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What is a Bond in Lieu of Probate?
In the State of Illinois, under the Probate Laws, when
a person dies, the Deceased’s Estate is subject to
claims from Creditors for a period of up to two years
from the date of death.
If the Deceased’s family and heirs wish, they can go
to Court and open what is known as a Probate case,
where official public notices are placed which in
effect “announces” the Decedent’s demise and
serves as notice to all his creditors to file any claims
that they may have against his/her Estate. After
these notices are placed, and the Judge reviews any
claims and assets of the Decedent’s Estate, the
Judge will decide who gets what, closes the Estate
and everything is done.
Some people however, whether it is by choice, a
perceived lack of tangible assets, or for whatever
reason do not open a Probate case. It is in these
instances where the 2 year claim period must be
allowed to take its course, since there wasn’t a
Judicial Order entered closing the claim period as
there would be in a Probate case situation. Since the
property involved in your transaction formally
belonged to the Deceased, the Title Company is
taking an additional risk regarding any creditor claims
that may arise, if any, which the Company would
have to pay. The Title Company will insist on a Bond
in Lieu of Probate, which essentially is an Additional
Risk Premium to cover any potential claim that may
arise. The amount will very depending on how long
the claim period has remaining, but generally will start
at 2 - 2 ½ percent of the sales price, on a purchase
or of the loan amount on a refinance; all for a recent
death. The Bond in Lieu of Probate is not refundable,
nor will it be returned at the end of the claim period.
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For the life of me, I cannot understand how Mr.
Madigan and the people in Springfield think that 4050
is going to work, not to mention actually help people.
They have written the Act to a point where the very
people they are supposed to be helping are going to
be the ones hurt. They will become prisoners in their
own homes, as they are not going to be able to sell
or refinance, since as it is now, it appears that the
areas targeted are not going to be able to be insured
by the Title Companies.
The Act requires us to be responsible for the
Borrower’s and Broker’s compliance with it. Why
is that our job? Last I checked, our job was to insure
the marketability of Title and the lien position of
Lenders, not to be the 4050 police. Something to
keep in mind, if this situation gets past the point of
no return, where we were expecting to be January
1st, prior to the December 21st stay, the Title
Companies are not the bad guys, the
Act itself is.
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Sincerely,
Michael Collins
Absolute Title Services, Inc
email:
mcollins@absolutetitle.com
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