May 2015 Vol. 61, No. 10

Trusts & EstatesThe newsletter of the Illinois State Bar Association’s Section on Trusts & Estates

IllInoIs state Bar assocIatIon

InsIde

In the May issue . . . . . . . . . . 1

Beneficiaries beware: En-forceability of spendthrift clauses in bankruptcy after In re: Castellano . . . . . 1

ISBA Trusts and Estates Section Council Meeting of Friday, February 27, 2015 . . . . . . . . 7

In the May issue . . .By Darrell Dies & Jennifer Bunker

In this month’s newsletter Aaron T. Troy pro-vides a summary of the recent case In re: Cas-tellano which involves the effectiveness of a

spendthrift clause in the Bankruptcy context. In an effort to provide the entire section with infor-mation regarding the section council’s activity, we are including a copy of the February 27, 2015 Meeting Minutes prepared by Gary Gehlbach.

Thank you to each and every person that

has helped make this newsletter a success by providing informative, substantive and practical articles. Members of the Trusts & Estates Section may now comment on the articles in the news-letter by way of the online discussion board on the ISBA Web site at http://www.isba.org/sec-tions/trustsestates/newsletter and as always, comments are welcome. ■

Beneficiaries beware: Enforceability of spendthrift

clauses in bankruptcy after In re: CastellanoBy Aaron T. Troy

In 2005, Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act (“BAPCPA”), which significantly curtailed

an individual’s ability to file for bankruptcy pro-tection. The BAPCPA added a new fraudulent transfer provision to the United States Bankrupt-cy Code, which was codified at 11 U.S.C. § 548(e).1

Section 548(e) of the Bankruptcy Code pro-vides, in relevant part, as follows:

The trustee may avoid any transfer of an interest of the debtor in property that was made on or within 10 years before the date of the filing of the petition, if: (A) such transfer was made to a self-settled trust or similar device; (B) such transfer was by the debtor; (C) the debtor is a beneficiary of such trust or similar device; and (D) the debtor made such transfer with actual in-tent to hinder, delay, or defraud any entity to which the debtor was or became, on or after the date that the transfer was made, indebted.

Section 548(e) was originally created to allow

creditors in bankruptcy to reach a debtor’s as-sets held in a self-settled spendthrift trust, also known as a “domestic asset protection trust” (“DAPT”).2 However, federal bankruptcy courts have construed the “or similar device” language in Section 548(e) very broadly to avoid transfers made by a debtor to non-DAPTs.3 In one recent Northern District of Illinois case, In re Castellano,4 a bankruptcy court judge found that the creation of a new sub-account for an irrevocable spend-thrift trust was a “transfer” to a “self-settled trust or similar device” as to a non-settlor beneficiary. While the United States District Court ultimately rejected the bankruptcy court’s proposed find-ings and declined to apply Section 548(e), the Castellano case is still a relevant look into the scope of Section 548(e) and the effectiveness of spendthrift trusts in bankruptcy.

BackgroundIn 1997, Faith Campbell created the Faith F.

Campbell Living Trust (the “Living Trust”). Faith

Continued on page 2

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trusts & estates | May 2015, Vol. 61, No. 10

Campbell was a resident of South Carolina and chose South Carolina law to govern the Living Trust. Faith Campbell was the initial trustee of the Living Trust and retained the power to use some or all of the Living Trust income or principal during her lifetime. The Living Trust further provided that, “upon the death of Faith F. Campbell and upon settle-ment of her estate, this trust shall terminate.” Thereafter, the Living Trust provided that the trust estate was to be divided equally among Faith Campbell’s four children, and distrib-uted to them free of trust.

