An Argument for Probate When Selling a Decedent’s House in Illinois

The following are just my musings from my experience as a real estate attorney and title company underwriter, and are not intended to contain legal or title advice. If you are a party to a probate or real estate sale, or an heir or other relative or other associate of such a party, you should consult a local lawyer who can represent you and your interests. Also, this article contains my observations and opinions as an Illinois attorney with real estate and title experience, and not the opinions or requirements of any particular title company or law firm or previous employer.

A preferred method for transferring title to Illinois real estate from a decedent’s estate is what’s called a “bond in lieu of probate.” It’s quick, convenient, and arguably cheaper than filing a probate. I’m here to argue that it can be, but is not always the best choice for your client. Sometimes filing a probate is safer and cheaper, and in some instances can be quicker.

What is a “Bond in Lieu of Probate”

A “bond in lieu of probate” is a title company term for a procedure through which the title company will insure a deed from the heirs of a deceased owner to the insured buyer rather than requiring a probate naming an executor or administrator who may sign the deed or requiring orders of a probate court declaring the heirs and distributing the estate to the named heirs or devisees under a will. The term “bond in lieu of probate” is a bit of a misnomer because there is no surety bond. An extra risk premium is charged by the title company to cover: 1) the risk that an unknown or unnamed heir later appears and claims an interest in the estate; and 2) claims against the estate for liens and debts of the deceased during the 2-year statutory claims period when no probate is filed (see 755 ILCS 5/18–12).

If the sale of the land closes within the two year claims period, the extra risk premium can be as much as 2% of the value of the estate, usually calculated as 2% of the purchase price of the home. When I first started working in title in 1985, the risk premium was returned after several years. Now, it is not.

Typical Bond in Lieu of Probate Requirements

In my experience, the bond in lieu of probate requirements, in addition to payment of the premium, include: an affidavit of heirship signed by someone with knowledge of the family, but preferably not one of the heirs (although in practice the affiant is almost always an heir); a copy of the will, if the decedent died testate; a copy of any trust that is a devisee under the will; and a personal undertaking signed by all of the heirs named agreeing to indemnify the title insurer for any claims against the estate or claims of unnamed or unknown heirs. The affidavit of heirship should recite the facts of the decedent’s life relevant to the question of who are his or her remaining heirs under the laws of descent and distribution, and not merely a list of heirs. This list of requirements is not exhaustive and may differ by jurisdiction and underwriter.

Depending on your title company and county recorder, the affidavit of heirship may be recorded in the public records along with the deed.

If an heir survived the deceased, but died prior to closing, the requirements separately apply to the deceased heir meaning two separate bond in lieu packages are required, one for the deceased owner and another for the deceased heir.

The Case For Bond in Lieu of Probate

The bond in lieu of probate procedure is convenient for obvious reasons. There is no need to file a probate case and no need to seek waivers or send notices and publish and wait for the notice periods to run. The real estate lawyer doesn’t have to worry about timing before a closing date or becoming an expert in probate or finding another lawyer who is. Real estate lawyers are notoriously loath to go to court and understandably so as the ever changing court routines and unwritten rules* can be difficult to decipher for those who do not attend court regularly. Mandatory efling has complicated matters for lawyers who do not regularly file cases. Also, with bond in lieu, there are no additional legal fees for the filing of the case and the attorney’s appearance in court at least twice (once to open the case and admit the will, and once to close it), sometimes more if there are claims or asset sale or accounting complications.

*Yes, there are unwritten rules in court and they differ by county, courthouse and even division in the same courthouse, and even by judges within the same division. There could be, and the lawyer should always check for, local rules and standing orders of the various judges, but sometimes the rules are just unwritten. For example, if you are an Illinois lawyer practicing in Cook County, can you name which Cook County courtrooms have no carbons requiring the lawyers to draft pre-approved orders and bring multiple copies or bring their own carbons for orders written out on the spot? If you can’t, you could get stuck writing out multiple copies of lengthy orders, and don’t count on other lawyers in the room to help you. It’s more likely they’ll laugh at you. Illinois still has a long way to go on professional civility.

