Blog

Carl Hansberry was a real “renaissance man.” He had been a deputy U.S. Marshall. He was an inventor with several patents. But he ultimately excelled at being a business entrepreneur – as a banker and as a real estate broker. He founded and was President of Lake Street Bank in Chicago and was one of the most successful real estate agents of his time. His general level of prosperity seemed to demand that he relocate his family consisting of a wife and four young children to a more prominent neighborhood in the City. But Carl Hansberry had limited options. The year was 1937, and he was African American. In addition, he lived in the public eye. Besides being the founder of one of Chicago’s first black-owned financial institutions and an objectively wealthy man, Carl Hansberry was an activist. He designed the businesses he built for the betterment of the black community. He helped organize and fund philanthropic organizations that advanced African American interests. He took political risks as well, at a time when speaking out was dangerous; he created the “Hansberry Foundation,” and wrote, published, and distributed pamphlets advocating for black civil rights. The Chicago Defender, a newspaper that catered to African American and urban issues, had dubbed Hansberry a “race man,” a title reserved for blacks who selflessly and tirelessly worked to contribute to the betterment of the community, and bravely stood against the ideas, people, and institutions in society that threatened and sought to limit the well-being and prosperity of his people. The prominent neighborhood where Hansberry chose to purchase a home in 1937 was Chicago’s Woodlawn neighborhood. Today, Woodlawn has mostly African American residents. But back then, it was a white neighborhood on Chicago’s south side. Despite a huge influx of black residents into Chicago at the time, African Americans were shut out of neighborhoods like Woodlawn because of racially restrictive covenants. A “restrictive covenant” is an agreement in a deed to real estate or in a plat of development that limits the future use of the property by any subsequent owner. An example might be “no fence may be constructed exceeding six feet in height,” or “no structure may be erected less than 5 feet from the lot lines,” or “basketball and tennis courts are prohibited.” Any new owner who violates these covenants can be fined, penalized, or legally enjoined and forced to comply. In 1928, a group of white businessmen organized a homeowner’s association in Woodlawn, establishing restrictive covenants to cover the entire neighborhood. Every owner of the 500 homes that joined the Woodlawn Property Owners Association purportedly agreed to a restrictive covenant that “no part of the land should be sold, leased to, or permitted to be occupied by any person of the colored race.” This was enforceable in court just like any other contractual commitment. If an African American sought to move into one of the homes in Woodlawn in violation of the covenant, the other homeowners could file a lawsuit to seek to prevent the sale or enjoin the new occupants from taking possession. These kinds of covenants effectively boxed African Americans into certain areas of Chicago. As more white neighborhoods adopted racially restrictive covenants, segregation was all the starker, and blacks were forced into ever shrinking spaces in poorer neighborhoods. The black population had tripled since 1900, yet by 1934, only 3% of blacks lived where 95% of the whites did. By 1937, there were 50,000 more black people than available housing units, resulting in African Americans paying up to 50% more than whites for comparable housing. At the same time, the Depression had reduced the demand for white housing. The white population in Woodlawn had decreased by 14% from 1930 to 1934. The economic atmosphere of the 1930s made it so many white families couldn’t afford houses in Woodlawn. Because of this dip in the white market share, many homes in Woodlawn that were for sale or rent sat vacant. In a strange twist of fate, the only market for these vacant homes were wealthy African Americans– people like Carl Hansberry. White property owners ended up covertly leasing their properties to blacks for exorbitant rents, risking the penalties for violating the covenants rather than suffer financial loss. It was into this environment that Carl Hansberry stepped, but he did not blaze the trail alone. Like so many other ground-breaking cases that eventually make it to the United State Supreme Court, there is a sense that everything here was “set up” to achieve the desired outcome. The authors of this set-up consisted of two African American attorneys and one of the white Woodlawn property owners. Both attorneys had been involved in promoting life insurance in the black community, substantially expanding economic opportunities for African Americans. Now they were trying to open the door for blacks to own their own homes. The first, Earl Dickerson, was also instrumental in helping African Americans qualify for the mortgage loans they needed to purchase real estate. In 1937, Carl Hansberry sought out a loan from Dickerson to buy a home in Woodlawn. Dickerson knew that if Hansberry tried to purchase this house, the Association would attempt to thwart the transaction. Dickerson was able to convince the lender (a black owned business that Dickerson had helped start) that any risk was consistent with its social goals, and that the chance of an ultimate victory in court were good. The second attorney, Harry Pace, was specifically on the lookout for an opportunity to test the validity of the Woodlawn racial covenants in court. He just needed a connection. But Pace’s connection was not with an African American buyer, but with a white seller. Pace found James Burke, a white Chicago policeman, and the owner of a 3-flat located at 6140 South Rhodes Avenue in Woodlawn. Burke had been one of the men who had helped found the Woodlawn Property Owners Association and may have had a hand in drafting the racially restrictive covenant. He had served on the Association’s board of directors, and his wife had been one of the plaintiffs in a lawsuit that had successfully enforced the covenants. In that 1934 case, Burke v. Klieman, which was brought as a class action by the Association, the Illinois Appellate Court had determined that an owner could not lease his property to an African American, and that the covenants were valid not just for current owners, but for the future. But, by 1937, Burke had experienced a falling out with the Association. The history of it is not clear – Burke and his wife had since divorced, and perhaps he bore her ill will, or maybe it was an issue with the entire association — but Pace and Burke became unlikely allies. When Burke had resigned his position with the Association, he had declared that he wanted to “put negroes in every block” of Woodlawn. Whether Burke was a noble man or not, Dickerson, Pace and Hansberry had their opening. Pace guided Burke to sell the property to Hansberry through a third party. Even before Hansberry and his family could move in, the Association filed suit to enforce the covenant. The complaint alleged that through fraudulent concealment, Burke, Price, and the lender (represented by Dickerson) had tried to hide the fact that Hansberry was black. The great irony was that Burke was now a defendant in Hansberry’s case, which sought to overturn the ruling in the prior lawsuit brought by his wife. At trial, the Woodlawn Association alleged that the restrictive covenant was valid and enforceable because 95 percent (or 475) of the 500 members of the Association had signed it. Hansberry v. Lee. 311 U.S. 32, 38 (1940). This was supported by the decree in the Burke decision from four years before, where the court had accepted a stipulation by the parties regarding the 95 percent acceptance rate. Hansberry responded that he had not been a party to the Burke case, so he was not bound by it, and to use it to deny his right to litigate the issue violated due process. Id. After hearing all the evidence, the trial court found that only 54 percent of the owners had signed the covenant, making the stipulation relied on in the Burke case fraudulent. Id. Yet, the trial court ruled that the validity of the covenant was res judicata (the principle that once a matter has been decided by a court it cannot be relitigated by the same parties), and therefore could not be challenged, regardless of any other evidence. The court ruled in favor of the Association. Id. On appeal, the Illinois Supreme Court adopted the trial court’s reasoning, finding that the 1934 Burke v. Klieman case was a “class or representative case,” and that “other members of the class are bound by the results in the case.” Lee v. Hansberry, 372 Ill. 369, 373 (1939). Agreeing that the Burke case’s ruling was res judicata, the question of the covenant’s validity had already been litigated and decided, and the trial court’s ruling was affirmed. Hansberry, 311 U.S. at 39-40. Hansberry’s legal team, now bolstered by an all-star lineup of attorneys from the NAACP, appealed to the U.S. Supreme Court. The centerpiece of Hansberry’s argument was that the res judicata issue should not apply to him because he was not a party to the Burke suit and was thus not bound by its ruling. In addition, the revelation at trial that the racially restrictive covenant had not been properly adopted meant that upholding its validity based on a fraudulent stipulation denied Hansberry’s due process rights under the 14th Amendment. Id. at 38. The U.S. Supreme Court, however, sidestepped the Constitution completely. Instead, the court hyper-focused on technicalities related to class actions, overlooking the obvious racism and the blatant unfairness of the entire process. The Court determined that the class action plaintiffs did not “adequately represent” absent members of the class. Id. at 40-43. In Hansberry’s case, the U.S. Supreme Court determined that the Burke judgment did NOT adequately represent his interests. The court explained that the restrictive covenant did not create a joint obligation, and that an inherent conflict existed between homeowners who sought to enforce the covenant and those who sought to challenge its validity. The interests of all the owners could not possibly be the same. Also, the defendants in the Burke case were not treated as if THEY were representing a class, and that the judgment, though binding on them, could not effectively bind the rights of anyone in the future. Id. at 44-46. Because of this, the Court reversed the judgment of the lower courts. Hansberry was the winner after all! In its conclusion, the court made a veiled reference at what might have been the reason for its decision. In explaining how the defendants’ interests in the Burke case did not necessarily line up with the defendants in Hansberry’s case, the Court noted that the Burke defendants were “nominal defendants,” and that “it does not appear that their interest in defeating the [covenant] outweighed their interest in establishing its validity.” Id. at 46. While not saying so directly, the Court seemed to imply that the Burke defendants, who were ostensibly all white homeowners, really didn’t have a vested interest in whether they won or lost the case. The defendants in the current case, however, included African Americans, whose interests in invalidating the covenant were clear. But there was also a white defendant in Hansberry’s case who had a unique position. James Burke would have been considered one of the class action plaintiffs in Burke. Indeed, his wife was the named plaintiff of the class. There would have been no doubt at the time Burke was litigated in 1934 that James Burke was one of many plaintiffs seeking to enforce the racially restrictive covenant. The evidence showed he had signed the covenant, leading to the implied conclusion he intended to be bound by it. But here he was, six years later, a defendant in a similar legal action seeking to invalidate the same covenant. Was Justice Harlan Stone, the opinion’s author, specifically thinking of James Burke when he defined the defendants as “nominal?” Regardless, the judgment against Carl Hansberry had been reversed, and his purchase of James Burke’s property went forward. The U.S. Supreme Court’s ruling was trumpeted in the black community as a tremendous victory. The Chicago Defender proclaimed to its largely black readership that “The iron band of restrictive covenants which has checked the eastward movement of the Race on Chicago’s South side was pierced at one point by a decision handed down by the United States Supreme Court.” In the same edition, an interview with Hansberry indicated he had purchased the property for the “purpose of trying to have the theory of restrictive covenants once and for all abolished, or declared as against the public policy of the state and nation.” But the ultimate legality of racially restrictive covenants had not been directly addressed, and Hansberry’s new neighbors were not pleased with the result. After his family moved in, they were subject to mob violence. A brick thrown through a window nearly killed his youngest daughter. His wife always carried a pistol with her and kept close watch over the children. Those children were subjected to open humiliation, and were spat upon, cursed at, and beaten as they walked to and from school every day. These daily struggles and the anxiety they caused took a terrible toll on Carl Hansberry. His health appeared to be in decline. He tried to continue his activism, and ran for Congress later that year, but lost. Depression began to set in. He became extremely disillusioned. He began to feel that the great victory he had won in court had all been in vain. Chicago’s neighborhoods were still as segregated as ever. He decided to relocate his family to Mexico, to escape the country whose noble ideals he now felt had betrayed him. While visiting Mexico, he suffered a cerebral hemorrhage, and died there on March 17, 1946. Sadly, had Carl Hansberry lived another two years, he would have seen the fruit of the seeds he had planted when he bought the 3-flat in Woodlawn. On May 3, 1948, the U.S. Supreme Court issued its decision in Shelly v. Kramer, 334 U.S. 1 (1948), which held racially restrictive housing covenants cannot be legally enforced and were unconstitutional because of the 14th Amendment’s Equal Protection Clause. Justice Harlan Stone had also died in 1946, and none of the same attorneys were involved. Chief Justice Fred Vinson wrote the opinion, which was a unanimous 6-0 decision. But doesn’t the U.S. Supreme Court have nine members? Yes, but three of the justices had to recuse themselves because they owned homes which had racially restrictive covenants. There was one other product that grew out of Carl Hansberry’s home purchase and social experiment. His youngest daughter – the one who had dodged the brick – grew up to be a playwright. In 1959, Lorraine Hansberry’s play, A Raisin in the Sun, premiered on Broadway. The play told a fictionalized version of her family’s story, about a black family who decides to purchase a home in an all-white neighborhood in Chicago. It was the first time an African American female author had a play performed on Broadway. The title of the play comes from a Langston Hughes poem, “Montage of a Dream Deferred,” “What happens to a dream deferred? Does it dry up like a raisin in the sun? Or does it explode?” Had Carl Hansberry lived to see his daughter’s work, he would have seen his “renaissance man” concept come full circle. His daughter portrayed his activism and idealism in the face of the racial injustice and oppression he fought so hard against in the character of “Mama,” the matriarch of the family in the play. Mama is determined to get her family out of a ghetto tenement. She rejects the community group’s cash offer to stop her family from moving into its all-white neighborhood, saying to her son, eager to take the money: “I come from five generations of people who was slaves and sharecroppers — but ain’t nobody in my family never let nobody pay ‘em no money that was a way of telling us we wasn’t fit to walk the earth. We ain’t never been that — dead inside.” Carl Hansberry never felt it himself, but he was vindicated. Vindicated in his court victory. Vindicated after death by the Shelly case. Vindicated by his daughter’s portrayal of his ideals on stage, and her life dedicated to civil rights activism. Carl Hansberry’s story is Chicago-centric, but with universal appeal. It’s a shame that when the concept of the 14th Amendment and equal protection is presented in American law schools, the name “Shelly” is remembered, and not “Hansberry.” SOURCES: Shelly v. Kramer, 334 U.S. 1 (1948). Hansberry v. Lee. 311 U.S. 32, 38 (1940). Lee v. Hansberry, 372 Ill. 369, 373 (1939). Burke v. Kleiman, 277 Ill. App. 519 (1934). Anna Price, Hansberry v. Lee: The Supreme Court Case that Influenced the Play “A Raisin in the Sun,” IN CUSTODIA LEGIS, Library of Congress, January 24, 2023, https://blogs.loc.gov/law/2023/01/hansberry-v-lee-the-supreme-court-case-that-influenced-the-play-a-raisin-in-the-sun/ Radiolab: The Vanishing of Harry Pace: Episode 2, WNYC STUDIOS (June 18, 2021), https://radiolab.org/episodes/vanishing-harry-pace-episode-2 Ron Grossman, Flashback: A Chicago Family Defied a Racist Real Estate Covenant. The Backlash and Legal Fight Inspired ‘A Raisin in the Sun,’ Chicago Tribune, July 10, 2020, https://www.chicagotribune.com/history/ct-opinion-flashback-hansberry-house-restrictive-convenant-20200710-dslzaju35ngmpghgwazpcodosq-story.html Becky Beaupre Gillespie, A Dream Deferred, Advanced, and Remembered, The University of Chicago Law School, April 29, 2020, https://www.law.uchicago.edu/news/dream-deferred-advanced-and-remembered Alan R. Kamp*, The History Behind Hansberry v. Lee, 20 U.C. Davis L. Rev., 481 (1987). (*Allen Kamp was a Professor at John Marshall Law School when the author was a student there).