The Living Trust also contained a spend-thrift clause, which provided as follows:

If...by reason of bankruptcy or in-solvency or any attempted execution, levy, attachment, or seizure of any assets remaining in the hands of the Trustee under claims of creditors or otherwise, all or any part of the income or principal might fail to be enjoyed by any beneficiary or might vest in or be enjoyed by some other person, then the interest of that beneficiary shall immediately terminate. Thereaf-ter, the Trustee shall pay to or for the benefit of that beneficiary only those amounts that the Trustee, in its sole and absolute discretion, deems advis-able for the education and support of that beneficiary until the death of that beneficiary or the maximum period permissible under the South Carolina rule against perpetuities, whichever first occurs. The Trustee shall then dis-tribute the Trust Estate or the affected part: (a) to the surviving issue of that beneficiary, by right of representation; (b) to the surviving issue of the Trus-tor, if the beneficiary has no surviving issue at the time of distribution, by right of representation; or (c) if neither the beneficiary nor the Trustor leave surviving issue, to those persons who would be entitled to take the property under the laws of intestate succession in South Carolina.

Faith Campbell died on February 11, 2011. As of the date of her death, Faith was living in Illinois and had been for a number of years. The Living Trust named Merrill Lynch Trust

Company of North Carolina (now known as Bank of America) as the sole successor trustee. Bank of America declined to serve as successor trustee on March 18, 2011. Consis-tent with the terms of the Living Trust instru-ment, Faith Campbell’s four children jointly selected J.T. Del Alcazar as successor trustee. Mr. Del Alcazar was an attorney and a family member by marriage, having married one of Faith Campbell’s granddaughters.

Linda Castellano, one of Faith Campbell’s four children and a remainder beneficiary of the Living Trust, owned a moving company with her husband. As a result of the 2008 housing bubble crash, and the decrease in home sales that followed, the Castellanos’ moving business experienced severe hard-ship in 2009 through 2011. Ms. Castellano’s financial difficulties only worsened in the spring and summer of 2011 as her husband experienced significant health issues. As a re-sult, Ms. Castellano’s attorney sent a letter to Mr. DelAlcazar on October 5, 2011, informing him of her insolvency (the “Insolvency Let-ter”). The Insolvency Letter stated:

I am writing to you in relation to Section 10.03 [i.e., the above-quoted spendthrift clause] of the trust, to ad-vise you that my client and her hus-band have experienced insolvency due to the recession. They have closed their business and are filing for bank-ruptcy protection. Linda Castellano considers that it is the trustee’s obli-gation to exercise his authority con-sistent with the provisions of the trust identified above.

After receiving the Insolvency Letter, Mr. Del Alcazar exercised his authority as suc-cessor trustee of the Living Trust by moving Ms. Castellano’s share of the Living Trust to a new sub-account, which he called the “Faith F. Campbell Spendthrift Trust f/b/o Linda Cas-tellano.” The parties later referred to this ac-count in shorthand as the “Spendthrift Trust.”

Linda Castellano filed a Chapter 7 bank-ruptcy petition on November 18, 2011. On the schedules of her petition, she listed her ¼ share of the Living Trust with a value of $400,000, and claimed it as exempt from her bankruptcy estate due to the spendthrift clause.

Beneficiaries beware: Enforceability of spendthrift clauses in bankruptcy after In re: Castellano

Continued from page 1

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Susan T. BartDavid A. BerekSean D. Brady

Jennifer L. BunkerDarrell E. Dies

Michael J. DrabantJames F. DunnebackNeil T. GoltermannFrank M. Greenfield

Edward Jarot, Jr.Justin J. Karubas

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Diana M. LawJeffrey G. Liss

David M. LutreyHeather A. McPherson

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May 2015, Vol. 61, No. 10 | Trusts & Estates

On November 21, 2011, Linda Castellano signed a document entitled “Receipt, Ap-proval of Accounting, Release and Discharge of Trustee” (the “Receipt”). The Receipt pro-vided in relevant part as follows:

I acknowledge that pursuant to the attached Schedule of Assets Dis-tributed I will individually receive no distribution from the Living Trust and that the Spendthrift Trust shall receive my lifetime, limited beneficial interest. This is in full satisfaction of my rights and interests under the Living Trust, however reserving my beneficial inter-ests pursuant to the Spendthrift Trust, I approve the Schedule of Assets Dis-tributed.

