The Illinois Appellate Court has ruled in a dispute regarding who should inherit a home in Highland Park, Ill. Although a trust instrument stated the house was part of the trust, there was no separate, formal documentation showing that a transfer of the house had been placed in the trust. The court In re Estate of Mendelson considered whether the house was properly transferred into the trust. The court noted that it could “find no Illinois authority on point.”
The Illinois Appellate Court held that the house was a part of the trust because it was described in it although there was no recorded deed transferring the real estate to the trust.
In the Mendelson case, the chain of title to the house was complex. In 2005, Diane Mendelson executed the deed that placed title to the house in joint tenancy with herself and her son. The deed was never recorded because she enjoyed a property tax benefit as the sole title owner of the property.
In 2006, Diane Mendelson executed a living trust that placed title to the Highland Park home in the trust. It provided that the property would then be divided equally among her four sons upon her death. In March 2011, the mortgage on the property was refinanced with Mendelson listed as the only owner.
Then in July 2011, she executed a new trust. The 2011 trust revoked the 2006 trust naming Mendelson as trustee and her son Michael as the successor trustee. She did not draft a separate trust conveying the Highland Park home into the trust. However, the trust “identified the [home] as part of the trust estate and specifically stated that she intended that her home become Michael’s sole and exclusive property upon her death.” She died Oct. 1, 2011.
Her estate claimed that the house was never properly transferred to the 2011 trust and thus all four brothers inherited an equal interest. The circuit court disagreed.
On the appeal, the appellate court held that “a settlor who declares a trust naming herself as trustee is not required to separately and formally transfer the designated property into the trust.”
In an article written in the Illinois Bar Journal, November 2015, attorney Sherwin Abrams was referenced as having compared the Mendelson case to the case of Ross v. Ross, 406 Ill. 598 (1950).
Abrams pointed to the Ross case wherein John Ross received a deed on a piece of property in 1941. The deed was never recorded. In 1943, Ross executed a trust instrument. The instrument stated that the trustee had title to the same piece of property, which was to be held in accordance with the terms of the trust. On John’s death, the trustee, John’s wife, was to convey the property to the trust’s beneficiary, his sister. The wife argued that the property wasn’t properly deeded to the trust and thus should go to her. The court held that the trust instrument did not contain the “usual words of grant” but did contain “many words indicating that the parties agreed and intended that the legal title was in the [trustee] Alice J. Ross.”
The Illinois Supreme Court held that the property was properly conveyed into the trust, even without a formal deed. Abrams noted that the language of the Ross Supreme Court decision supported the court’s decision in Mendelson.
In the end, although some lawyers have questioned the Mendelson decision, it seems that good practice would demand that a deed be transferred and recorded to the name of the trust.
Kreisman Law Offices has been handling commercial litigation, real estate litigation and general corporate and business litigation for individuals, families and businesses for more than 38 years, in and around Chicago, Cook County and its surrounding areas including Aurora, Bannockburn, Crystal Lake, Deerfield, Elmhurst, Franklin Park, Gurnee, Hanover Park, Inverness, Lemont, Naperville and Winnetka, Ill.
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