Carter G. Woodson (a Virginia native and the son of former slaves who relocated to Illinois) graduated from the University of Chicago in 1908 with a Master’s degree in History and completed his PhD in History at Harvard University in 1912. In 1915, he traveled to Washington, D.C., to celebrate and serve as an exhibitor for the 50th anniversary of emancipation. Illinois helped sponsor the national celebration showcasing Black history and accomplishments. Inspired, Woodson returned to Chicago resolved to promote the study of Black life and history. Later that year, Woodson was among the founders of the Association for the Study of Negro Life and History – now known as the Association for the Study of African American Life and History (https://asalh.org/about-us/origins-of-black-history-month/) and The Journal of Negro History was published in 1916. A member of Omega Psi Phi Fraternity Incorporated, Woodson leveraged his fraternity brothers’ networks, but Woodson and the ASALH wanted greater exposure and impact. The organization established Negro History Week in February 1926. The choice of February was savvy, because the birthdays of Abraham Lincoln and Frederick Douglass had been traditionally celebrated in the Black community. Rather than try to create a new tradition, Woodson sought to promote the study of Black history by encompassing Negro History Week in already established celebrations. Woodson also had a larger goal in mind; he would transform a celebration of singularly great figures into the celebration of the wider contributions and accomplishments of the Black community. Although the celebration of Black History in the United States was officially expanded to a month-long concept in 1976, during the nation’s bicentennial, the path to expanding Black History Month is multifaceted and goes as far back as the 1940s. Black civic leaders in West Virginia, cultural activists in Chicago and young Blacks on college campuses were instrumental in the eventual expansion. Before his death in 1950, Woodson believed that Black history celebrations would eventually come to an end, envisioning an environment where Black accomplishments, history and studies would be an established facet of annual learning. (This material, slightly edited, is taken from the website of the Illinois Realtor’s Association. (https://www.illinoisrealtors.org/). Illinois REALTORS® advocate for private property rights at the state Capitol in Springfield and in communities statewide. They stand for excellence in advocacy, education, and ethics for real estate practitioners. As an attorney who regularly represents people who buy and sell real estate, I believe and recommend that well trained, savvy, and professional realtors are part of the transaction to assist my clients).

For a half century, federal law has prohibited employers from discriminating against their workers based on religion. Title VII of the Civil Rights Act made it clear that employers must “reasonably accommodate. . . an employee’s or prospective employee’s religious observance or practice” unless the employer is “unable” to do so “without undue hardship on the conduct of the employer’s business.” 42 U.S.C §2000e(j). The question for an employer has been “Where is the line drawn?” If an employee’s religious practices require the employer to change its policies or make some special exception, at what point does it become an “undue burden?” In 1977, the U.S. Supreme Court decided Trans World Airlines v. Hardison, 432 U.S. 63 (1977). The case involved a Seventh-Day Adventist employee, whose religious beliefs required that he not work on their Sabbath Day – which was Saturday. The employee asked to have every Saturday off. Because the employer operated seven days a week, and scheduled its workers according to seniority, more recent hires like this employee were assigned to work on Saturday. Attempts were made to accommodate the employee, but if the employee didn’t work his assigned Saturday shift, the employer was forced to fill the shift with a supervisor, shift another employee over (which left that department undermanned), or pay premium wages for overtime. The employee was fired for refusing to work his assigned shift and brought an action against the employer via Title VII for failing to make a “reasonable accommodation.” Id. at 67-69. While the Court ruled in the employer’s favor, it was not the decision itself that made the most impact, but what the court said about “undue hardship.” “To require [the employer] to bear more than a de minimus cost” to provide the accommodation “is an undue hardship.” Id. at 84. Courts that have interpreted Title VII since then have understood that an employer has no duty to accommodate an employee’s sincerely held religious beliefs if the employer could demonstrate that the proposed accommodation would result in more than a minimal cost or expense for the business. Even when the Equal Employment Opportunity Commission investigated claims of religious discrimination, it adopted this position. However, in an opinion released June 29, 2023, the U.S. Supreme Court announced that this was all wrong. In Groff v. DeJoy, the Court ruled that a “small or trifling” burden is not the kind of “undue hardship” that justifies an employer refusing to accommodate an employee’s religious beliefs. Id. at 17. Instead, employers must accommodate employee religious beliefs unless they can show that “granting an accommodation would result in substantial increased costs in relation to the conduct of” employer’s business. Id. at 18. The facts of Groff are similar to Hardison. The employee was an evangelical Christian who believed that Sundays must be reserved for rest and worship. He began working for the employer (the U.S. Postal Service) in 2012, He was disciplined for refusing to come to work when scheduled to work on Sundays and resigned in 2019. Id. at 2-3. The Court, in a unanimous opinion, spent a great deal of space explaining the Hardison decision. Justice Alito’s opinion explained that courts interpreting Hardison have construed “undue hardship” to mean “any effort or cost that was more” than minimal, but that this interpretation is “a mistake.” Id. at 19. Hardison’s focus had been on whether federal employment discrimination laws required an employer and labor union to accommodate employee religious practices at the expense of bargained-for seniority rights of the established employees. Hardison barely discussed the question of what constituted an “undue hardship.” Id., 16-18. Indeed, Hardison relied on an express finding of the District Court that the employee’s proposed accommodations “would have created an undue burden on the conduct of [employer’s] business (Hardison, 42 U.S., at 84, n.15) and that “accommodation is not required when it entails “substantial” “costs” or “expenditures.” Groff at 3. The Court noted that the phrase “undue hardship” required a higher standard. “Hardship” itself is a term that means “something hard to bear,” and “more than a mere burden.” Id. at 16. With the additional modifier, “undue,” the concept must be “excessive” or “unjustifiable.” Id. The Groff employee argued that employers must accommodate religious practices unless the employer would experience “significant difficulty or expense.” The Government argued that an “undue hardship” meant an employer would suffer” substantial expenditures” or “substantial additional costs.” The Court concluded that “it is enough to say that an employer must show that the burden of granting an accommodation would result in substantial increased costs in relation to the conduct of its particular business.” Id. at 18. So, if “undue hardship” does not mean “de minimus” anymore, but rather means “substantial increased costs,” how are employers to interpret that? The Court, while refusing to establish any kind of clearly established “bright line” test, noted that the burden of granting an accommodation would result in substantial increased costs in relation to the conduct of its particular business.” Id. at 18 (emphasis added). This is not a one-size-fits-all standard. A small business operating at one location with 15 employees might face substantial increased costs accommodating an employee like the one in Groff, while a Fortune 500 company could allow this same employee the leeway necessary to accomplish the basic functions of his job while not violating his conscience. The Court also noted that the employee/plaintiff wanted the Court to apply the same standards used to determine when a suggested accommodation becomes an undue hardship from the standards under the Americans with Disabilities Act (“ADA”). Id. at 18. Under the ADA’s Enforcement Guidance, “undue hardship” also means “significant difficulty or expense.” The guidance encourages an analysis “which focuses on the resources and circumstances of the particular employer in relationship to the cost or difficulty of providing a specific accommodation. Undue hardship refers not only to financial difficulty, but to reasonable accommodations that are unduly extensive, substantial, or disruptive, or those that would fundamentally alter the nature or operation of the business.” EEOC Enforcement Guidance on Reasonable Accommodation and Undue Hardship under the Americans with Disabilities Act. [Washington, D.C.] EEOC, Notice No. 915.002 (October 17, 2002). The Groff decision seems to suggest the Title VII standard for establishing undue hardship is lower than the ADA standard, noting that the suggestion that decades’ worth of ADA caselaw should serve to guide the courts “goes too far.” Groff, at 19. I think it’s a closer call than Justice Alito suggests. I guess we will wait for the lower courts to figure this out. But the Groff Court has made it clear that employers must do more than simply determine if a particular possible religious accommodation suggested by an employee is reasonable. For example, in the Groff example, giving the Sabbatarian employee every Sunday off will force other employees to work overtime, meaning an increased payroll, which the employer concludes is an “undue hardship.” Id. at 20. The employer will need to consider other options, such as voluntary shift swapping, incentive pay, or shifting employees from one worksite to another. Id. at 20-21. “Title VII requires that an employer reasonably accommodate an employee’s practice of religion, not merely that it assesses the reasonableness of a particular possible accommodation or accommodations.” Id. at 20. Other factors that might be relevant when an employer considers the impact of a religious accommodation is how it will affect the productivity or morale of the other employees. However, “a hardship that is attributable to employee animosity to a particular religion, to religion in gen­eral, or to the very notion of accommodating religious practice, cannot be considered “undue.” Bias or hostility to a religious practice or accommodation cannot supply a defense.” Id. at 5. The Court remanded the case back to trial, specifically instructing the District Court to consider all possible accommodations, some of which may have been overlooked because of the “de minimus” threshold. Id. at 21. The Groff employee’s high court victory may prove hollow. The evidence that there were multiple efforts by the employer to accommodate the employee’s request to have Sunday off that were not considered at trial, and that the trial court found there to a be genuine issue of material fact regarding whether the employee’s resignation was an “adverse employment action” for purposes of Title VII indicate a strong possibility that the employer will still prevail. Id. at 3, n.2. But the Groff Court’s clarified standard for what constitutes an “undue burden” for religious accommodation under Title VI will offer employees who seek religious accommodations more negotiating power, and force employers to take such requests more seriously.

