How to Distinguish Estate Assets from Corporate Assets in Illinois

Detailed Answer

When someone dies, you must separate assets they owned individually (estate assets) from assets owned by any corporation a relative formed. Estate assets pass under the Probate Act of 1975 (755 ILCS 5). Corporate assets remain under the Illinois Business Corporation Act (805 ILCS 5). Mixing them can create legal and tax problems. Follow these steps:

1. Identify Ownership Records

• Estate Assets: Look for titles or deeds in the decedent’s name alone or jointly with right of survivorship. Check bank statements, real estate deeds, and vehicle titles. Under 755 ILCS 5/2-6, property titled only in the decedent’s name generally enters probate.
• Corporate Assets: Review the corporate charter, articles of incorporation, and bylaws filed with the Illinois Secretary of State. Assets titled in the corporation’s name—even if held by a family member—belong to the corporation. See 805 ILCS 5/1.10.

2. Examine Account Signatures and Registrations

• Bank and Investment Accounts: Accounts registered in the decedent’s name (with or without POD/ITF designations) are estate assets. Payable-on-death (POD) or in-trust-for (ITF) accounts bypass probate but remain individual assets.
• Corporate Accounts: Business bank accounts and brokerage accounts will list the corporation’s name, Employer Identification Number (EIN), and authorized signatories.

3. Review Corporate Minutes and Resolutions

Corporate minutes record asset purchases by the corporation. If a relative used corporate funds to buy property, that property stays with the corporation. Check resolutions authorizing major purchases or transfers. Minutes should reference each asset directly.

4. Check Tax Returns and Filings

• Estate Tax Filings: Estate assets may require an Illinois estate tax return under 755 ILCS 15. Estate returns list all assets owned at death.
• Corporate Tax Returns: Corporate assets appear on annual Form IL-1120 business tax returns under the corporation’s EIN.

5. Consult a Qualified Attorney or Accountant

These professionals can trace assets, review filings, and ensure correct estate or corporate treatment. They help prevent claims of impropriety or creditor disputes.

Helpful Hints

• Gather All Documentation: Deeds, bank statements, account agreements, corporate charter, bylaws, minutes, and tax returns.
• Use a Checklist: Create a spreadsheet to track asset titleholder, account numbers, and relevant statutes.
• Verify Corporate Formalities: Ensure meeting minutes and corporate resolutions exist when assets transfer in or out of the corporation. Lack of formalities can blur lines.
• Look for Commingling: Avoid mixing personal and corporate funds. Commingling risks piercing the corporate veil and estate claims.
• Keep Records Updated: Title changes or new corporate filings should occur promptly after significant transactions.

By following these steps under Illinois law, you can clearly separate a decedent’s estate assets from those held by a relative’s corporation, reducing disputes and ensuring proper administration.