Estate Planning and Probate Law and Practice Section MCLE Meeting

DuPage Judicial Center - ARC

January 22, 2020

11:45 AM – 12:00 PM Welcome/Introductions

Bill Hardesty – Estate Planning and Probate Law Chair

A few words John Matejcak JD, from First American Bank Wealth

Management Group – Today’s Lunch Sponsor

12:00 PM – 1:00 PM Program – On the High Wire with Goldilocks: 2020 Economic and

Financial Markets Outlook

Kurt Funderburg, First American Bank Wealth Management Group

Speakers’ Bio - See attached

Presentation Summary

Review of the U.S. economy and financial markets of 2019 as well as

the outlook for 2020.

Next Meeting: February 26th – Representing Clients with Diminished Capacity

Janet Rae Montgomery, Nisen & Elliott, LLC

DCBA Events: January 24th – DCBA/DBF Memorial Program – ARC

February 5th – Lawyers Lending a Hand CPR Instruction – Bar Center

Classroom

February 21st – DCBA Unwind – Weber Grill, Lombard

February 28th – 45th Annual Judges’ Nite – COD McAninch Center

Earn CLE Online!

DCBA OnDemand CLE is Now Powered by IICLE The Illinois Institute for Continuing Legal

Education (IICLE®) and the DuPage County Bar Association (DCBA) are excited to offer a new

IICLE®Share collaboration to provide DCBA members a high quality and reliable online

learning experience. Members can find the link to The Illinois Institute for Continuing Legal

Education (IICLE) on the DCBA website under “Legal Community”→OnDemand CLE →Online

CLE Catalog. You must be logged into your DCBA Membership Profile in order to view courses

for free or at a reduced price.

View & Print All CLE Certificates through the DCBA Website:

Manage Profile -> Professional Development (under content & features) and choose the icon to

the left of each meeting to print your certificate directly or choose to have them emailed to you

to save to your computer (you MUST be logged in to view this feature)

Kurt Funderburg, Director of Equity & Economic Research - First American Bank Wealth

Management Group

Kurt Funderburg has more than 30 years of experience providing investment advice and

analysis to high net worth clients and institutional investors. Kurt is responsible for

providing analysis of the economy and equity markets utilized as an input in the formation

of asset allocation models and proprietary equity strategies for First American Bank's

Wealth Management Clients. He also manages the equity research department and

functions as an equity research analyst. Prior to joining First American Bank in 2016, Kurt

served as Senior Equity Analyst with Morningstar Equity Research; Senior Equity Analyst

with Harris Associates, LP, advisor to the $140 Billion Oakmark family of mutual funds;

Senior Vice President and Director of Equity Research with Ferris, Baker Watts, Inc.; and

Investment Officer and Portfolio Manager with Mercantile Safe Deposit & Trust Company.

Kurt has appeared on Bloomberg Television and has been quoted in business publications

including The Wall Street Journal, Barron's, Fortune, Forbes and Business Week. He holds a

bachelor's degree in finance from West Virginia University and an MBA in finance from

Pennsylvania State University.

Join us Tuesday for lunch in the ARC!

The DCBA Wellness Committee is actively seeking members to assist

and participate in future committee events, social gatherings, and

organized functions!

If you, or someone you know, are interested in focusing on the mind,

body, or spirit within the legal field, please join us! Lunch to be

provided!

I

Email: Ian@kgdivorce.com or Lisa@kgdivorce.com for more information

Tuesday, January 28, 2020, 12:00 pm – 1:00 pm Attorney Resource Center, 3rd Floor, DuPage Judicial Center

FLYING TOO CLOSE TO THE SUN

The DuPage County Bar Association presents The 45th Annual Judges’ Nite

Friday, February 28, 2020Cocktails and Heavy Appetizers at 5:30 pm Show at 7:00 pm

The Belushi Auditorium at the College of DuPage

A DuPage Legal Assistance Foundation Fundraiserdirected by NICK NELSON music by JUDGES’ NITE BAND stage manager PAM TROJAN

produced by CHRISTINA MORRISON artwork by ANNA PIRO DESIGN

To purchase tickets go to dcba.org or call 630-653-7779

Trackman v. Michela, 2019 IL App (2d) 190131 (op. filed Nov. 20, 2019).

In this opinion, the Second District affirmed a ruling that the plaintiff’s claim in the current

litigation (“Trackman II”) for tortious interference with an expectation of inheritance against the

defendant was barred by res judicata in light of a previously filed, and dismissed, claim by the

plaintiff challenging a trust amendment for lack of testator/settlor capacity raised in an earlier

action (“Trackman I”).* According to the court, plaintiff’s claim in Trackman II that the defendant

engaged in various tortious acts, which caused the testator/settlor to sign a trust amendment that

deprived the plaintiff of his inheritance, was “the same for res judicata purposes” as the plaintiff’s

earlier claim in Trackman I that the testator/settlor lacked the capacity to execute the trust

amendment. Under Illinois’ “transactional test” for determining whether two causes of action are

identical for res judicata purposes, the Trackman I cause of action alleging lack of capacity and

the Trackman II cause of action for tortious interference were “based on the same core of operative

facts, even though their theories and factual bases are not identical. Both are based on [the

testator/settlor’s] conduct in creating trust documents that excluded plaintiff from any inheritance.