John R. Russell Co-Authors Article About Analysis of Interest Arbitration During Economic and Social Crisis in University of Illinois and Chicago-Kent College of Law’s Illinois Public Employee Relations Report

I have helped many of my clients develop comprehensive estate plans that include revocable inter vivos trusts, often referred to as “living trusts.” A “living trust” is a legal document that allows a person to distribute their possessions and assets to the people they want to after they die. A living trust “owns” the property transferred to it, while still allowing the owner to maintain control. Most types of assets or property can be transferred into the ownership of a living trust, if those assets have value. For example, if my clients own a home, I help them prepare a deed to transfer the ownership of the house into the name of the trust. I also prepare a general assignment of personal property to the trust, so that all my client’s “stuff” (furniture, clothes, computer equipment, jewelry, family heirlooms etc.) are also owned by the trust. I work with them to make decisions as to the wisdom and propriety of transferring other property (bank accounts, automobiles, stocks, insurance policies etc.) into the trust. A living trust can also allow for the appointment of a custodian to manage gifts my client’s leave to minor children or make plans for their pets’ care – all after they die! A big reason why this type of planning is effective is it helps avoid probate. A person’s probate estate is everything that is owned by that person in their own name alone on the day they die. If such assets or property consist of real estate or are worth more than $100,000.00 in Illinois or $50,000.00 in Indiana, the distribution of those assets requires going to court, and opening a probate estate. But, if a person’s assets are transferred into a trust, those assets are NOT owned by them, or in their name when they die. The trust survives them, and a successor trustee of the client’s choosing can, in most instances, administer the estate without having to go to court. But sometimes, the ongoing management of a living trust can have difficulties. For example, a client who has a living trust may decide to sell the home that is now owned by the trust. When the real estate transaction is near the time to close, the title company overseeing the deal will need to verify if the trust is valid, still in effect, and that the trustee has the authority to convey real estate. In the past, the only way to verify this information would be to disclose a copy of the trust to the title company. This is objectionable because the trust agreement usually contains a lot of confidential information about the clients and their families. Other than the questions of validity, identity of the trustee, and the authority to convey the real estate, the rest was none of the title company’s business. Attorneys would try to get around the requirement of total disclosure by drafting affidavits for the grantor or trustee of the trust, citing and quoting the language from the sections of the trust that applied to the information sought by the title company. Sometimes attorneys would redact the private information from the trust before disclosing the rest. These solutions did not always work. Sometimes, the institutions would be uncooperative and resistant. A bank or title company would simply insist that a certified copy of the entire trust was the only thing they would accept. Even where the institution was willing to accept a summary of the trust contents, they also often insisted on the use of their own form or policy, creating an undue burden for trustees who might need to interact with multiple institutions, each with their own distinct policy and format regarding trust disclosures. Of course, this would mean an attorney tasked with meeting all these requirements would have to charge a higher fee for all the extra work. In 2015, however, the Illinois General Assembly offered a practical solution. Senate Bill 1877 (codified today at 760 ILCS 3/1013) provided a more sensible and efficient means for the trustee of an Illinois living trust to deal with third parties regarding trust property. This new law expressly authorizes a trustee to use a “Certification of Trust” to help manage trust affairs. This legislation allows a trustee, with the specific authorization of the statute, to simply present a third party with a document in the form of a notarized affidavit containing specific information about the trust. The proscribed statutory format includes: A statement that the trust exists and has not been revoked, modified or amended in any way that would make the certification incorrect; The date the trust was executed; The identity of the settlor/grantor of the trust (i.e., the trust creator); The identity and address of the current trustee; The trustee’s powers; Whether the trust is revocable or irrevocable; Whether the trust may be amended, and if so, the identity of the person holding the power to amend it; The authority of co-trustees to sign; The trust’s taxpayer ID number (if the client wishes to disclose); and The manner in which trust property should be titled. The statute’s required inclusions are basic and provide the kind of information financial institutions and title companies are looking for. No other additional information is necessary. The reality is a bank, financial institution, or title company presented with an accurate and complete certification of trust like this generally does not have any valid reason for requesting the entire trust agreement. Any institution “making a demand for the trust instrument in addition to a certification of trust or excerpts is liable for damages if the court determines that the person did not act in good faith in demanding the trust instrument.” (760 ILCS 3/1013(h)). This statutory certification of trust form is a welcome development for my clients who use revocable living trusts (and other trust mechanisms as well) as part of their estate plan. It makes trust management less confusing, easier, and provides predictable clarity when dealing with third party institutions. I will often include a certification of trust for my clients along with the other estate planning documents I prepare so they will have it handy when needed (although the certification may need updating if a lot of time has passed since it was originally signed, so the institution asking for the information can be assured such information is up to date). Interested in creating an Estate Plan for your family? Contact John.

I cannot emphasize this enough – it is essential that every adult prepare an estate plan. Regardless of how old you are, your marital status, or how much money you have, having a Will, advanced directives such as powers of attorney, and perhaps a trust or other plan, is important. Nearly 70% of Americans do not have an estate plan of any kind. Many people don’t even know if their parents have a will, and for those who do know, many don’t know what’s in it. It seems logical that anyone who has worked hard to establish themselves financially would plan to leave an inheritance for their children or family. But, without an estate plan, the costs of administrating even a small estate can eat up ten to fifteen percent of the total. Estate planning does away with all the uncertainty. You will have assurance that there are legally enforceable documents that will safeguard your wishes after you die. The stability of the power of this enforcement will prevent family conflict over your estate. It will allow you to pass a legacy to your children and make and enforce the choices that are right for you. With families gathering in December for the holidays, it might be a good time to talk about these concepts with your loved ones. But how should you approach this subject during your family holiday gatherings? I suppose it could be argued that bringing up the concept of death and the parceling out of family assets might really bring down the mood at Christmas dinner. But the problem in most families is this subject is taboo – no one wants to ever discuss it at all. Having the right family members together might be the perfect time to start. If you don’t yet have an estate plan, but are considering it, the family will benefit from the discussion. There needs to be an opportunity for everyone to be honest and express their feelings. The relevant concepts that go into estate planning need to be open to conversation. It’s good for the person who will be drafting a will or trust to address the people who they will name as executors, trustees, guardians, or agents to ask them if they are willing to serve and talk about what that might entail. I feel it is generally good for the “younger generation” to grasp what their parents are doing. Just having the discussion might inspire others to put a plan together as well, bringing even more stability to the extended family. If you already have an estate plan, share the details and discuss it openly with the specific persons involved (i.e., the people you’ve named in your plan as trustees, executors, agents, etc.), as well as the family at large. If your family knows what your wishes are in advance because you talked to them about it, it is more likely that those same wishes as stated in your will or trust will be met. This discussion should not only inform the family that an estate plan exists, but how to find it in the “hour of need.” The person who is your successor trustee or executor of your Will should have photocopies of the documents and know where to retrieve the originals. This also should include any separate written instructions for the disposition of tangible personal property to specific people (all the revocable trusts I draft contain a provision for this). They also need the information about where you might be storing valuables (i.e., a safe, safe deposit box, storage unit, or “hiding place” within the home). You also must let trusted family members know who is named as your agent under the powers of attorney, where files can be located that contain information relating to your bank accounts, investments, debts, insurance policies, and any specific information that is particularly important to you (such as documentation relating to you being an organ donor, or your established wishes for funeral arrangements). If the parts of your estate plan that express your wishes can’t be found, they will have no use. As stated, conversations about estate planning are difficult. One way to avoid bringing down all the holiday cheer is to consider establishing ahead of time that you will discuss estate planning. This allows your family to prepare themselves in advance. There will invariably be a level of discomfort. I encourage my clients who discuss their estate plans with their family to be as understanding as possible. Some will have questions. Everyone will have an opinion. There may be a lot of emotion. Some might get angry or be hurt over perceptions that things aren’t fair. Some might just not be able to handle the discussion about death. But if you guide the discussion back to the need to make sure there is a need for a plan that will carry out your wishes to avoid as much outside interference as possible, a lot of the shock, emotion, and denial can be softened. Of course, every family is unique. In situations where siblings all basically get along, and the parental plan is to eventually pass the estate on to all the children in equal shares, the discussion may not spark much controversy. But in instances where there are unique circumstances – i.e., children who are spendthrifts, have addiction problems, or have alienated the family –discussions must be approached more carefully. The audience for your conversation may not be the entire family. Choosing to have multiple conversations with groups of family members might help. There may be a perceived need to make sure your out-of-town-family members who you rarely see are informed. Careful discretion is advised. In an age where the pandemic has taught us how to meet remotely, opening the door to conversation to continue later via telephone, video chat, or even a Zoom meeting with multiple family members all involved is a way to avoid open controversy while opening presents around the Christmas Tree. Having estate planning conversations with your family is inherently difficult. But its extremely important. If these conversations can be started in the context of your holiday gatherings, I recommend it. Even if you just open the door. Understanding and communication in this area is vital to family harmony and the efficient administration of any estate plan.