On October 25, 2013, the bankruptcy trustee filed an adversarial case against Ms. Castellano and Mr. Del Alcazar in the United States Bankruptcy Court for the Northern District of Illinois, seeking to have the Living Trust included in Ms. Castellano’s bankruptcy estate. The bankruptcy trustee argued that the creation of the Spendthrift Trust was a transfer to a “self-settled trust or similar de-vice” made for the purpose of defrauding Ms. Castellano’s creditors, and thus was in violation of Section 548(e) of the Bankruptcy Code.

In the interests of transparency, the au-thor wishes to point out that the author’s firm, Rolewick & Gutzke, P.C. had the privilege of representing Ms. Castellano in the adver-sarial case.

The Bankruptcy Court’s Proposed Findings of Fact and Conclusions of Law

After a trial, the Bankruptcy Court sided with the bankruptcy trustee, finding that Ms. Castellano “voluntarily effectuated an indi-rect, conditional parting with an interest in property—her share of the Living Trust as-sets.”5 The Bankruptcy Court conceded that Ms. Castellano did not make any direct trans-fer, but found that she “recruited [Mr. Del Al-cazar] to accomplish the equivalent result[.]”6 Specifically, the Bankruptcy Court found that “[r]ead together, the Insolvency Letter and the Receipt provide strong evidence that the Spendthrift Trustee [i.e., Mr. Del Alcazar] in-voked the Spendthrift Provision and created the Spendthrift Trust in direct response to the Debtor’s express wishes.”7

The Bankruptcy Court found that, con-trary to the arguments of Ms. Castellano and Mr. Del Alcazar, the Spendthrift Trust was a

separate, distinct “self-settled trust or similar device” for purposes of Section 548(e). The Bankruptcy Court found that the Spendthrift Trust was analogous to a self-settled trust in that it “was created in part to shield the Debtor’s assets from her creditors” and “was created to preserve the right of the Debtor to receive future distributions from the Living Trust.”8 The Bankruptcy Court also found that the Spendthrift Trust was created in direct response to Ms. Castellano’s Insolvency Let-ter, concluding “the Debtor satisfied the ‘self-settled’ aspect of Section 548(e) by using the Spendthrift Trustee as her cat’s paw to create the Spendthrift Trust, rather than setting it up directly.”9

The Bankruptcy Court further found that the “transfer” was made with the actual in-tent to hinder, delay, or defraud Ms. Castella-no’s creditors. Noting that Mr. Del Alcazar was married to Ms. Castellano’s niece as well as the timing of the creation of the Spendthrift Trust vis-à-vis Ms. Castellano’s filing for bank-ruptcy, the court concluded that the transfer of funds “was delayed until an instrumental-ity had been created to deny the Debtor’s creditors access to these assets while making them available for the Debtor’s benefit.”10

In a footnote, the Bankruptcy Court pro-vided an alternative analysis leading to the same result. This analysis was based upon an alarmingly broad interpretation of Section 548(e). The Bankruptcy Court explained:

It is undisputed that the Living Trust set up by Ms. Campbell was a “self-settled” trust, since it was directly cre-ated by Ms. Campbell. All that § 548(e) requires is that the avoidable transfer be made within ten years of the bank-ruptcy filing by a debtor beneficiary. Even if the Court were to ignore the Spendthrift Trust and look solely at the Living Trust, the Debtor’s actions taken in the Insolvency Letter and the Receipt would still have accomplished a ‘transfer’ into a “self-settled trust or similar device,” i.e., the Living Trust cre-ated by Ms. Campbell, that would be avoidable under § 548(e).11

Thus, according to the Bankruptcy Court, Mr. Del Alcazar’s actions in following the provisions of the Living Trust (which was established more than 10 years before Ms. Castellano’s bankruptcy) by creating a sub-account and “transferring” Ms. Castellano’s share of the Living Trust to that account was in violation of Section 548(e) (since the physi-cal “transfer” of funds was made within 10

years of Ms. Castellano’s bankruptcy). Implicit in this alternative analysis is the conclusion that the Living Trust was self-settled as to Ms. Castellano, even though the Living Trust was created by her mother!

The Bankruptcy Court concluded that the creation of the Spendthrift Trust violated Section 548(e), and recommended that the United States District Court rule in favor of the bankruptcy trustee on his adversarial case and turn over the assets in the Spend-thrift Trust to the bankruptcy trustee.

