determine if the proposed transfer is the result of fraud or undue influence, and completes and delivers to the transferor a Certificate of Independent Review.
        Section 155.0975 of the Nevada Revised Statutes exempts transfers to certain persons or entities, certain types of transfers, and transfers which are determined by a court to be permitted transfers.  Section 155.0975 also has a specific exception to the presumption if an independent attorney counsels the transferor about the proposed transfer, attempts to determine if the proposed transfer is the result of fraud, duress, or undue influence, and completes and delivers to the transferor a Certificate of Independent Review.
         In contrast, section 1022 of Title 33 of the Maine Revised Statues requires the elderly dependent person (or that person’s representative) to raise the presumption of undue influence by a preponderance of the evidence.  Apparently this means that the elderly dependent person must establish that there was a transfer of real estate or a major transfer of personal property for less than full consideration by an elderly dependent person to a person with whom the elderly dependent person had a confidential or fiduciary relationship.  Section 1022 then provides that the presumption of undue influence arises, unless the elderly dependent person was represented in the transfer or execution by independent counsel. 
       It’s clear that each of these 3 statutory plans creates an exception to the presumption if the transferor was represented by independent counsel.  The statutes do vary regarding what independent counsel is required to do in order to meet the requirements of the statutory exception. 
           As discussed in one of my earlier blogs, Senate Amendment 001 to Illinois Senate Bill 1048 contained a provision which stated that the presumption of void transfer did not apply if an independent attorney reviewed the transfer instrument and then certified that he or she was not associated with the interest of the transferee and had 1) reviewed the transfer instrument prior to it being signed, 2) counseled the transferor on the nature and consequences of the transfer, and 3) concluded that the transfer instrument was valid because it was not the product of fraud, duress, or undue influence.  In my opinion, the attorney certification contained in Senate Amendment 001 went too far. 
           In California and Nevada, the independent attorney must 1) counsel the transferor about the nature and consequences of the potential transfer, 2) attempt to determine if the potential transfer is the result of fraud or undue influence (Nevada adds duress), and 3) execute the certificate of review (and California adds that the original certificate of review must be delivered to the transferor).  In my opinion, a certificate of review by an independent attorney should be added to Public Act 98-1093, but the attorney should only be required to attempt to determine if the proposed transfer is the result of fraud, duress, or undue influence, not to state conclusively that the proposed transfer was not the result of the previously mentioned wrongful acts.  The language of Senate Amendment 001 placed an almost impossible burden on an attorney to know conclusively that the transferee did not engage in wrongdoing. 
          Another significant problem with the Illinois statute is that if the presumption of void transfer is not rebutted, the entire transfer document is void.  For example, under the current Illinois statute, if a will contains a gift to a caregiver, the presumption applies, and the presumption is not overcome, the entire will is void, not just the provision making the gift to the caregiver.  In the other three states that have similar statutory plans, the language of these statutes is directed against the specific transfer and generally not against the entire transfer document.  The Illinois provision should be amended to presume only that the gift to the caregiver is void and not the entire transfer document.
          Illinois House Bill 3325, introduced on February 26, 2015, attempted to address this second problem.  This bill substituted the word “transfer” in every place where the words “transfer instrument” appeared.  House Bill 3325 also made some additional minor changes in P. A. 98-1093, but did not address the attorney certification problem.  On the day that it was introduced, House Bill 3325 was referred to the Rules Committee and it never emerged from that committee.   Since the Illinois legislature will deal almost exclusively with vetoed bills when the two houses reconvene after the election, it is virtually guaranteed that House Bill 3325 will not be voted on and will “die” in the Rules Committee.  This bill may be reintroduced in the next general assembly, a substantially different bill may be introduced, or there may be no further attempts to change P. A. 98-1093 when the 100th General Assembly convenes in 2017.  We can only wait and wonder.
            Next time I will discuss the Illinois Fiduciary Access to Digital Assets Act.  Do you have a topic you would like to see discussed in a future blog?  If so, please put any appropriate topics in the Comments section provided below.