© 2016 Joan E. Emery
Article IVa is titled “Presumptively Void Transfers” and contains 7 sections. Article IVa includes the following sections: definitions; a presumption of void transfer; exceptions; effect on the common law; attorney’s fees and costs; a limit regarding the duty of financial institutions and others; and an applicability section. Article IVa was intended to protect persons receiving care from financial overreaching by certain caregivers.
Section 5/4a-5 defines the following 5 terms: caregiver; family member; transfer instrument; transferee; and transferor. “Caregiver” is defined broadly to include a person who has assumed responsibility for all or a portion of the care of another person who needs assistance with daily living activities. The caregiver may be paid or unpaid. Caregiver does not include a family member. “Family member” is defined as a spouse, child, grandchild, sibling, aunt, uncle, niece, nephew, first cousin, or parent. “Transfer instrument” is limited to a legal document which is intended to transfer property on or after the transferor’s death. It’s important to note that the concept of presumptively void transfers only applies to transfers intended to take effect on or after the death of the person who makes the property transfer to the caregiver. Thus, transfers which take effect during the lifetime of the transferor, although subject to other legal challenges, would not be subject to the rules imposed by Article IVa.
Article IVa’s presumption of void transfer is contained in section 5/4a-10. This section provides that, in a civil action challenging the transfer instrument, unless the exceptions of section 5/4a-15 apply, there is a rebuttable presumption that the transfer instrument is void if the transferee is a caregiver and the value of the transferred property exceeds $20,000. There are 4 requirements in order for the rebuttable presumption to apply: 1) the transferee must be a caregiver; 2) the value of the property must exceed $20,000; 3) there is a civil action challenging the transfer instrument; and 4) neither of the two section 5/4a-15 exceptions applies. A rebuttable presumption generally means that sufficient facts to prove a factual issue are presumed to have been proven without the need to produce any evidence. Since the presumption is rebuttable, the Article IVa presumption that the transfer instrument is void can be overcome if the caregiver produces sufficient evidence. But how much evidence is sufficient? Section 5/4a-15 provides some answers to that question.
Section 5/4a-15 states that the rebuttable presumption can be overcome if the caregiver proves to the court: 1) by a preponderance of the evidence that the caregiver’s share under the transfer instrument is not greater than the share the caregiver was entitled to under a transfer instrument in effect before the caregiver became the caregiver; or 2) by clear and convincing evidence that the transfer was not the product of fraud, duress, or undue influence. It is important to note that section 5/4a-15 presents two different standards of proof. If the caregiver received the same share under a transfer document in effect before the caregiver became the caregiver, then the standard is a preponderance of the evidence. A preponderance of the evidence standard would generally require the caregiver to present some evidence, which when viewed favorably to the caregiver’s position, would allow a reasonable trier of fact to conclude that the required factual element was proven. For example, proof of a prior will dated before the date when the caregiver became the caregiver should be sufficient proof. In contrast, the standard of proof required to overcome the presumption that the transfer is void due to fraud, duress, or undue influence is clear and convincing evidence, which is a higher standard of proof and requires the presentation of more relevant evidence in order to meet that standard.
If a person receiving care, who has sufficient mental capacity and is not subject to fraud, duress or undue influence, wishes to provide for a gift to a caregiver in excess of $20,000 which will take effect at or after death, then an effective way for the person to do so is for that person to meet with his or her independent legal counsel and express his or her wishes in regard to the caregiver. The client and his or her attorney can then decide how best to move forward to implement the plan. The presence of independent legal counsel who actively interviews his or her client, assesses competence, discusses options, memorializes the client’s wishes and motivations, and assists in implementing a plan, etc. will go a long way toward creating the proof needed to rebut the presumption that the transfer instrument is void. The attorney for the person who wishes to make the transfer must also consider the impact of various evidentiary issues.
Section 5/4a-20 provides that “nothing in this Article precludes any action against any individual under the common law, or any other applicable law, regardless of the individual’s familial relationship with the person receiving assistance.” Some of the common law actions which were and continue to be available are actions for fraud, duress, and undue influence.
It is relatively uncommon for an Illinois statute to provide for the payment of attorney’s fees and costs, but section 5/4a-25 specifically provides that if the caregiver is not successful in overcoming the presumption of void transfer, then the caregiver pays the costs of the proceeding, including reasonable attorney’s fees. This means that if the caregiver fails to overcome the presumption, the caregiver pays his or her attorney’s fees and costs and also the attorney’s fees and costs of the person who challenged the transfer instrument. As a practical matter, this section alone may be enough to cause most caregivers to give up and not seek to overcome the presumption. This may happen because the caregiver may think, “Litigation is uncertain. If I lose, I will pay all attorneys’ fees and costs and I will receive no funds with which to pay these potentially substantial costs.”
Section 5/4a-30 states that the rebuttable presumption (of section 5/4a-10) does not impose a duty on a financial institution, trust company, trustee or similar entity related to any transfer instrument. This language probably means that, for example, a bank does not have an affirmative duty to take some action simply because a payable on death account is established. The final section of Article IVa is section 5/4a-35 and this section limits the applicability of Public Act 98-1093 to transfer documents executed after the effective date of the Act, which was January 1, 2015.
For those who challenge property transfers to caregivers which take effect at or after the death of the person receiving care, new Article IVa of the Illinois Probate Act is a helpful asset protection tool. However, there are many situations that are not covered by Article IVa. For example, section 5/4a-5(2) excludes most family members from the presumption created by the Article and section 5/4a-5(3) excludes transfers which take effect during the lifetime of the transferor. A significant percentage of such improper transfers are “gifts” which take effect during the lifetime of the transferor and many improper transfers are to family members. If this is the case, then Article IVa will have no impact on many types of improper transfers.
Next time I will discuss some additional potential problems with Article IVa and how a pending Illinois House Bill addresses some of these additional potential problems.
I am an attorney practicing in the Chicago area.