The Bankruptcy Court’s conclusions on two crucial factors should be quite alarm-ing to estate planners. First, the Bankruptcy Court concluded—with little precedent or authority—that Mr. Del Alcazar’s opening of the Spendthrift Trust (i.e., a separate bank ac-count which was still controlled by and held in the name of the Living Trust) equated to the creation of a “self-settled trust or similar device” under Section 548(e). As one com-mentator noted:

Wow—think about that one for a minute! If a Trustee sets up a new investment account, that could be a “similar device” under this Court’s in-terpretation of Section 548(e). Presum-ably, if the Trustee set up a sub-trust to hold assets, that would also be a “simi-lar device.” What about if the Trustee decants the existing Trust assets to a new Trust? If this Opinion stands up, I can hear the ice cracking.12

Second, the Bankruptcy Court found that the Living Trust terminated by its terms im-mediately upon Faith Campbell’s death. The Living Trust was to terminate “upon [Faith’s] death and upon settlement of [her] estate,” and the Bankruptcy Court interpreted the word “estate” to mean “probate estate.” Since no probate estate was ever opened (nor re-quired) for Faith Campbell, the Bankruptcy Court concluded that the Living Trust termi-nated immediately upon Faith’s death.13 The alarming consequence of this conclusion is that the spendthrift clause which Faith want-ed in order to protect her children’s interests in the Living Trust could never be effective, since the children’s interests would have fully vested as soon as Faith passed away. As not-ed in Adkisson, “if the Court’s rationale is fol-lowed in future cases, this means that prob-ably millions (literally, millions) of existing trusts may be defective as to the operation of their Spendthrift Clause, if the Trust may be deemed to terminate immediately upon the death of the Settlor.”14

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trusts & estates | May 2015, Vol. 61, No. 10

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May 2015, Vol. 61, No. 10 | Trusts & Estates

The District Court Rejects the Bankruptcy Court’s Findings

Ms. Castellano and Mr. Del Alcazar filed objections to the Bankruptcy Court’s pro-posed findings, and their objections were heard by Judge Manish S. Shah of the United States District Court for the Northern District of Illinois. On April 27, 2015, Judge Shah sus-tained the objections, rejected the Bankrupt-cy Court’s proposed findings, and dismissed the adversarial case against Ms. Castellano and Mr. Del Alcazar.15

The District Court ruled that the Bank-ruptcy Court erred by not considering Sec-tion 541(c)(2) in its proposed findings of fact and conclusions of law. Section 541(c)(2) pro-vides that property which otherwise would be in a debtor’s bankruptcy estate is not in-cluded if: (1) it consists of a beneficial inter-est in a trust; (2) the trust contains language restricting transfer of the interest; and (3) the restriction is enforceable under “applicable nonbankruptcy law.” 11 U.S.C. § 541(c)(2). Ms. Castellano and Mr. Del Alcazar argued before the Bankruptcy Court that Section 541(c)(2) applied to the Living Trust.

The District Court began its analysis by finding that Ms. Castellano’s interest was still in a trust. Contrary to the Bankruptcy Court’s interpretation that the Living Trust termi-nated immediately upon Faith Campbell’s death, the District Court noted that there were many sections of the Living Trust “that instruct the successor trustee to accomplish certain tasks following Campbell’s death but before final distribution of the Trust Estate.”16 One such provision was the instruction to the successor trustee to make equal distribu-tions to the beneficiaries in accordance with the terms of the Living Trust. Since Mr. Del Al-cazar had not made any distributions on the date Ms. Castellano filed for bankruptcy, the District Court concluded that “the living Trust was still in effect and Castellano had a benefi-cial interest in it.”17

The District Court likewise found that the Living Trust contained restrictions on the transfer of beneficial interests, and that those restrictions were valid under applicable non-bankruptcy law. The District Court initially noted that there was a question as to which state’s law applied: Castellano and Del Alcazar argued that South Carolina law controlled, since it was the choice of law provided for in the trust instrument; the bankruptcy trustee argued that Illinois law controlled, since Faith Campbell was a resident of Illinois as of the date of her death; and the District Court noted the possibility that Wisconsin law was

applicable, since the Living Trust owned real estate in Wisconsin. Nevertheless, the District Court held that the transfer restrictions were valid under the law of any of the three states.

