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Estate of Henry v. St. Peter's Evangelical Church

February 26, 2003

ESTATE OF WILLIAM LEHMAN HENRY, JR., DECEASED, PLAINTIFF-APPELLEE,
v.
ST. PETER'S EVANGELICAL CHURCH, DEFENDANT-APPELLANT



Appeal from the Circuit Court of the 14th Judicial Circuit Henry County, Illinois No. 96-P-150 Honorable Ted J. Hamer Judge, Presiding

The opinion of the court was delivered by: Justice Lytton

UNPUBLISHED

William Henry willed his 119 acre farm to St. Peter's Evangelical Church (St. Peter's), subject to a life estate. Henry died, and the administrator of his estate, Farmer's National Bank of Prophetstown, filed a petition to sell St. Peter's remainder interest in the property.

The trial court found that the sale was necessary for the administration of the estate. The court ordered the sale at public auction, using a valuation method set out in section 15(b) of the Principal and Income Act to determine its value. 760 ILCS 15/15(b) (West 1992) (Act). We affirm.

In his will, William Henry devised a 119 acre farm to St. Peter's, subject to a life estate granted to his wife and daughter. His wife renounced the will, thereby taking an undivided one-third interest in the farm. This left their daughter, Susan Anderson, with a life estate in a two-thirds interest of the farm and St. Peters with a two-thirds remainder interest in the farm. Henry's wife subsequently passed away, leaving her undivided one-third interest to Anderson.

Anderson offered to buy St. Peter's remainder interest in the farm and the administrator agreed to the sale. In the "Petition to Sell Real Estate," the administrator claimed that the sale was necessary to pay administration expenses and properly settle and close the estate. The petition alleged that the estate had only $18,000 in cash, all of which was derived from income. At trial, the bank's trust officer testified that this was substantially less than the amount of income owed to the income beneficiary, Anderson. He stated that this deficiency was a result of the previous administrator's use of income to pay administration expenses that should have been charged to the principal of the estate.

The trial court found that sale of the remainder interest would appropriately restitute the income portion of the estate. The court ordered that the remainder interest should be sold at public auction in order to obtain the maximum possible price for the sale. The court used Anderson's original offer as the minimum opening bid. The court held that the offer was a proper minimum sale price because it was determined using a formula found in section 15(b) of the Act.

I.

St. Peter's argues that the court abused its discretion by allowing the sale of the remainder interest in the property, particularly since the real estate was a specific bequest.

Section 20-4(b) of the Probate Act of 1975 (Probate Act) states that real estate that is specifically bequeathed may not be sold "unless necessary for the payment of claims, expenses of administration or estate or inheritance taxes or the proper distribution of the estate." 755 ILCS 5/20-4(b) (West 1992). Section 5/24-3(d) of the Probate Act states, "On final distribution of an estate, payments made from principal or income shall be accounted for as provided in Sections 5 and 6 of the Principal and Income Act." 755 ILCS 5/24-3(d) (West 1992). Section 6(a) of the Act provides that expenses of administration of the estate must be charged against the principal of the estate. 760 ILCS 15/6(a) (West 1992). Taken together, these sections require that an administrator account for all probate income at the time of distribution and that the income beneficiaries of the estate are entitled to all probate income not reduced by expenses of administering the decedent's estate, estate taxes and fees of attorneys and personal representatives. In re Estate of Enright, 106 Ill. App. 3d 914, 917 (1982).

Here, the administrator accounted for all receipts and disbursements from principal and income. He determined that expenses that should have been charged against the principal of the estate were improperly paid from the income, resulting in a substantial shortfall in income.

The estate can only be properly administered under the Act if the administrator uses the principal of the estate to restitute the improperly expended probate income. Restoring probate income from the principal ensures that the income beneficiary will receive all of the probate income, not reduced by expenses of administration. See Enright, 106 Ill. App. 3d at 917. The only principal remaining in the estate is the farmland in which St. Peter's has its remainder interest. Therefore, the sale of that farmland is necessary for the proper distribution of the estate and the court was within its discretion to order the sale of St. Peter's specifically bequeathed interest in the property. See 755 ILCS 5/20-4(b).

II.

St. Peter's also contends that, even if the sale of the property was proper, the court erred in its valuation of St. Peter's remainder interest. St. Peter's claims that the valuation method the court employed, found in section 15(b) of the Act, is implicitly meant to apply only when the cost of improvements to land are apportioned between a legal tenant ...


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