It’s a question I am obliged to ask my clients at the outset of the initial consultation about estate planning. I will gravely ask if they think there will be a concern with federal estate taxation. A concerned look will cross their faces – “Should we be concerned?” I will reply that if their gross estate is worth more than $11.7 million for individuals, or $23.4 million for couples, they need to be concerned. Invariably, my clients will smile and assure me they are not worth nearly that much. I will smile, and dryly say, “Just once, I’d like a client to answer that question with a ‘yes.’ ” We’ll share a laugh and move on with the discussion. My estate tax question has become an ice breaker for the conversation about their assets and property. This was not always so. Back when I was just starting out as an attorney (shortly after the earth cooled and dinosaurs were the dominant species), the estate tax threshold for individuals was $600,000.00. In the late 1980s and early 1990s, that was a sizable estate. However, it wasn’t that hard for an average middle class American to cross over that threshold. The reason for this was the estate tax was based on a person’s gross estate – unlike a person’s probate estate, which includes only those assets owned in a person’s own name individually on their date of death. The taxable estate covers any assets under the decedent’s control before they died. One area that people don’t often consider is life insurance. Life insurance passes as a matter of contract to the beneficiary on the policy. Life insurance proceeds are not subject to income tax. But, because life insurance is generally included in the taxable estate, it was easy to cross over into taxable territory when the threshold was $600,000 and the decedent owned a $500,000 life insurance policy. Beginning in 2004, Congress started pushing the lower limits of estate taxes, with the individual rate jumping to $1.5 million. By 2016, this amount was $5.49 million. Then, in 2017, the threshold more than doubled to $11.18 million, and, indexed for inflation, the 2021 starting point for estate taxation is $11.7 million. Another consideration, however, are local estate taxes. Illinois has its own estate tax. The threshold here is $4 million for individuals. (Fortunately, Indiana did away with its inheritance tax several years ago). Therefore, my estate planning clients also have little concern about the Illinois estate tax. But with the lower $4 million dollar state-level threshold, and the potential that some of our more progressive congressional representatives may seek to lower the federal estate tax threshold, some of my entrepreneurial clients (those who have built profitable businesses or invested well) might inadvertently fall into an estate tax problem. And the culprit will no doubt be life insurance proceeds. As with my earlier example, the heirs of a business owner who has created personal wealth of around $3 million may not realize the actual calculation is closer to $4 million. A $1 million doller life insurance policy pushes it over the edge. The Illinois estate tax on a $5 million dollar estate will be anywhere from $320,000 to $400,000. How can this life insurance trap be avoided? Life insurance proceeds are considered part of the taxable estate if the decedent owned the policy at the time of death. If I want my life insurance proceeds to avoid estate taxation, I need to transfer the ownership to somebody else. How would you accomplish this? You would need to designate a competent adult or corporate entity to be the new owner. It can even be be the policy beneficiary! You would need to consult your insurance company to obtain the correct assignment forms to accomplish this. After assignment of the ownership, the new owner must pay the premiums. If the new owner finds this difficult, you are allowed to give up to $15,000 per person per year and not face a tax consequence. This would allow the new owner to use the gift to pay the premiums. Of course, by giving up ownership, you also give up the ability to control the policy or to amend it in the future. However, if your strategy is to benefit family or friends with the policy proceeds, if you name a family member or friend as the new owner, its likely they will be willing to change things upon your request. To qualify as a true transfer of ownership, the change must be irrevocable. You would need to be aware of potential future situations when choosing the new owner (e.g. You choose to name your spouse, and later you divorce). You would, of course, make sure to receive written confirmation from your life insurance company as to proof of the ownership change. A second way to remove life insurance proceeds from your taxable estate is to create an irrevocable life insurance trust (“ILIT”). For an ILIT to work, you cannot be the trustee of the trust and you may not retain the right to revoke the trust. The ILIT holds the policy in trust, meaning you are not considered the owner; the proceeds are therefore not included as part of your estate. What is the benefit to creating a trust instead of transferring ownership to another person? An ILIT allows you to maintain some legal control over the policy. In the case of that person we described earlier who might be unable to pay the premiums, the trust can be set up so that premiums are paid promptly. If the beneficiaries of the proceeds are minor children, an ILIT will allow you to name a dependable person as trustee to oversee the money on behalf of those children, controlled by the terms of the trust document. In addition, there are IRS regulations that govern the determination of who owns an insurance policy at the time a person dies. There is a “three year rule,” which states that any gifts of life insurance policies made within three years of death are still subject to federal estate tax. Whether it’s a transfer to another person or the creation of an ILIT, the life insurance proceeds will be included in your taxable estate if you die within three years of the transfer. The IRS also looks to make sure the transfer of ownership is truly a transfer; the original owner must not retain any power to change beneficiaries, borrow against the policy, surrender or cancel, or select beneficiary payment options. Most important, the original owner cannot be paying the premiums. It the original owner holds on to any of these rights, any advantage gained by the transfer will be negated. Another issue is the value of the policy at the time of transfer. If current cash value exceeds $15,000.00, a gift tax will be assessed, and potentially payable at the time of the original owner’s death. So while it is true that most if not all of my clients are not concerned about estate taxes, it is true that most if not all of my clients don’t think about their life insurance benefits when computing their net worth. When the value of a home, retirement accounts, savings, investments, business holdings, and other property are added together, the actual size of your estate may surprise you. Add in future years of growth along with a (theoretical) $2 million dollar life insurance policy, and maybe your taxable estate actually WILL cross the $4 million dollar Illinois line. The solution is to preserve the value of the life insurance for your family, maximize your giving potential, and transfer the life insurance policy while avoiding gift tax costs. As long as you live another three years after the transfer, your estate could avoid or minimize the tax. It happens to be national life insurance month, so in order to figure all this life insurance stuff out, you need an expert. I can claim expertise in legal matters, but not life insurance, so make sure you discuss this matter with your trusted life insurance professional, who has the background, training and experience to meet your life insurance needs.

The coronavirus crisis has caused our society to generally shut down. Businesses and schools are closed, and people have been ordered to stay home. Other than essentials like groceries and pharmaceuticals, people aren’t in the market for a whole lot more. But the fact of matter is – most people don’t have an estate plan, and an estate plan is essential. Without such a plan, the State’s intestacy laws dictate what happens. For example, in Illinois, if you’re married with children at the time of your death, the law of intestate succession distributes half of your estate to your spouse, half to your children, regardless of their age or financial situation. So if you don’t have a plan, you need one. Fortunately, the standing orders for closing businesses have declared that legal services are essential. We are open for business, and ready to serve you in helping you put together an estate plan. But what about the precautions necessary for preventing the spread of the coronavirus? What about social distancing. Not to worry. We can help you develop and establish an estate plan tailor made to meet you and your family’s needs and still follow the CDC guidelines. The initial planning meeting can occur remotely, either by telephone or video conferencing. I prefer face to face meetings when discussing these matters, and platforms like Zoom video can accommodate a remote but direct contact. Documentary information can be shared by email, fax, or through a secure link. Both attorney and client can be seated at our home computers for the first meeting. Once I have drafted the documents, I will forward them to the client via email for review. Most editing and explaining can be done via email, but follow up video conferences can certainly be scheduled. The trickiest part is getting the clients to execute (sign) all the documents. Prior to the current crisis, remote will signing was unheard of in Illinois. It was possible in Indiana, but the witnesses still needed to physically present in the room with the person signing the will. Both Illinois and Indiana have issued emergency orders to help with remote execution, but I have found them confusing. Because my office can be open during this crisis, I believe we can safely execute documents in my office. My office has a large conference room set off from the rest of the space. Prior to an appointment, we will make sure the room is completely sanitized. We have a large table, and the signer(s) will be seated more than 6 feet from anyone else. I will wear an appropriate mask, and be gloved. The pens used will new, and thrown away after use. The witnesses (other attorneys or staff in the office) will observe from a safe distance, and sign their portion of the documents in a separate room. I will scan documents in a separate room (to preserve pdf copies), and return the originals to the clients in an envelope or folder. If this does not provide the client with enough comfort, we can do “curbside” signings (providing it’s not raining) and have documents signed and witnessed while the client remains in their cars. We will do whatever is possible to provide a safe environment for clients to sign documents in my office. Legal services are essential, and estate planning is essential. In a crisis where lives are threatened, you need to make sure your affairs are in order. Please reach out to us for estate planning legal services. We will provide a safe and effective way to get that accomplished.