In all three states, the District Court found that a spendthrift provision prevents the involuntary transfer of a trust interest if the trust is not self-settled and the spendthrift provision restricts both voluntary and invol-untary transfers.18

The District Court also rejected the Bank-ruptcy Court’s alternative analysis that the spendthrift clause was not valid as to Ms. Castellano because it was never valid as to Faith Campbell. In support of the Bankruptcy Court, the bankruptcy trustee argued that the issue was whether “a trust that is not—and cannot be—a spendthrift trust at the moment of creation can convert itself into a spendthrift trust at a later date.”19 The District Court disagreed, holding that the true ques-tion was “whether a specific provision was valid as to a specific person’s interest at a spe-cific point in time.”20 The District Court noted that none of the cases cited by the bankrupt-cy trustee held that a spendthrift provision is per se invalid as to remainder beneficiaries. Thus, the District Court concluded, “[s]uch an overbroad rule would be inconsistent with the universal acceptance of non-self-settled spendthrift provisions.”21

The District Court likewise rejected the bankruptcy trustee’s argument that the spendthrift provision stopped protecting Ms. Castellano’s interest once Mr. Del Alcazar was permitted to make distributions from the Living Trust. Examining South Carolina, Illinois, and Wisconsin law, the District Court found that “spendthrift provisions continue to restrict transfers of interests at least until a distribution is mandated or declared by the trustee—neither of which happened here.”22 The Court continued:

Although [Castellano] was a benefi-ciary and almost certainly would have had access at some point (i.e., an “un-fettered right of control”), Del Alcazar’s duty to divide the Trust Estate (which involved liquidating real property) combined with his discretion to “retain any property placed in Trust by Trustor for as long as [he] deem[ed] advisable,” precluded Castellano from ever having access to the trust funds at any point before she filed for bankruptcy.23

The District Court also found a second valid restriction in the Living Trust on the transfer of Ms. Castellano’s beneficial interest. The spendthrift clause in the Living Trust pro-

vided that, upon Ms. Castellano’s insolvency, the successor trustee had the sole discretion to make distributions to Ms. Castellano when he determined a distribution was advisable for her education and support. This, accord-ing to the District Court, converted Ms. Cas-tellano’s unrestricted interest in the Living Trust into a discretionary interest at the mo-ment of her insolvency.24 The District Court noted that, in all three states, a discretionary trust was a valid restriction upon the alien-ation of a beneficiary’s interest. South Caro-lina law is the most clear on this topic; S.C.C.L. § 62-7-504(b) explicitly provides that discre-tionary trusts are valid and cannot ordinarily be reached by a beneficiary’s creditors.25 The Court stated that Illinois and Wisconsin do not have explicit statutes addressing discre-tionary trusts. However, the Court found that “several [Illinois] decisions state or imply that such trusts generally are protected against the reach of creditors[,]”26 and that certain statutes in Wisconsin allowing access to dis-cretionary trust funds in limited circumstanc-es “suggests a general rule of no access.”27

Thus, the District Court concluded that Section 541(c)(2) applied to the Living Trust and operated to keep the funds in the Spend-thrift Trust out of Ms. Castellano’s bankruptcy estate.

The District Court briefly discussed Sec-tion 548(e) and found that the Bankruptcy Court erred in applying Section 548(e) to the Living Trust. The District Court stated:

At all times, Castellano’s potential share remained the property of the Living Trust in the custody of Merrill Lynch. Although [Del Alcazar] seg-regated a portion of the Living Trust into a second account at Merrill Lynch earmarked for potential discretionary distributions to Castellano, that act did not end the Living Trust’s ownership of those funds, constitute a distribution to Castellano, or create a new trust. It was simply a division of trust property as permitted by § 4.02(b) of the Living Trust. Accordingly, because there was no transfer of an interest of the debtor, § 548(e) does not apply.28