Both allege the same harm. That they would have formed a convenient trial unit is self-evident [.

. .].”

* Trackman, 2015 IL App (2d) 140985-U.

Shakman v. Department of Revenue, 2019 IL App (1st) 182197 (op. filed Dec. 12, 2019).

In this opinion, the First District agreed with the Illinois Department of Revenue that the

transfer of the plaintiff’s aircraft from himself individually to himself as the trustee of his revocable

(grantor) trust, done as part of the plaintiff’s estate planning, was a “taxable event” under Illinois’

Aircraft Use Tax Law, which imposes a 6.25% tax “on the privilege of using . . . any aircraft . . .

acquired by transfer” (35 ILCS 157/10-15). In 2014, the plaintiff transferred ownership of his

aircraft to his revocable trust by completing an aircraft bill of sale using a preprinted form from

the FAA. The Department, which monitors FAA records, sent the plaintiff a notice of tax liability

under the Aircraft Use Tax Law when it noticed the change in legal ownership of the plaintiff’s

aircraft. The plaintiff, who had already paid a use tax when he initially purchased the aircraft in

2008, paid the 2014 use tax under protest and filed a declaratory judgment action against the

Department. In reviewing the language of the Aircraft Use Tax Law, the court noted “it is clear

that the legislative intent was to cover an expansive and nearly limitless array of aircraft

dispositions.” With respect to the plaintiff’s specific disposition, because the applicable definition

of “person” for purposes of the Aircraft Use Tax Law (which is expressly incorporated from the

Use Tax Act) includes both a “natural individual” and a “trustee,” the court concluded “that the

legislature intended to tax as a ‘transfer’ [the plaintiff’s] change of ownership of his aircraft from

himself individually to himself as trustee of his revocable trust.”

While recognizing that the plaintiff “is ultimately the same person as a natural individual

and trustee,” the court stressed that “the privileges of use are different by virtue of him being a

trustee.” Importantly, “under Illinois law, a natural individual is legally different than a trustee of

a trust and clearly different for purposes of the Aircraft Use Tax Law as exemplified by the

definition of ‘person’ incorporated into the statute. Because [the plaintiff] individually and [the

plaintiff] as trustee are legally distinct persons under Illinois common law and Aircraft Use Tax

Law, the privilege of using his aircraft that had been first acquired by himself individually was

acquired by transfer to himself as trustee of his trust.” As such, under the plain language of the

Aircraft Use Tax Law, he, as trustee of his trust, had also to pay a use tax.

Towards the end of the opinion, the court explained that even though it reached the

conclusion it reached, “we are not unsympathetic to [the plaintiff’s] cause. The Department

imposed against him a nearly $8000 tax (inclusive of a penalty and interest) for routine estate

planning. And certainly, if [the plaintiff] decided to remove the plane from his revocable trust, he

could very well incur a third tax on his airplane. But as previously discussed, we must interpret a

statute and apply it consistently with the manner it is written, and when a statute is unambiguous,

we have no power to depart from its plain language and read into it exceptions, limitations or

conditions which the legislature did not express. Only the legislature has the power to amend a

statute.” (Citations and quotations omitted.)

Additional cases of interest:

Litvak v. Black, as Trustee of the Supplemental Needs Trust for the Benefit of Joanne Black, as

Trustee of the Irrevocable Trust for the Benefit of the Issue of Renata Black, and as Trustee of

the Joanne Black 2013 Trust Agreement (Goodwin, as Court-Appointed Successor Conservator

for Joanne Black, Intervenor-Appellant), 2019 IL App (1st) 181707 (op. filed Nov. 22, 2019) –

In which the First District vacated an agreed judgment against a trust (called the “Issue Trust” in

the opinion) because the motion to vacate (filed by the intervenor-appellant on behalf of Joanne

Black, a non-beneficiary of the Issue Trust) adequately established that the agreed judgment was

the product of fraud and collusion and vacating it was appropriate in order to protect Joanne’s

interests given that the Issue Trust held funds a Colorado court had previously ruled were stolen

by the defendant, Bernard Black, from Joanne.

In re Estate of Crawford, 2019 IL App (1st) 182703 (op. filed Dec. 26, 2019) – In which the First

District affirmed summary judgment denying a claim against two estates on the basis that the

Dead-Man’s Act (735 ILCS 5/8-201) prevented the claimant from establishing that he made any

payments to the decedents (who were the claimant’s son and daughter-in-law) or that any payments

were loans and not gifts, in large part because the Dead-Man’s Act barred the claimant’s testimony

and his main piece of documentary evidence (a handwritten “contemporaneous log” maintained

by the claimant listing the date and amount of the purported loan payments to the decedents).

