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Ernie Banks Estate, Part 3: Creditor Claims Against the Estate

Banks pin

Mr. Cub’s estate battle has now entered roughly the top of the second inning. To recap, you can read my first two installments on this case here and here.

What’s happened since my last installment on March 3rd? Quite a bit (you can actually review the basic probate docket entries here). I will start with a summary of creditor claims filed against the estate and discuss probate claims procedures generally. Then I will highlight additional developments over the last month.

Let’s File Two! (Creditor Claims Against the Banks Estate)

So far, two creditor claims have been filed with the probate court against the Banks Estate:

1. Donnellan Family Funeral Services. On Friday March 6, news broke that Donnellan Family Funeral Services had filed a claim for $35,000 in unpaid funeral-related expenses relating to Banks’ February 6, 2015 funeral. Donnellan’s filing included $3,995 for legal fees incurred due to the dispute over the disposition of Banks’ remains.

Later that night, we learned that that the Cubs would cover the full tab for the funeral. Donnellan subsequently confirmed that the Cubs had picked up the tab. At the claims call hearing on March 23, the claim was dismissed for failure to prosecute.

While the Cubs’ generosity is commendable, the estate tax geek in me can’t help but see this as a possible costly tax move. If Ernie Banks’ Estate is subject to Federal and/or Illinois estate tax, reasonable funeral and burial expenses are deducted on the estate tax returns. But there’s a catch: funeral/burial expenses (and any other claims against the estate) may only be deducted if actually paid by and from the estate. If the Cubs pay these expenses, the deduction would not apply.

The 2015 Federal Estate Tax exemption is $5,430,000 and the Illinois estate tax exemption is $4,000,000. We don’t yet know if Banks’ estate will exceed either threshold, but it certainly wouldn’t surprise me, especially given the value of his name and likeness, plus what’s likely to be a valuable memorabilia collection. If estate tax applies, the combined Federal and Illinois rate on the amounts over $5,430,000 taxable estate is roughly 50%. So if the estate is taxable, that $35,000 “gift” from the Cubs could result in additional $17,500 in Federal and Illinois estate taxes due. Note that the probate estate is ≠ “gross estate” for tax purposes. The gross estate includes assets in Banks’ revocable trust and subject to beneficiary designation. I’ll likely cover estate tax issues a bit down the road.

2. Dussias Law Group. On February 20, Dussias Law Group filed a claim against the estate. A review of Banks’ divorce court records shows that this law firm represented Ernie Banks for a period of time during his (never completed) divorce proceedings. I have not personally seem this claim filing, but presumably it asked for payment of unpaid attorney fees. But at least for the time being, it appears that Dussias has abandoned the claim. On March 23, this claim was also dismissed for failure to prosecute. Perhaps an agreement was reached to satisfy this claim. Otherwise, Dussias could still re-file its claim within the claims limitations period (see below).

Creditor Claims Procedure Generally

These are just the first two claims, but not necessarily the only claims. After an estate is opened, the estate attorney will arrange for a notice to be published in a newspaper (Cook County estates typically use Chicago Daily Law Bulletin). The notice is published once per week, for three consecutive weeks. This notice will tell potential creditors that they have 6 months (starting from the first publication date) within which to submit claims.

Publication is step 1 for the estate’s representative. Step 2 is then mailing actual written notice to all ‘known and reasonable ascertainable creditors.’ If the representative properly completes these 2 steps, then any claims not timely filed (within 6 months of first publication) are forever barred. Filing can be made either with the representative or the court. If the claim is filed only with the representative, then the representative can disallow the claim, forcing the claimant to file its claim with the court within 2 months of disallowance.

Once filed with the court, the claim can be litigated in probate court based on the underlying cause of action. In most cases though, claims are paid or settled outside of court.

When we talk about estate claims, we’re generally talking about money that the decedent owed someone at the time of death. What are some typical claims? Credit card balances and medical bills are the most common. But a claim can involve any kind of lawsuit against the decedent, including a lawsuit based on a tort (e.g. personal injury caused by the decedent). An employee or a person who provided personal services to the decedent might also submit a claim asking to be paid.

Additional Developments

1. Will ‘confirmed’ at proof of will hearing — On March 31, a ‘Proof of Will’ hearing was held before Judge Riley. In an unusual twist, the hearing was actually held in a traffic court room in the basement of the Daley Center (rather than the 18th floor) to accommodate a claustrophobic witness. I’ve written generally about Proof of Will hearings here.

As expected, Judge Riley ‘confirmed’ the will after a 20-minute hearing. It seems though that this ruling has been widely misconstrued by the media, and in social media comments, as a rejection of the Banks family’s claims of incapacity and/or undue influence (e.g. see here and here). That is not accurate. The Proof of Will hearing is generally limited to testimony from the witnesses on the will to confirm the genuineness of the signatures and describe the circumstances surrounding the will execution ceremony. As long as the signatures are genuine, were signed in the presence of each and the testator and the witnesses believed the testator was of sound mind and memory, then the will must be upheld (at this stage), absent proof of “fraud, forgery, coercion or other improper conduct” (this is extremely rare).

A contest based on allegations of Mr. Banks’ (lack of) capacity and/or Ms. Rice’s undue influence will be heard after the will (and trust) contest is filed and discovery is completed. The contest has not yet been filed. The family has up to 6 months (until August 10, 2015) to file the will/trust contest. This will likely play out many months (or years) down the road. Because the proof of will hearing and the will contest provide two separate opportunities to invalidate the will, Illinois is dubbed a “double contest” state.

So why might the Banks family demand this hearing even if they knew they would “lose?” First, you never know what the witnesses might say — maybe the signatures are forged. But more importantly, it’s an opportunity to elicit from the witnesses — under oath — potentially useful facts that might ultimately be included in the will contest. For example, the witnesses (paralegals at the attorney’s office) apparently testified that Regina Rice was present in the attorney’s office when the will was signed. That fact does not invalidate the will at the proof of will stage, but it could be a useful fact during the will contest stage.

2. Dueling citationsElizabeth Banks previously filed a ‘Citation to Discover Assets’ against Regina Rice in an effort to obtain a full accounting of assets. More recently, Regina Rice (as executor) also filed a Citation against Elizabeth Banks based on property that Elizabeth retained after Ernie moved out of the couple’s home in 2012. I intend to discuss citations (to discover and recover) in a future blog post.

3. Inventory due April 27 — Administration was converted from independent to supervised administration on February 24. This type of Order always includes a requirement that the supervised executor file an initial inventory with the court within 60 days.

4. Subpoena to Banks’ physician — On February 11, Elizabeth Banks’ attorneys issued a Records Only Subpoena to Ernie Banks’ physician, Dr. Jeffrey R. Pua, of Edwards Hospital, seeking copies of Ernie Banks’ medical records. The hospital sought and received a court order requiring them to comply with the subpoena. I intend to discuss discovery in probate litigation in a future blog post.

Articles and Blogs

And finally…

The Cubs honored Ernie Banks’ legacy with multiple tributes on opening night — a moment of silence, a video and Banks’ likeness on tarps covering the unfinished bleachers.  Also, Ernie’s sons, Joey and Jerry, threw out the ceremonial first pitch and sang the 7th inning stretch. The Cubs plan to honor Banks throughout the season. Unfortunately, the Cubs lost the opener 3-0. But that’s why they play 162!