ConclusionThe District Court’s memorandum opin-

ion and order should reassure estate plan-ners and their clients that spendthrift trusts are still exempt from bankruptcy under Sec-tion 541(c)(2). Thankfully, the Bankruptcy Court’s broad interpretation of the phrase “self-settled trust or similar device” as used in

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trusts & estates | May 2015, Vol. 61, No. 10

Section 548(e) was rejected. Nevertheless, as of the writing of this article, the bankruptcy trustee still has the right to appeal the District Court’s order to the Seventh Circuit. Regard-less of whether or not an appeal is filed, the fact remains that bankruptcy courts will take a long, hard look at the creation and admin-istration of a spendthrift trust when deciding whether it should be included in the bank-ruptcy estate. Estate planning and adminis-tration attorneys can take away a handful of best practices from this case.

First, advise the trustee to be careful when titling assets and opening accounts. The Bankruptcy Court placed great signifi-cance on the fact that, when Mr. Del Alcazar opened the Living Trust account for adminis-tering Ms. Castellano’s share, he titled it the “Faith F. Campbell Spendthrift Trust f/b/o Lin-da Castellano.” The subsequent Receipt and communications between Mr. Del Alcazar and Ms. Castellano likewise referred to the account as the “Spendthrift Trust.” If Mr. Del Alcazar had more clearly indicated that the account was merely a separate bank account still in the name of the Living Trust, the Bank-ruptcy Court may have been less inclined to find that a new trust had been created.

Secondly, make sure that the trust instru-ment clearly describes when and upon what events the trust will terminate. In this case, the Living Trust was to terminate upon the death of Faith Campbell “and upon settle-ment of [her] estate.” Unfortunately, the term “estate” was not defined elsewhere in the Living Trust, which led to multiple interpre-tations as to whether the Living Trust had terminated before Ms. Castellano filed for bankruptcy (and thus, whether Ms. Castel-lano’s interest in the Living Trust had vested prior to being moved into the spendthrift account). As Adkisson notes, this problem may be avoided if the trust document states that “the trust will not terminate if there is a remaining beneficiary who cannot immedi-ately take because of existing creditors.”29

Third, be careful when communicating with the trustee on behalf of a beneficiary (or vice versa). On one hand, the Bankruptcy Court placed a great deal of emphasis on the Insolvency Letter from Ms. Castellano’s attor-ney to Mr. Del Alcazar’s attorney and found that the Insolvency Letter was the trigger of Ms. Castellano creating a “self-settled trust or similar device” under Section 548(e). On the other hand, Mr. Del Alcazar insisted upon re-ceiving some sort of written confirmation of Ms. Castellano’s insolvency. In fact, Mr. Del Al-cazar might have breached his fiduciary du-

ties if he did not inquire into Ms. Castellano’s potential insolvency, especially in light of the spendthrift clause in the Living Trust. Coun-sel for the beneficiary and the trustee should carefully draft any communication between them, making sure that their communication could not be construed as direction from the beneficiary to the trustee. ■__________

Aaron T. Troy (aaront@rglawfirm.com) is an Associate at Rolewick & Gutzke, P.C. in Wheaton, whose practice is focused primarily on estate and trust litigation and administration.

1. All section references herein are to the United States Bankruptcy Code unless otherwise indicated.

2. In re Porco, Inc., 447 B.R. 590, 596 (Bankr. S.D. Ill. 2011).

3. See e.g. In re Thomas, 447 B.R. 778 (Bankr. D. Idaho 2012) (holding that a transfer to an IRA was a transfer to a “similar device” under Section 548(e)).

4. 514 B.R. 555 (Bankr. N.D. Ill. 2014)5. Castellano, 514 B.R. at 560.6. Id.7. Id. at 561.8. Id. at 562.9. Id.10. Id. at 564-65.11. Id. at 563, n. 5.12. Jay Adkisson, Trust Beneficiary Checkmated

by Bankruptcy Code 548(e) in Castellano, http://www.forbes.com/sites/jayadkisson/2014/08/11/trust-beneficiary-checkmated-by-bankruptcy-code-548e-in-castellano/ (last visited April 29, 2015) (hereinafter, “Adkisson”), at p. 6.