NOTE: NONE OF THESE OPINIONS HAVE BEEN RELEASED FOR PUBLICATION IN THE

PERMANENT LAW REPORTS. UNTIL RELEASED, THEY ARE EACH SUBJECT TO

REVISION OR WITHDRAWAL.

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On the High Wire With Goldilocks2019 & 2020 Economic & Markets Review and Outlook

Agenda• Overview – Look back at 4Q18 & 2019

• Outlook for 2020 – What We’re Watching

• Long Term Economic Drivers & Challenges

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Disclaimer

This material has been prepared for informational purposes only and is not intended to provide investment, tax or legal advice. You should consult with your own investment, tax and legal advisers before engaging in any securities transaction.

www.firstambank.com

Chicago I Coral Gables I Kenosha I Tampa

Not FDIC Insured-Not Bank Guaranteed-May Lose Value

On the High Wire With Goldilocks

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Goldilocks Economy: One that is neither too hot nor too cold but just right. Characterized by full employment and stable growth without material inflationary pressure. This economy tends to drive asset prices higher.

Thoughts from the high wire: “To survive on the high wire one must stay straight and stubborn in his madness.” Philippe Petit – noted high wire walker.

Review of 4Q18, 2019 & How We Arrived Here

4Q18 – Dread, Despair and Panic

The Powell Pivot/The Wu-Xia Moment

Financial Markets Rejoice

Trump Tariff Tango

Global Economic Weakness Spreads

Interest Rates Go Negative

Reasons For Hope

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4Q18 – Dread, Despair and Panic

Growth scare abetted by market liquidity challenges

Fed executes its fourth target rate hike of the year and signals that more are on the way – “rates still below neutral level”

Fed balance sheet reduction continues apace

Bond market dislocation makes equity sell-off worse

Worst December for stocks since the Great Depression

Returns for virtually all major asset classes negative in 2018

The Powell Pivot & The Wu-Xia Moment

The financial markets make clear to Powell that higher rates will break asset markets and could bring a recession

Powell pivots from rate hikes to a strategic pause

Trump’s bluster for lower rates is mostly noise

Fed makes clear it will act as needed to sustain the economic expansion (and financial markets)

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Financial Markets Rejoice

Return of the Powell Put kindles continued rally in risk assets

Lower rates and liquidity will cure all ills

Falling rates bring rally in bond prices

Equities keep pricing in stronger earnings growth even as EPS for 2019 continue to slide

Trump Tariff Tango

Trump sets out to deliver another campaign promise –addressing U.S. foreign trade imbalances

He chooses the most blunt and confrontational tool in his trade arsenal, tariffs, as his weapon of choice

Trump’s methods may be brutal for nearly all involved but he tackles a problem – the economic and security relationship with China – that previous presidents punted

Stock market seems to drive the heat of Trumps rhetoric

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Global Economic Weakness Spreads

Already weakening global economy declines further

Reverse of globalization leads to drop in global trade

Europe – more exposed to international trade than the U.S. bears the brunt

China’s economic transition complicated by challenges to export growth

U.S. slows but remains relatively resilient

Interest Rates Go Negative Slowing global growth and desperate central pumping

liquidity drives more interest rates into negative territory

Negative-yielding bonds peak at $17 trillion – about 25% of global bonds outstanding – mainly in Japan and Western Europe

Negative rates drive up risk asset prices in search for returns

Rise and fall of the unicorns

Long-term impacts could be dire and benefits unclear

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Reasons for Hope

Global growth appears to bottom early in 4Q19

Trump, focused on re-election, engineers trade truces with Europe, Japan, Canada, Mexico and China

Not clear that the pain justified the gain but at least the threat to growth from trade tensions has faded for now

Stay tuned for what’s next on trade if Trump is re-elected

Outlook for 2020 – What We’re Watching

U.S. Economic growth in 2020 likely to stay near trend –between 1.75% and 2.25%

Equities maintain an upward bias but a lot of good news is priced in already and markets could be vulnerable to earnings disppointments

Bonds very unlikely to match 2019’s performance

Politics, both domestic and international, will replace trade as main points of concern for financial markets

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Outlook for 2020 – Potential Surprises Populism continues to rise globally

China’s economic rebound underwhelms and internal political problems worsen

Inflation rises above market expectations but not enough to spur Fed rate hikes – an additional Fed rate cut more probable

Earnings growth disappoints

Asset bubble become more apparent

Outlook for 2020 – How to Prepare

Know your risk tolerance and let it drive your allocation

Consider one, three and five-year liquidity needs and adjust accordingly

Lean toward quality and away from speculation

Keep dancing as long as the music is playing, but make sure to dance near the door

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Long-Term Economic Drivers & Challenges

Economic Growth = Labor Force Growth + Productivity Growth

Labor force growth is slow or negative in many economies

Productivity growth is feeble throughout most developed economies

Political conflict is worsening – problem solving suffers

Debt has exploded over the past decade

Q & A

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