The Cook County Recorder Says Nothing for Decades, Then No, Then Yes, Then No, Then Maybe, Now Who Knows

After decades of saying nothing about affidavits of heirship and deeds signed by heirs, the Cook County, Illinois Recorder recently advised title companies that it would no longer accept affidavits of heirship and deeds signed by heirs for recording. The stated reason was that the recording of these documents was not supported in the law. They went back and forth on this and I’m still not sure where they landed, but they’re not entirely wrong on their legal point. This is Illinois law on the duty of executors named in a will:

Sec. 6-3. Duty of executor to present will for probate.) (a) Within 30 days after a person acquires knowledge that he is named as executor of the will of a deceased person, he shall either institute a proceeding to have the will admitted to probate in the court of the proper county or declare his refusal to act as executor. If he fails to do so, except for good cause shown, the court on its motion or on the petition of any interested person may deny him the right to act as executor and letters of office may be issued by the court as if the person so named were disqualified to act as executor.
(b) When 30 days have elapsed since the death of the testator and no petition has been filed to admit his will to probate, the court may proceed to probate the will without the filing of a petition therefor, unless it appears to the court that probate thereof is unnecessary and failure to probate it will not prejudice the rights of any interested person. Such notice of the hearing on the admission of the will to probate shall be given to the persons in interest as the court directs. 755 ILCS 5/6-3.

The law doesn’t say the executor may institute the probate proceeding if he or she feels like it. It says the executor shall institute the probate proceeding or resign. So, at least for testate estates, the named executor has a duty to file a probate case. If the executor fails to file, the court may do so. I’ve never seen the court file its own probate, but it can and probably has, and you can add that to the list of risks in the bond in lieu procedure.

The Cook County Recorder also appears to be preparing the records for blockchain. Deeds from heirs and not the record owner or an executor of the estate can muck of the works of a blockchain that requires the end of a prior block to match the beginning of the next block.

The Recorder has stated it will accept a deed signed by heirs together with an order declaring heirship under Section 5–3 of the Probate Act and has recommended using that as a summary proceeding if a full probate is not desired. See 755 ILCS 5/5–3.

The Case For Probate

Bond in lieu of probate allows self-declared heirs to sell the real property of a deceased person without court intervention. If the deceased left a will, this is arguably in contravention of the Illinois Probate Act which states the executor shall file a probate case.

Also, the heirs that come to the brokers and lawyers to make their sales are signing self-serving affidavits stating the facts that lead to a list of heirs who will sign the deed. The title company can attempts to check sources such as Ancestry.com for verification, but not everyone can be found on Ancestry.com, particularly the more recently deceased.

Further, the heir or heirs signing the affidavit of heirship may think they know the correct heirship, but don’t. It’s not impossible to predict that someone’s mom or dad had a child as a teenager or young woman or man, or even during the marriage and seeming happy family, and never revealed that fact to the family. If parental rights weren’t legally relinquished or the child hadn’t been adopted while the biological mother or father lived, the child could be an heir under Descent and Distribution. See 755 ILCS 5/2–4(d). If the deceased wasn’t married and had no children, the heirs could be siblings, nieces and nephews or even cousins. They may not know or know of each other. In my several years in real estate and title, I’ve seen a few of these situations go bad. Once, a closer called me worried that the heirs who were the sellers on the buy/sell agreement and disclosed on the affidavit of heirship were not the only heirs of the deceased owner of record. Another group of people showed up to the closing claiming to be heirs of the deceased. I will never forget the closer’s comment to me, “they all look alike.” It turned out that the additional, uninvited closing attendees were heirs of the deceased owner after all. When the initial group finally admitted the mistake or deception, I sent them all back to the Probate Court. Once they presented an inaccurate affidavit, the title company could not be comfortable insuring that all the heirs had signed the deed. The title company needed the process and limitations of the Probate Court and Probate Act to protect it. In another instance, I had accepted an affidavit of heirship for the title company only to discover after the closing that the deceased had a wife and child in another state. The heirs listed on the affidavit claimed they knew nothing about this family. Luckily, the entire family came to a settlement and everyone ultimately signed off on a family settlement agreement and the deed. On a separate note that can affect many bond in lieu situations, what if that child had been a minor? There would have been further complications requiring a guardianship.