My mantra as an estate planning attorney is “Estate Planning is all about planning for everything you own and everyone you care about – including yourself.” It’s this last concept that is most often overlooked in the process — there is a lot more to think about when you plan for the future than what will happen after you die. What if you become disabled? How will your business affairs be managed? Who will take care of you? How will you be cared for? How will your intentions regarding health care and end-of-life issues be made known? Who and how will determine when you are disabled? Properly drafted durable powers of attorney for both property and health care will make sure these intentions are carried out, and help avoid expensive and difficult guardianship proceedings. A “power of attorney” is a document which allows you (as the “principal”) to name a person (an “agent”) to manage your affairs and act as your representative when a decision or action is required from a third party. They are referred to as “durable” powers of attorney because when the proper language is included, the agency survives the principal’s disability. So while POAs can be used to simply appoint someone else to, in effect, make decisions for you, these documents are usually reserved for the purpose of making sure the principal is cared for in the event he or she becomes disabled. Because POAs have been created by statute, I rely on that legislation to prepare the forms I present to my clients. Illinois’ Power of Attorney Act has a recommended statutory form for both the POA for property (allowing the agent to make business related decisions) and for health care (allowing the agent to make health care and treatments decisions). Indiana’s statute does not prescribe a specific form, but clearly lays out the kinds of legal powers that can be delegated through a durable power of attorney, either for general business purposes or for health care. I usually prepare estate plans when my clients are vigorous and healthy. They expect to live a long and fulfilling life. The estate plan therefore serves the same purpose as a life insurance policy – to plan for both the unforeseen and the inevitable. The POA is kept ready, in case disability strikes. In fact, when I draft powers of attorney relating to property or general matters, I usually include language that the agent cannot act unless proof of the principal’s disability (in the form of a letter from an attending physician) is produced with the POA. With both the doctor’s letter and the POA (which has been properly signed, notarized, and witnessed) in hand, the agent can approach the Bank or other financial institution and “do business” on behalf of the principal. Recently, however, several clients have come to me complaining of problems connected with the use of a general/property POA for a disabled family member. The scenario usually goes like this: the Client drafts and executes the POA at a time when they are healthy. Many years pass; sometimes 5, 10, or even 20 years go by. Suddenly, the client suffers a sudden, debilitating condition that incapacitates them — a stroke, a heart attack, or a chronic disease. Because the client was prepared, the agent named in the POA (usually a spouse or adult child) already has a copy of the POA and springs into action, obtaining the necessary certification of disability from the client’s physician, and then takes that certification with the POA to the client’s bank. The bank, however, refuses to recognize the power or attorney. Despite the fact that the POA has been properly drafted, and the agent has produced what is necessary to prove his/her authority, the Bank will not allow the agent to access the bank accounts. The Bank will insist that the principal who signed the POA must come to the Bank in person to establish the agency relationship. If the principal is now disabled, this is impossible, creating a frustrating stalemate. This shouldn’t happen. The purpose of the Illinois Power of Attorney Act is clear. “[E]ach individual has the right to appoint an agent to make property, financial, personal, and health care decisions for the individual but that this right cannot be fully effective unless the principal may empower the agent to act throughout the principal’s lifetime, including during periods of disability, and have confidence that third parties will honor the agent’s authority at all times.” 755 ILCS 45/2-1. The Indiana Code states the same thing more succinctly, declaring that a power of attorney drafted under that law is presumed valid. IN Code § 30-5-3-2. Therefore, a properly drafted and executed POA is legally binding on third parties such as Banks. An essential purpose of both the Illinois and Indiana Power of Attorney legislation is to fully protect third parties (i.e., people, financial institutions, healthcare providers, etc.) who rely on the agent and his/her authority, and release them from liability if they rely on a copy of the power of attorney in good faith and treat the agent as if they were dealing directly with a fully competent principal. 755 ILCS 45/2-8(a); IN Code § 30-5-8-7(a). A third party dealing with an agent named in a copy of a document purporting to establish an agency may presume to rely on the validity of the agency and the agent’s powers as reflected in the POA. 755 ILCS 45/2-8(c); IN Code § 30-5-8-7(c). A Bank or other financial institution that refuses to accept or rely on a power of attorney risks significant penalties because any person who arbitrarily or without reasonable cause fails to comply with the direction of a duly appointed agent in accordance with the power of attorney is subject to civil liability for any damages resulting from noncompliance. 755 ILCS 45/2-8(d). Indiana’s statute goes even further. There, a Bank that refuses to accept the authority of an agent under a POA “shall pay” three times actual damages, attorney’s fees and any prejudgment interest. IN Code § 30-5-9-9(a). Therefore, agents under POAs ultimately have the threat of litigation against Banks that blithely refuse to follow the law. The Bank does have one area where it can demand a certain level of verification from the agent. Both the Illinois and Indiana statutes provide that an agent can be required to certify, under oath, that to the best of their knowledge, the principal had the proper capacity to execute the POA, is alive, has not revoked, altered, or terminated the POA, and that the POA remains in full force and effect. Just like for its POA forms, Illinois has a statutorily prescribed from for this purpose. 755 ILCS 45/2-8(b). The Indiana law has no form, but provides for the same concept. IN Code § 30-5-8-7(b). An affidavit to this effect should be sufficient for a Bank to rely on the agency. The Illinois act emphasizes that “good faith reliance on a document purporting to establish an agency will protect the reliant without the affidavit.” 755 ILCS 45/2-8(a). The Indiana statute says that “[a] copy of the power of attorney has the same force and effect as the original power of attorney if the attorney in fact certifies that the copy is a true and correct copy.” IN Code § 30-5-8-5. Therefore, it should not be necessary to produce the original document. It might be worthwhile to include additional information in this affidavit. For example, if a spouse of the principal is the agent, it would be helpful for the certification to state that the spouse and the principal are not involved in a proceeding for legal separation or divorce. Also, if the power of attorney requires a physician’s certification of the principal’s disability, the agent should state that the triggering event has occurred. These additions would make the certification more palatable to a bank or financial institution. Ultimately, a Bank that refuses to recognize a valid POA could be taken to court and made to comply, and pay for any damages the noncompliance caused. Perhaps the threat of such consequences might be enough to get the bank to cooperate. But a little forward thinking might help avoid the conflict in the first place. I am advising all of my estate planning clients to try and head off these issues. Even if the client is as young as twenty-one, or at any other age where they do not foresee any immediate health problems, once the POA has been executed, they should make an appointment with their banker and/or financial advisor. Bring the agent along with to meet the banker. At the meeting, share copies of the POA documents and explain all of your concerns. This way, the Bank will have the POA on record and be aware of the agency (or possibility of the agency) long in advance, and there will (hopefully) be no surprises from the bank if the principal is disabled. There are some banking and financial institutions that insist on the use of their own forms for allowing an agent to have access to accounts or to do business on behalf of the principal. As stated already, a valid POA does not need to be questioned, and refusal by the bank could lead to its liability. But, perhaps these “in-house” forms can be dealt with at the time of this first appointment. As long as the in-house forms serve to supplement the POA, meeting the bank “half-way” should work. But be cautious. Some of these in-house power of attorney forms state that all previous powers of attorney “are revoked.” Such language could endanger the validity of the agency under the statutory POA. Language should also be included, either in the general POA, or in the in-house form, that any conflicting language between the two documents are resolved in favor of the client’s previously executed POA. But if the agent only discovers that the Bank insists on having the principal execute its own in-house forms after the principal is already disabled, how can the stalemate be solved? One potential answer might already lie in the body of the POA itself. For example, paragraph 4 of the Illinois statutory form authorizes the agent to delegate discretionary decision-making powers. 755 ILCS 45/2-8(d)(4). This allows for the agent to execute the in-house forms on behalf of the principal. In order to make sure this concept will work, I recommend adding this language to the POA form: that the agent shall have explicit authority to execute such excluded powers of attorney on behalf of the principal. In addition, I have also had clients recently complain about misunderstandings with banks when they have already had this initial appointment and introduced the POA and the agent to their bankers. Often, my clients will add the agent’s name as a co-owner, with signature power on their bank accounts, both for the convenience of allowing the agent access to the funds upon disability, as well as allowing the account to pass to the agent (if the agent is also an heir) without having to submit the account to probate at the time of death. (This is because property in joint tenancy passes to the surviving joint owner as a matter of law, and does not require probate to change ownership). In an earlier article, I have warned about the dangers of relying on joint tenancy as an estate planning tool (see Helping Seniors Avoid the Pitfalls of Do-it-Yourself Estate Planning), but joint ownership or “transfer on death” designations to facilitate the passing of banking or investment accounts to the next generation can be both prudent and convenient. The problem stems from how the banker understands what the client is trying to do. If the principal under the POA presents the document and introduces the agent, asking for the agent’s name to be added to the account, the banker will probably not presume the principal intends the account to be in joint ownership. Even if the agent is an adult child of the principal, the bank is going to be careful with the “ownership” designation. An agent under a POA is a fiduciary; the presumption is the agent will not and cannot use his/her position for personal gain. Therefore, the bank will not make the agent a joint owner with right of survivorship unless the principal makes this intention absolutely clear. Several of my clients have expressed frustration to discover that even when they have taken their elderly parent in to the bank to establish the agency relationship with the POA document, after the parent has died, the Bank will not give them access to the account. This is because the Bank presumed that the agency was all that was intended. After the principal’s death, the POA has no effect, and if the joint ownership was not properly established, the bank account will likely need probate to be transferred to the heirs. In any event, there is no reason a bank should reject a validly executed power of attorney, and if this happens, the threat of legal action might convince the bank to cooperate. However, if the problem can be avoided altogether by bringing the POA and the agency relationship it creates to the Bank’s attention in advance, then perhaps you can avoid these kinds of conflicts at a time when its essential to make sure your agent’s power to help you is completely unfettered.