13. Castellano, 514 B.R. at 564, n. 7.14. Adkisson, at p. 5.15. Safanda v. Castellano, 2015 WL 1911130

(N.D. Ill. April 27, 2015).16. Id. at *4.17. Id.18. Id. at *5 (citing S.C.C.L. § 62-7-502(a); In re

Marriage of Chapman, 297 Ill. App. 3d 611, 318-20 (1st Dist. 1998); In re Marriage of Sharp, 369 Ill. App. 3d 271, 281 (2d Dist. 2006); Wisc. Stat. § 701.06(1) (2011).

19. Id. (citing In re Lunkes, 427 B.R. 425, 430 (N.D. Ill. 2010).

20. Id.21. Id.22. Id. at *6.23. Id.24. Id. at *5.25. Id. at *7.26. Id. (citing Button v. Elmhurst National Bank,

169 Ill. App. 3d 28, 40 (2d Dist. 1988); Estate of Mc-Inerny, 289 Ill. App. 3d 589, 598 (1st Dist. 1997); Goodpasteur v. Fried, 183 Ill. App. 3d 491, 496 (1st Dist. 1989))

27. Id. (citing Wisc. Stat. § 701.06(4)(b); § 701.06(5)(b)).

28. Id. at *8.29. Adkisson, at p. 5.

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May 2015, Vol. 61, No. 10 | Trusts & Estates

ISBA Trusts and Estates Section Council Meeting of Friday, February 27, 2015

Chair Mary Lee Faupel called the meet-ing to order at 10:10 a.m. In atten-dance, in addition to Chair Faupel,

were the following Section Council members:Tracy S. Dalton, Michael J. Drabant, James

F. Dunneback, Gary R. Gehlbach, Neil T. Goltermann, Frank M. Greenfield, Robert W. Kaufman, Jeffrey G. Liss, David M. Lutrey, Pat-rick D. Owens, Kathryn C. Rolewick, George L. Schoenbeck, III, David C. Thies and Dennis Jacknewitz.

Attending via telephone were Sean D. Brady, Jennifer L. Bunker, Darrell E. Dies, Wil-liam R. Kuehn, Paul A. Meints, James A. Nep-ple, Joseph P. O’Keefe and Steven E. Siebers.

Also in attendance were Mary M. Grant and Melissa Burkholder, Staff Liaisons. Mary Grant announced that Melissa Burkholder would now be assuming responsibility for the Trusts and Estates Section Law Council.

Absent were Susan T. Bart, David A. Berek, Edward Jarot, Jr., Justin J. Karubas, Katerinna McBride, Heather A. McPherson, Raymond W. Prather and Alan R. Press.

MinutesThe minutes of the December 12, 2014,

meeting were addressed and on motion by Bob Kaufman, seconded by Dave Lutrey, ap-proved.

CLEBill Kuehn and Tracy Dalton provided the

CLE report:

• Bill Nero presented aWebinar programon Intellectual Property on February 11, attended by approximately 30 persons. This program, which, Bill noted, was quite good, should now be available on the ISBA website as a free CLE.

• Theguardianshipprogramisprogressingand Tracy announced that she needed two more topics and speakers. Dar-rell Dies volunteered to check with Dan Daneen and Dave Lutrey volunteered to present a litigation topic. The date of this program is to be determined.

• Tracy is working on a hot topics 1-1/2-hour program and invited members to participate. Mary Lee suggested a pro-gram on undue influence, including the new Illinois law on presumptively void transfers and the new health care power of attorney.

• Afulldayestatenutsandboltsplanningcourse is being planned for April 2016.

• JeffreyLissadvisedthattheISBAisjoining

with the Science Fiction Writers’ Associa-tion for a program in Chicago on June 5 at which Scott Turow will be presenting. Speakers are needed for all programs and all are encouraged to volunteer.

LegislationBob Kaufman presented the Legislation

Committee’s positions on pending legisla-tion, carefully tabulated by Justin Karubas. The accompanying spreadsheet summarizes positions taken by the Section Council.