Finally, remember that the heirs signing the affidavit of heirship are required to sign a personal undertaking to the title company, making them liable if the affidavit proves to be incorrect. They take on the liability of unknown heirs. They also take on any unknown debts of the deceased as the personal undertaking also covers claims against the estate for two years after the date of death. If you’re an heir and you do not know for sure that Aunt Alice didn’t rack up a huge Capitol One bill, you may not want to sign a personal undertaking making you responsible for it.

Apart from the risks of unknown heirs and unknown debts of the deceased, privacy issues could cause an attorney to recommend against the bond in lieu of probate procedure. Some counties and title companies require recording of the affidavit of heirship. That affidavit could contain a lot of information about children born out of wedlock and divorces that, even in these more open-minded times, parties may not be thrilled to put in the public record.

To Use Bond in Lieu or To Use Probate, That is the Question

When the deceased had an uncomplicated life and the heirs are absolutely certain the deceased has no unknown heirs or unknown debts, and are in a position to know to a high degree of certainty, the bond in lieu of probate procedure can be a quick, convenient way to pass title without a probate in Illinois counties that will record the deed signed by the heirs without an order declaring heirship from the Probate Court. The procedure has been around for decades and claims incidents, to my knowledge, are relatively low.

Clients who are removed from the decedent by relation or miles may not be in a position to know about all potential heirs or all potential debts of the deceased. Then, the bond in lieu of probate procedure adds an element of risk they may not want to take on, or possibly shouldn’t take on. In any event, the risks should be explained to the clients.

Sometimes it’s cheaper to probate. If the likely purchase price of the home means that the 1-2% risk premium is a more than the average cost of probate, and there’s plenty of time before closing, probate may be the better choice.

Sometimes, the title company will require a probate. The bond in lieu procedure is not available when the deceased died testate and the will gives the land to anyone other than the heirs in the same share they would have taken under descent and distribution. The title company cannot take property rights away from a lawful will devisee. A family settlement agreement and signatures of all parties, heirs and devisees, can resolve that problem and allow the bond in lieu procedure. Also, sometimes an heir is subject to a lien of his or her own in the county where the land is situated making it too expensive to allow the land to pass through the debtor heir’s hands. A sale from an executor or administrator for the decedent avoids liens against individual heirs because, while the land vests in the heirs of a deceased at the time of death by operation of law, a probate case and power of sale in a will or under the Probate Act can divest ownership of the land from the heirs.

Lastly, some lenders do not understand or care about bond in lieu of probate, and require an order naming an executor or administrator before they will issue a payoff letter for a deceased sole owner’s mortgage.

So, why do I fall on the side of probate? It’s cleaner, leaves no latent risks and everyone gets notice, by way of mail or publication. Everything is done according to statute and the recorded record remains cleaner, something very useful for new technologies including blockchain and AI title examination. Claims against the estate can be eliminated in as little as 6 months if notice procedures are followed. If, however, the heirs are certain they have a cut and dry case with no unusual risk of unknown heirs or claims of debts that have to be paid, and you’ve explained the risks to them, bond in lieu of probate can help you complete a closing with a short deadline. The procedure should never be used as a tool to avoid notifying potential heirs of the death or sale of land, or to sell land out from under them.

Lawyer, Teacher, Mediator. Worked on many political campaigns and learned nothing will help until we enforce our laws, particularly laws against corruption.

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