All of us have people in our lives who are aging. Grandparents or parents, Uncles and Aunts, people we go to church with, or people we work with. Getting older always has the same consequences – bodies deteriorate, sight dims, hearing is more difficult. Reflexes are slower, aches and pains seem more pronounced, memory issues are frustrating. The decline may start when someone is as young as their mid-50s; others seem to avoid the ravages of aging well into their 80s or 90s But the process is inevitable. Often, a catastrophic or life changing experience will seem to hasten the decline. It could be an illness, the death of a spouse, or a major financial set back. The trauma and emotion of dealing with such a turning point seems to add years overnight to the lives of the seniors we care about. We want to help them. And often, that person’s perception of a sudden deterioration will cause them to scramble to get a grip on their lives when things seem to be careening out of control — and that includes “getting their affairs in order” to be ready when they die. Let’s look at a hypothetical but very real situation. Let’s take your average 45 year old man – let’s call him Joe. He’s married, has children, has a steady job and a positive outlook. He has a decent relationship with his parents, who are in their late 70s, and both retired. Suddenly, however, there is an unforeseen turn. Joe’s mother falls ill, and before he can even wrap his mind around the enormity of the situation, she dies. Joe’s father is devastated. The sudden and unanticipated nature of his wife’s death seems cruel. He becomes angry and sullen. He retreats into himself, spending most of his time just sitting in front of a television, not socializing much, not seeming to care. In addition, as the months pass, Joe notices an obvious decline in his father. Its not just depression and mourning. Joe’s father is not taking care of the house. He never seems to have any groceries on hand, or seems to be eating all the wrong things. Joe notices important past due invoices in the stacks of unread mail that are collecting in various places in his father’s house. He also sees his Dad carrying large sums of cash, rolled up in his pockets. Dad explains that he wants to be sure he has enough money; he doesn’t want to be caught short. Joe is concerned this could make his increasingly frail father vulnerable to theft or financial exploitation. Joe is at a loss as to how to approach his Dad to try and help. But Joe’s father beats him to the punch. Joe’s Dad invites him over for an important talk. Joe’s Dad realizes he’s having trouble managing things, particularly his finances. The loss of his wife has also caused him to feel his own mortality, so he wants to talk about the future, and what will happen after he dies. Joe’s Dad has a plan. He’s been talking with his buddies at the restaurant where he hangs out at on Saturday mornings, and knows exactly what needs to be done, First, he wants to add Joe’s name to all of his bank and investment accounts, so Joe can make deposits and withdrawals, write checks, pay the bills, and help his father keep track of and manage his finances. As for all of the “stuff” he has in the house – that is, his tangible personal property, Joe’s Dad wants to make a list with instructions for how it will be divided among Joe and his siblings after he dies. Then, there is the matter of the house. The mortgage has long been paid off, so Joe’s father owns the place, free and clear. He announces he will simply add Joe’s name and the names of each of Joe’s siblings to the title of the house. This way, when he dies, his children will be sure to inherit the house, and they can deal with it however they want. He’s already gotten a form for a quit claim deed from one of his friends. He insists that a lawyer doesn’t need to be involved. “Let’s keep it simple,” he says. He is determined that there is no need for an expensive estate plan created by an attorney. Joe’s father feels his “do it yourself” estate plans should be enough to carry out his own wishes. Joe is a bit perplexed. It seems like at least some of his Dad’s suggestions will be helpful. But will carrying out his father’s wishes be the right thing to do? Are these even good ideas? Each of the three things Joe’s father wants to do represent concepts in estate planning that often do not, or cannot work out as planned. Each is fraught with difficulty and potential negative consequences. Potentially devastating results could be avoided if Joe’s father would consider consulting an attorney for a simple estate plan. First, consider the issue of the bank accounts. It is not uncommon for an older person to rely on the assistance of a responsible adult child to help manage their finances. Adding a child’s name to accounts with signature authority is a simple, practical way to make this happen. But if that’s all Joe’s Dad does, there could be disaster waiting after his death. Usually, adding someone’s name to a bank account makes that person a joint owner of the account, with full rights to withdraw the funds — its joint ownership in every sense of the word, with right of survivorship. Where such a joint tenancy account with a right of survivorship is created, there is a presumption that a gift is intended. Upon the death of one person, the other person becomes the sole owner. The funds in the account are not considered part of the decedent’s probate estate because they pass as a matter of law to the surviving joint owner. But that may not be what Dad intends. Perhaps Dad did not intend for Joe to get all of the money in his accounts when he died. Instead, Dad wants Joe to divide it equally among all of his children. He only put Joe’s name on the account for the convenience of Joe helping manage Dad’s finances. The law presumes this money will be a gift to Joe when Dad dies. But this presumption can be rebutted — but only by clear and convincing evidence that no donative intent existed at the time the joint tenancy was created. This creates the potential for a great deal of misunderstanding after Dad dies. Joe’s father adding Joe’s name to his bank accounts creates a two sided trap that often results in extremely nasty litigation. On one side, Joe (who now is in control of Dad’s finances), can manipulate the situation so that he winds up with a significantly higher percentage of the estate, or perhaps all of it. After his Dad’s passing, Joe will argue that the legal presumption of the gift must stand — to the detriment of all of the other siblings. And because of this presumption, it is very difficult for Joe’s siblings to prove Dad’s actual intent. On the other side is the concept where Joe’s Dad truly does intend to reward Joe with a bigger share of the estate than his siblings. For example, maybe Joe ends up opening his home to his Dad, and Joe’s family is providing care for his Dad through his later years. So Joe’s father arranges to have a larger portion of his funds placed in joint tenancy with Joe, intending for Joe to get every penny, and intending that it be to the detriment of Joe’s siblings. After Dad dies, Joe’s siblings may rise up in righteous indignation, believing Dad must have intended otherwise, and that they deserve more. What about the written instructions as to the distribution of property? While Joe’s father might believe that Joe and his siblings will honor his wishes, there is nothing to stop Joe to do whatever he wishes with the property. This is because under Illinois law, any written disposition of a decedent’s property that is not part of a validly executed Will is unenforceable. Indiana law has provisions to enforce this kind of estate planning, but only if Dad strictly adheres to the statutory requirements. Even then, in either case, all Joe has to do is destroy the written instructions as soon as he locates them, and then divide the property as he wishes. There is likely to be no independent verification of Dad’s intent. Joe’s father’s decision to use the Quit Claim deed to add his children to the title of his house is the most dangerous of all these concepts. First, a quit-claim deed only transfers the owner’s actual existing ownership rights in the property – it offers no guarantee that Joe’s Dad’s title interest in the property is valid. A warranty deed, however, offers the grantees more certainty as to what they are getting. A warranty deed promises that Dad owns the land and has the right to transfer it to Joe, that no one else has an interest in the land unless identified in the deed, and that if a claim is made against Joe’s interest in the land after the transfer, his father (or his father’s estate if he has died) is obligated to defend the title in court. If any of these promises turn out to be false, the grantee can potentially recover for the loss. Quitclaim deeds make no such promises. If there was a break in the chain of title years before Dad acquired the property, the title insurance Dad obtained when he purchased the home will not protect against the quit claim deed. Other quitclaim issues include the perceived informality of using a quitclaim. A layman like Joe’s father might prepare the deed so it appears to be a forgery, or include an incomplete or inaccurate legal description of the property, making the transfer void or creating a cloud on the title. If the property is mortgaged, will the new owner be responsible to pay the mortgage? If Joe’s father expects such an arrangement, especially if its an informal oral promise, he will remain responsible to pay the mortgage should the children default. Also, a child’s bad credit could become Joe’s Dad’s problem, even if he an excellent credit rating. Making his children a co-owner means their judgment liens become his judgment liens. Mortgages often contain “due on sale” clauses, so that a transfer of any part of the ownership of the property without the lender’s consent is a default, meaning the lender can foreclose. While Federal regulation prevents this result if the property is the homestead, other properties are subject, and if the new owner can’t afford to pay off the debt or refinance, the property could be lost. Joe’s father might also believe he can hide his own ownership interest in this kind of a transfer, or avoid creditors with a quitclaim. Sorry, it doesn’t work – a quitclaim deed does not extinguish judgment liens. Finally, if the house is worth more then $14,000.00, or the aggregate of $14,000.00 for each child Joe’s Dad includes in the deed, he could be liable for Federal gift taxes. If the house were to pass as an inheritance after death, the potential estate tax rate is lower than the gift tax, and the capital gains tax realized when an heir sells the interest in the property will likely be less. Hopefully, Joe is smart enough to take his Dad’s concerns and plans to an experienced estate planning attorney. He would learn that the only document conveying his Dad’s intention that is enforceable after his Dad dies is a validly executed Will. Better still is a plan that includes a land trust or a revocable, intervivos trust (often called a “Living Trust’), which can make the transfer of the real estate after death a simple and painless concept. We need to help our parents and grandparents avoid the pitfalls and traps that do-it-you-self estate planning will bring. The end result is almost always simpler, easier, and less expensive. I encourage anyone who is “feeling their age” to consult with an attorney for a valid, carefully considered estate plan. But older folks aren’t the only ones who need to consider estate planning. Any adult needs to think about it. Estate planning is not just for the wealthy. It’s not just for parents who need to provide for children. It’s for everyone. Estate planning is planning for everything you own and everyone you care about, including yourself. In future installments of my blog and newsletter, we will visit more estate planning topics and considerations. Because even if a person doesn’t make a plan, there is a plan provided under the State’s intestacy laws. These laws are often at odds with what people intend and want. Please – don’t allow your parents or grandparents to rely on a do-it-yourself estate plan. And don’t allow yourself to fall into the same trap. Only a properly drafted and executed estate plan will ensure that your wishes will be carried out after you die.

Most people think they don’t need a Will. But when you die, everything you own in your own name alone will be subject to Probate. While there are some ways to get around the Probate process even when people don’t have Wills, this generally only works when the person who has died doesn’t own real estate. Even then, the limitations for transferring property out of a deceased person’s estate in Illinois caps out at $100,000. In most cases, when someone’s total estate is worth more than $100K, or that person owned real estate, Illinois law requires a probate estate be opened. Someone might argue that often times, even WITH a Will, there is a need for Probate. But there are key differences. One such difference is the need for a bond. Wills routinely have clauses in them which allow the Executor to serve without a bond. Without a Will, however, the Court will require the Estate’s representative obtain a bond. Essentially, this is an insurance policy, protecting the potential heirs of the Estate from a representative who might not act with care and diligence, or might actually steal from the Estate. Depending on the size of the Estate, such a bond could cost the Estate hundreds, even thousands of dollars right off the top. A simple Will with a clause allowing for the executor to serve without bond solves this problem. That money is saved! While some folks would argue that going through the trouble of estate planning and preparing a Will is expensive, it actually can be quite cost effective.

Is It Really Necessary to Have an Attorney in A Real Estate Transaction? Indiana Clients should click here for a Special Note Many non-legal professionals, such as realtors, bankers, or mortgage brokers might still insist that real estate contracts and closings can be accomplished without the assistance of an attorney. They argue that the expense is too great, especially when customers are paying so much in other expenses related to selling or buying their home or obtaining financing. Yet, it ís still true — the purchase of a home is the most expensive purchase you will ever make. Why wouldn’t you want to protect that investment with all the resources available to you? Here are just some of the reasons why you should engage an attorney when you buy or sell a home: 1. A Real Estate Attorney Will Keep Things Above Board and Ultimately Save You Money. Real estate contracts are fairly complicated. Your realtor will help prepare the contract, but even the savviest real estate agent is still filling out a form. These form contracts contain attorney review provisions, which will allow the attorney to make sure there are no hidden “pitfalls,” that the contract meets the client’s expectations and that the clients truly understand what they are getting into. An attorney’s experience helps assure the deal is fair to you. The goal is to protect your interests. Unforeseen problems might come up before or after the closing. If contractual contingencies are not met, the deal might fall through. The attorney review process that happens when the contract is signed could save you a lot more than the attorney’s fee. 2. Real Estate Attorneys Can Help You Get Your Loan Approved. The process of getting approved for a loan, and dealing with the ins and outs of home finance is changing all the time. The recent scandals involving loan fraud, improper documentation, and lenders or title companies charging unfair fees reveal how tricky these concepts are. A lawyer’s advice and experience can help avoid these problems from the time you enter into the contract through the closing and even afterwards. But even more so, now that federal and state regulators are trying to “fix” these problems, and the regulatory pendulum is swinging towards making it more difficult to obtain financing and for getting buyers to the closing stage, the new rules are confusing for buyers, sellers, lenders, and realtors — an attorney can help make sense of the financing landscape. 3. Real Estate Attorneys Help Make Sure the Deal Closes. A lot of things need to happen before a real estate transaction can close. There are key points along the way where conflicts often arise. If these conflicts can’t be overcome, the deal inevitably dies. Time frames involving inspections, financing, notices, and other contingencies need to be followed, and if they are not, the attorney can protect your rights. What if the inspection turns up an unforeseen defect? Or the survey reveals an encroachment? What if there are issues with the chain of title, unpaid taxes, judgments against the parties, or other liens? Your attorney will work to resolve these problems before you close. 4. Real Estate Attorneys Help Cut Red Tape. Many municipalities have enacted strict requirements that must be satisfied before the real estate transfer can be completed. These can include home inspections and repairs, zoning certificates, water certifications and payment, and transfer taxes and other requirements before a property can be transferred. In some cases, such requirements are the Seller’s responsibilities, in others it’s the Buyer’s. Your attorney will help you keep this all straight. 5. Real Estate Attorneys Make Sense of Title Issues. In Illinois, a real estate attorney acts as the Seller’s title agent. The attorney works with the title company to make sure the Seller can convey clear title to the buyer. The buyer’s attorney will review the title commitment and survey to ensure the buyer is receiving exactly what the contract requires. The attorney will explain the intricacies of title exceptions and liens. Your attorney is invaluable in offering explanation and assistance in this area. 6. Real Estate Attorneys Help Avoid Post-Closing Problems. Even after the closing, disputes can arise. There might be a lack of clarity or even a mistake in the contract. An issue with the title arises. The buyer moves in and discovers some horrible problem after the fact. Your attorney will help make sure any contractual issues are covered, the title is clear prior to closing, inspection issues have been resolved, and all required disclosures were made. If the Seller and Buyer each have an attorney, things go a lot smoother. (As a side note, even if something does go horribly wrong, the deal falls apart, and the result is rancorous and expensive litigation over who is at fault, the only professional sitting at the closing table with professional liability insurance to cover such a problem is your attorney). 7. Real Estate Attorneys Help Make Sense of It All. Whether buying or selling a home, the documents you’ll be signing at closing will seem both voluminous and confusing. You need your questions answered. Representatives of the lender or title company either cannot answer or have a conflict of interest. A knowledgeable realtor is out of their depth when trying to give what is essentially legal advice. An attorney will explain it all to you, as your advocate. 8. Real Estate Attorneys Advise You on More than Real Estate. Your attorney will look deeper than just the transaction. Purchasing a home often involves more than just qualifying for a mortgage and closing. The client who now owns real estate will need to understand matters relating to debt-servicing based on the value of the home. Home ownership raises questions of estate planning, financial planning, accounting, and taxation. For example, there are different ways a person can hold title to real estate — a buyer needs to make an informed decision on how title should be held. Estate planning concerns might dictate holding title in a trust, or the owner of a business or a professional (e.g. a doctor) might want to try and avoid exposure to legal liability. An attorney will help his client understand these issues and refer the client to other professionals to help properly sort out these concepts when necessary. 9. Real Estate Attorneys Are Not that Expensive. The going rate for hiring an attorney to help you with your real estate transaction is still generally a bargain when you consider what the other closing charges and fees will be and the services an attorney provides. Most attorneys will provide real estate closing services on a flat fee basis, encompassing all matters related to the transaction. The amount of the fee usually amounts to about one half of one percent of the contract price or less. And the cost of a litigation attorney to clean up the mess of a failed transaction is a lot higher.