David Lutrey presented a proposal for revisions to the statute of repose for actions against attorneys (735 ILCS 5/13-214.3). The consensus of the Section Council was to move forward with this proposal. Dave an-nounced that he had spoken with Jim Cov-ington about this initiative and that Jim is wholly supportive and will have his staff pre-pare an analysis of how other states handle this issue. Jim pointed out, however, that there is opposition in the ISBA ranks. Gary Gehlbach suggested that the phrase “Which-ever is later” in the last line of subsection (d) be revised to “whichever is earlier.” Working with Dave Lutrey on this endeavor will be Jim Dunneback, Steve Siebers, David Thies, Paul Meints, George Schoenbeck and Bill Kuehn.

Gary Gehlbach presented the proposal to eliminate a survivor’s award for an adult dependent child under 755 ILCS 5/15-1 and 15-2. The Section Council having already ex-pressed its support for this, Chair Faupel in-structed Gary to prepare the formal proposal on the ISBA form.

The Legislation Committee is tasked with considering a legislative proposal similar to the recently enacted Florida law that would revoke beneficiary designations in favor of a recently divorced spouse.

Flinn ReportJoe O’Keefe had previously circulated the

latest Flinn Report.

Case Law UpdateNo report.

PublicationsDarrell Dies and Jennifer Bunker had

submitted a written report, which included newsletter articles authored by Section Council members and non-members from June 2014 through February 2015. Jennifer also advised that she is working on an article for the annual SIU Law Journal’s survey of re-

cent Illinois law.

Tax LegislationNo report.

EthicsMike Drabant reported on two recent de-

velopments: one in which an attorney, learn-ing of a previously unknown heir failed to advise the court of the existence of that heir and was thus disciplined with a suspension, and a case in which the ISBA Mutual was able to avoid coverage for a claim based on an in-nocent but material misrepresentation on a renewal application by one of two partners in the firm (the partner completing the form being unaware of a potential claim against the other partner). Chair Faupel asked Mike to prepare a report on recent changes to the Rules of Professional Responsibility.

TechnologyPatrick Owens presented an analysis of

the Uniform Fiduciary Access to Digital Assets Act and the Committee’s proposed changes and the rationale for this Act. The Section Council unanimously voted to approve the Committee’s recommended revisions.

Old Business

New Health Care POAMembers discussed their modifications

to the new statutory form, the resistance to this form by trusts and estates counsel and NAELA members, and the acceptance of this form by consumers. Mary Lee and Gary had previously circulated the forms their firms are using.

Consumer BrochureSean Brady announced that he has sent a

draft of an updated brochure to his Commit-tee for the members to review

Future DatesFuture meeting dates are scheduled as

follows:

a. Friday, April 17, 2015, Galena 12:30-4 p.m. requested

b. Annual Meeting, June 18-20, 2015, Grand Geneva, WI

Chair Faupel adjourned the meeting at 1:29 p.m.

Respectfully Submitted,Gary R. Gehlbach, Secretary

Trusts & EstatesIllinois Bar CenterSpringfield, Illinois 62701-1779

May 2015Vol. 61 No. 10

Non-Profit Org.U.S. POSTAGE

PAIDSpringfield, Ill.Permit No. 820

Protecting and Preserving Author Rights: Contracts, Digital Publishing,

& Literary EstatesPresented by Intellectual Property and Trusts and Estates,

Co-sponsored by Science Fiction & Fantasy Writers of America (SFWA)

June 5, 2015Chicago

Palmer House Hilton Hotel17 East Monroe Street9:00 a .m . – 5:15 p .m .

6 .75 MCLE hours

Every creative endeavor has two sides: the artistic and – the decidedly less romantic one—the commercial. In light of the quickly changing face of the industry, however, it is essential that writers understand the business side of authorship. Join us for this special joint program to gain insights into the following:

• Theimportanceofcopyrightandchainoftitleindocuments;• Howtobestfindateamandtheimportanceofone;• Understandingwhatmakesawinningscreenplayandawinningteam;• Knowingwhenyouneedanattorneyandwhattolookforinone;• Bringinganaccountantintothemix;• Knowingifandwhenyouneedabusinessplananditsrequiredcriteria;• Andmuchmore!

Go to www.isba.org/cle/upcoming for more information and to register

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