Carl Hansberry was a real “renaissance man.” He had been a deputy U.S. Marshall. He was an inventor with several patents. But he ultimately excelled at being a business entrepreneur – as a banker and as a real estate broker. He founded and was President of Lake Street Bank in Chicago and was one of the most successful real estate agents of his time. His general level of prosperity seemed to demand that he relocate his family consisting of a wife and four young children to a more prominent neighborhood in the City. But Carl Hansberry had limited options. The year was 1937, and he was African American. In addition, he lived in the public eye. Besides being the founder of one of Chicago’s first black-owned financial institutions and an objectively wealthy man, Carl Hansberry was an activist. He designed the businesses he built for the betterment of the black community. He helped organize and fund philanthropic organizations that advanced African American interests. He took political risks as well, at a time when speaking out was dangerous; he created the “Hansberry Foundation,” and wrote, published, and distributed pamphlets advocating for black civil rights. The Chicago Defender, a newspaper that catered to African American and urban issues, had dubbed Hansberry a “race man,” a title reserved for blacks who selflessly and tirelessly worked to contribute to the betterment of the community, and bravely stood against the ideas, people, and institutions in society that threatened and sought to limit the well-being and prosperity of his people. The prominent neighborhood where Hansberry chose to purchase a home in 1937 was Chicago’s Woodlawn neighborhood. Today, Woodlawn has mostly African American residents. But back then, it was a white neighborhood on Chicago’s south side. Despite a huge influx of black residents into Chicago at the time, African Americans were shut out of neighborhoods like Woodlawn because of racially restrictive covenants. A “restrictive covenant” is an agreement in a deed to real estate or in a plat of development that limits the future use of the property by any subsequent owner. An example might be “no fence may be constructed exceeding six feet in height,” or “no structure may be erected less than 5 feet from the lot lines,” or “basketball and tennis courts are prohibited.” Any new owner who violates these covenants can be fined, penalized, or legally enjoined and forced to comply. In 1928, a group of white businessmen organized a homeowner’s association in Woodlawn, establishing restrictive covenants to cover the entire neighborhood. Every owner of the 500 homes that joined the Woodlawn Property Owners Association purportedly agreed to a restrictive covenant that “no part of the land should be sold, leased to, or permitted to be occupied by any person of the colored race.” This was enforceable in court just like any other contractual commitment. If an African American sought to move into one of the homes in Woodlawn in violation of the covenant, the other homeowners could file a lawsuit to seek to prevent the sale or enjoin the new occupants from taking possession. These kinds of covenants effectively boxed African Americans into certain areas of Chicago. As more white neighborhoods adopted racially restrictive covenants, segregation was all the starker, and blacks were forced into ever shrinking spaces in poorer neighborhoods. The black population had tripled since 1900, yet by 1934, only 3% of blacks lived where 95% of the whites did. By 1937, there were 50,000 more black people than available housing units, resulting in African Americans paying up to 50% more than whites for comparable housing. At the same time, the Depression had reduced the demand for white housing. The white population in Woodlawn had decreased by 14% from 1930 to 1934. The economic atmosphere of the 1930s made it so many white families couldn’t afford houses in Woodlawn. Because of this dip in the white market share, many homes in Woodlawn that were for sale or rent sat vacant. In a strange twist of fate, the only market for these vacant homes were wealthy African Americans– people like Carl Hansberry. White property owners ended up covertly leasing their properties to blacks for exorbitant rents, risking the penalties for violating the covenants rather than suffer financial loss. It was into this environment that Carl Hansberry stepped, but he did not blaze the trail alone. Like so many other ground-breaking cases that eventually make it to the United State Supreme Court, there is a sense that everything here was “set up” to achieve the desired outcome. The authors of this set-up consisted of two African American attorneys and one of the white Woodlawn property owners. Both attorneys had been involved in promoting life insurance in the black community, substantially expanding economic opportunities for African Americans. Now they were trying to open the door for blacks to own their own homes. The first, Earl Dickerson, was also instrumental in helping African Americans qualify for the mortgage loans they needed to purchase real estate. In 1937, Carl Hansberry sought out a loan from Dickerson to buy a home in Woodlawn. Dickerson knew that if Hansberry tried to purchase this house, the Association would attempt to thwart the transaction. Dickerson was able to convince the lender (a black owned business that Dickerson had helped start) that any risk was consistent with its social goals, and that the chance of an ultimate victory in court were good. The second attorney, Harry Pace, was specifically on the lookout for an opportunity to test the validity of the Woodlawn racial covenants in court. He just needed a connection. But Pace’s connection was not with an African American buyer, but with a white seller. Pace found James Burke, a white Chicago policeman, and the owner of a 3-flat located at 6140 South Rhodes Avenue in Woodlawn. Burke had been one of the men who had helped found the Woodlawn Property Owners Association and may have had a hand in drafting the racially restrictive covenant. He had served on the Association’s board of directors, and his wife had been one of the plaintiffs in a lawsuit that had successfully enforced the covenants. In that 1934 case, Burke v. Klieman, which was brought as a class action by the Association, the Illinois Appellate Court had determined that an owner could not lease his property to an African American, and that the covenants were valid not just for current owners, but for the future. But, by 1937, Burke had experienced a falling out with the Association. The history of it is not clear – Burke and his wife had since divorced, and perhaps he bore her ill will, or maybe it was an issue with the entire association — but Pace and Burke became unlikely allies. When Burke had resigned his position with the Association, he had declared that he wanted to “put negroes in every block” of Woodlawn. Whether Burke was a noble man or not, Dickerson, Pace and Hansberry had their opening. Pace guided Burke to sell the property to Hansberry through a third party. Even before Hansberry and his family could move in, the Association filed suit to enforce the covenant. The complaint alleged that through fraudulent concealment, Burke, Price, and the lender (represented by Dickerson) had tried to hide the fact that Hansberry was black. The great irony was that Burke was now a defendant in Hansberry’s case, which sought to overturn the ruling in the prior lawsuit brought by his wife. At trial, the Woodlawn Association alleged that the restrictive covenant was valid and enforceable because 95 percent (or 475) of the 500 members of the Association had signed it. Hansberry v. Lee. 311 U.S. 32, 38 (1940). This was supported by the decree in the Burke decision from four years before, where the court had accepted a stipulation by the parties regarding the 95 percent acceptance rate. Hansberry responded that he had not been a party to the Burke case, so he was not bound by it, and to use it to deny his right to litigate the issue violated due process. Id. After hearing all the evidence, the trial court found that only 54 percent of the owners had signed the covenant, making the stipulation relied on in the Burke case fraudulent. Id. Yet, the trial court ruled that the validity of the covenant was res judicata (the principle that once a matter has been decided by a court it cannot be relitigated by the same parties), and therefore could not be challenged, regardless of any other evidence. The court ruled in favor of the Association. Id. On appeal, the Illinois Supreme Court adopted the trial court’s reasoning, finding that the 1934 Burke v. Klieman case was a “class or representative case,” and that “other members of the class are bound by the results in the case.” Lee v. Hansberry, 372 Ill. 369, 373 (1939). Agreeing that the Burke case’s ruling was res judicata, the question of the covenant’s validity had already been litigated and decided, and the trial court’s ruling was affirmed. Hansberry, 311 U.S. at 39-40. Hansberry’s legal team, now bolstered by an all-star lineup of attorneys from the NAACP, appealed to the U.S. Supreme Court. The centerpiece of Hansberry’s argument was that the res judicata issue should not apply to him because he was not a party to the Burke suit and was thus not bound by its ruling. In addition, the revelation at trial that the racially restrictive covenant had not been properly adopted meant that upholding its validity based on a fraudulent stipulation denied Hansberry’s due process rights under the 14th Amendment. Id. at 38. The U.S. Supreme Court, however, sidestepped the Constitution completely. Instead, the court hyper-focused on technicalities related to class actions, overlooking the obvious racism and the blatant unfairness of the entire process. The Court determined that the class action plaintiffs did not “adequately represent” absent members of the class. Id. at 40-43. In Hansberry’s case, the U.S. Supreme Court determined that the Burke judgment did NOT adequately represent his interests. The court explained that the restrictive covenant did not create a joint obligation, and that an inherent conflict existed between homeowners who sought to enforce the covenant and those who sought to challenge its validity. The interests of all the owners could not possibly be the same. Also, the defendants in the Burke case were not treated as if THEY were representing a class, and that the judgment, though binding on them, could not effectively bind the rights of anyone in the future. Id. at 44-46. Because of this, the Court reversed the judgment of the lower courts. Hansberry was the winner after all! In its conclusion, the court made a veiled reference at what might have been the reason for its decision. In explaining how the defendants’ interests in the Burke case did not necessarily line up with the defendants in Hansberry’s case, the Court noted that the Burke defendants were “nominal defendants,” and that “it does not appear that their interest in defeating the [covenant] outweighed their interest in establishing its validity.” Id. at 46. While not saying so directly, the Court seemed to imply that the Burke defendants, who were ostensibly all white homeowners, really didn’t have a vested interest in whether they won or lost the case. The defendants in the current case, however, included African Americans, whose interests in invalidating the covenant were clear. But there was also a white defendant in Hansberry’s case who had a unique position. James Burke would have been considered one of the class action plaintiffs in Burke. Indeed, his wife was the named plaintiff of the class. There would have been no doubt at the time Burke was litigated in 1934 that James Burke was one of many plaintiffs seeking to enforce the racially restrictive covenant. The evidence showed he had signed the covenant, leading to the implied conclusion he intended to be bound by it. But here he was, six years later, a defendant in a similar legal action seeking to invalidate the same covenant. Was Justice Harlan Stone, the opinion’s author, specifically thinking of James Burke when he defined the defendants as “nominal?” Regardless, the judgment against Carl Hansberry had been reversed, and his purchase of James Burke’s property went forward. The U.S. Supreme Court’s ruling was trumpeted in the black community as a tremendous victory. The Chicago Defender proclaimed to its largely black readership that “The iron band of restrictive covenants which has checked the eastward movement of the Race on Chicago’s South side was pierced at one point by a decision handed down by the United States Supreme Court.” In the same edition, an interview with Hansberry indicated he had purchased the property for the “purpose of trying to have the theory of restrictive covenants once and for all abolished, or declared as against the public policy of the state and nation.” But the ultimate legality of racially restrictive covenants had not been directly addressed, and Hansberry’s new neighbors were not pleased with the result. After his family moved in, they were subject to mob violence. A brick thrown through a window nearly killed his youngest daughter. His wife always carried a pistol with her and kept close watch over the children. Those children were subjected to open humiliation, and were spat upon, cursed at, and beaten as they walked to and from school every day. These daily struggles and the anxiety they caused took a terrible toll on Carl Hansberry. His health appeared to be in decline. He tried to continue his activism, and ran for Congress later that year, but lost. Depression began to set in. He became extremely disillusioned. He began to feel that the great victory he had won in court had all been in vain. Chicago’s neighborhoods were still as segregated as ever. He decided to relocate his family to Mexico, to escape the country whose noble ideals he now felt had betrayed him. While visiting Mexico, he suffered a cerebral hemorrhage, and died there on March 17, 1946. Sadly, had Carl Hansberry lived another two years, he would have seen the fruit of the seeds he had planted when he bought the 3-flat in Woodlawn. On May 3, 1948, the U.S. Supreme Court issued its decision in Shelly v. Kramer, 334 U.S. 1 (1948), which held racially restrictive housing covenants cannot be legally enforced and were unconstitutional because of the 14th Amendment’s Equal Protection Clause. Justice Harlan Stone had also died in 1946, and none of the same attorneys were involved. Chief Justice Fred Vinson wrote the opinion, which was a unanimous 6-0 decision. But doesn’t the U.S. Supreme Court have nine members? Yes, but three of the justices had to recuse themselves because they owned homes which had racially restrictive covenants. There was one other product that grew out of Carl Hansberry’s home purchase and social experiment. His youngest daughter – the one who had dodged the brick – grew up to be a playwright. In 1959, Lorraine Hansberry’s play, A Raisin in the Sun, premiered on Broadway. The play told a fictionalized version of her family’s story, about a black family who decides to purchase a home in an all-white neighborhood in Chicago. It was the first time an African American female author had a play performed on Broadway. The title of the play comes from a Langston Hughes poem, “Montage of a Dream Deferred,” “What happens to a dream deferred? Does it dry up like a raisin in the sun? Or does it explode?” Had Carl Hansberry lived to see his daughter’s work, he would have seen his “renaissance man” concept come full circle. His daughter portrayed his activism and idealism in the face of the racial injustice and oppression he fought so hard against in the character of “Mama,” the matriarch of the family in the play. Mama is determined to get her family out of a ghetto tenement. She rejects the community group’s cash offer to stop her family from moving into its all-white neighborhood, saying to her son, eager to take the money: “I come from five generations of people who was slaves and sharecroppers — but ain’t nobody in my family never let nobody pay ‘em no money that was a way of telling us we wasn’t fit to walk the earth. We ain’t never been that — dead inside.” Carl Hansberry never felt it himself, but he was vindicated. Vindicated in his court victory. Vindicated after death by the Shelly case. Vindicated by his daughter’s portrayal of his ideals on stage, and her life dedicated to civil rights activism. Carl Hansberry’s story is Chicago-centric, but with universal appeal. It’s a shame that when the concept of the 14th Amendment and equal protection is presented in American law schools, the name “Shelly” is remembered, and not “Hansberry.” SOURCES: Shelly v. Kramer, 334 U.S. 1 (1948). Hansberry v. Lee. 311 U.S. 32, 38 (1940). Lee v. Hansberry, 372 Ill. 369, 373 (1939). Burke v. Kleiman, 277 Ill. App. 519 (1934). Anna Price, Hansberry v. Lee: The Supreme Court Case that Influenced the Play “A Raisin in the Sun,” IN CUSTODIA LEGIS, Library of Congress, January 24, 2023, https://blogs.loc.gov/law/2023/01/hansberry-v-lee-the-supreme-court-case-that-influenced-the-play-a-raisin-in-the-sun/ Radiolab: The Vanishing of Harry Pace: Episode 2, WNYC STUDIOS (June 18, 2021), https://radiolab.org/episodes/vanishing-harry-pace-episode-2 Ron Grossman, Flashback: A Chicago Family Defied a Racist Real Estate Covenant. The Backlash and Legal Fight Inspired ‘A Raisin in the Sun,’ Chicago Tribune, July 10, 2020, https://www.chicagotribune.com/history/ct-opinion-flashback-hansberry-house-restrictive-convenant-20200710-dslzaju35ngmpghgwazpcodosq-story.html Becky Beaupre Gillespie, A Dream Deferred, Advanced, and Remembered, The University of Chicago Law School, April 29, 2020, https://www.law.uchicago.edu/news/dream-deferred-advanced-and-remembered Alan R. Kamp*, The History Behind Hansberry v. Lee, 20 U.C. Davis L. Rev., 481 (1987). (*Allen Kamp was a Professor at John Marshall Law School when the author was a student there).

Last month, I talked about how high housing prices, unpredictable and rising mortgage rates, combined with runaway inflation were making it tough for consumers to buy homes. In making suggestions for ways that might help consumers make buying a home more affordable, one of the ideas was to investigate the recent changes in “conforming loan” limitations. The two most important federal entities that regulate mortgages — the Federal Housing Finance Agency (FHFA) and the Federal Housing Administration (FHA) — raised the confirming loan limits and FHA loan limits for 2023. What is a “conforming loan?” This means a loan that is structured according to guidelines set by government-sponsored entities such as Freddie Mac and Fannie Mae, as well as the FHFA. Contrast this with a “conventional” loan., which is any loan issued by a private, non-government entity, such as a bank. Not every conventional loan is a conforming loan. Conventional loans tend to require a larger down payment and charge higher interest rates than conforming loans. A conforming loan is easier to qualify for. Conforming loans are also designed to be purchased by Fannie Mae or Freddie Mac on the secondary mortgage market, making them more appealable for lenders to offer them. And don’t think these loan programs are just for first-time home buyers – if the house you are looking to purchase is in a “designated low-cost area” (and Southern Cook County certainly is!), you can qualify for a lower interest rate. Conforming loan limits are based on the average home price of an area and change each year to reflect current home values. Homebuyers shopping for a single-family homewill be able to qualify for a confirming loan of up to $726,200 in 2023, a $79,000 jump over the 2022 conforming loan limit. For the consumer who is trying to figure out how to buy that bigger, fancier house, this increase is a boon. When the conforming limit price is passed, the only loan a purchaser can get is a “jumbo” loan, with a much higher down payment and interest rate. The new limits allow for an additional $79K before that line is crossed. In desirable areas, this could be the difference for the family that needs more bedrooms. The FHA loan limits have also increased. FHA loans are traditionally meant for homes on the less-expensive side of the spectrum for lower income buyers. The FHA loan limit is set at 65% of the conforming loan limit. The 2023 FHA loan limit is now $472, 200.00, which is $51K higher than 2022. So what’s the difference here? FHA loans are issued by private mortgage lenders but are guaranteed by the government. This government backing classifies FHA loans as non-conventional, but it also makes the loans less risky for banks. As a result, it’s usually easier for borrowers to qualify for an FHA loan than for a conventional or conforming loan. If you have issues with your credit, it’s easier to get an FHA loan. Conventional loans fall into two categories: Conforming and non-conforming loans. Loans that don’t meet the FHFA’s standards are considered non-conforming conventional loans – like the “jumbo” loans mentioned above. The difference between conforming conventional loans and FHA loans, are the conforming loans are not backed by the government, but they meet the standards set by the FHFA and can be sold by your lender on the secondary market. So, while conventional conforming loans have fewer restrictions, they can still be tougher to qualify for. The practical differences between FHA loans and conventional conforming loans are that with FHA loans, the home must be owner occupied. The down payment for the FHA loan tends is usually around 3.5% of the price, while conventional conforming loans usually require 5%. (Although there can be rara occasions where the conventional loan’s interest rate could be as low as 5%). Both loans require mortgage insurance, and with the conventional loan, this is eliminated when your debt-to-equity ratio reaches 20%. (Many FHA borrowers try to refinance when they get to that 20% level as well). Of course, the required minimum credit score is lower for the FHA loan. In the end, there are multiple factors that every buyer needs to consider as they determine what kind of mortgage to pursue. Buyers need to determine how much they can ultimately spend on a house. Interest rates and the kind of loan you end up getting are just two of the factors. If people expect the interest rates to come back down to 2 percent again, they will be waiting a long time. But the costs of renting are at an all-time high as well. While the increased interest rates and rising prices force some to sit on the sidelines for now, those who want or need to buy despite the economic situation need whatever help they can get. Understanding mortgage options – like the “ins and outs” of conforming and FHA loan limits — is a great starting point.

What a difference a year makes. A year ago, the real estate market still seemed hot. 2021 had seen mortgage interest rates hit an almost unheard-of annual average low of 2.96 percent. The supply side problems of the pandemic made new construction materials hard to obtain, and therefore much more expensive. Home buyers turned to existing homes. But there was a shortage of the “inventory” of pre-built homes, driving up demand, prices, and prompting buyers to try to snap up homes as soon as they were listed for sale. Bidding wars erupted. Selling for more than the list price was the norm. As 2022 began, we started to feel the effect of an economic downturn. Inflation had returned to haunt us in a way it hadn’t since the 1970s. Consumer prices started to rise. The lingering supply side issues from the pandemic made it tough to find what we needed. Demand drove up the price; inflation brought it up even more. From gas to groceries to garages, 2022 prices seemed out of control. The core inflation rate rose nearly 9 percent from January to December – 5.1 percent in September alone. The Federal Reserve felt compelled to raise interest rates seven times over the course of 2022. What About the Housing Market? The housing “inventory shortage” became less of a problem. As the number of existing homes increased by over 26 percent, buyers had more choice, and therefore, more negotiating power. Houses were spending more time on the market. By October 2022, the average time a home spent on the market was 54 days, when just a few months before, it was 7 days. This change in supply and demand also affected prices. By mid-2022, the median listing price for a home was $450,000.00 – an all-time record high. July 2022’s home-price growth over the same time in 2021 was an amazing 15.6 percent. In just a month’s time, the median price had dropped to $435,000.00. By the end of November, it had fallen to $370,700.00. While this still reflected an increase of 5 percent over 2021, homes seemed to be losing value at a rate of 2 percent or more per month. (Although these prices were still 30 percent ahead of January 2019). Great News for Buyers, but What About the Mortgage Rates? The mortgage rates were at 3.25 percent as 2022 began. Inflation and the Federal Reserve’s decisions to raise general interest rates drove mortgage rates upward at a dizzying pace. By April, the thirty-year fixed mortgage rate was over 7 percent for the first time since 2002. While rates retreated briefly, by the end of the year, they were at 6.75 percent to 8 percent depending on the property’s location. This meant that even if home prices were coming down, soaring mortgage rates served to cramp affordability. For example, a $200,000.00 house purchased in February 2022, with a mortgage of $195,000 and an interest rate of 3.8 percent resulted in a monthly payment of principal and interest of $903.00 a month. The same home at the same price and same loan purchased in December 2022 with an interest rate of 7 percent results in a monthly payment of $1,297.00. The same investment now costs 30 percent more. This combination of elevated mortgage rates and housing prices (which, despite the recent decline, are still 30 to 50 percent higher than they have been in decades) means substantially reduced affordability. We’ve seen new construction sales decline by 18 percent. Existing home sales are down 23.8 percent. As 2023 dawns, the news about the real estate market seems to be all bad – especially for Buyers. But home prices and mortgage rates aren’t the only things to consider. The cost of renting is also at an all-time high. With overall inflation currently around 8 or 9 percent, a homeowner can take on a fixed rate mortgage to provide a hedge against inflation. With home prices starting to come down, the monthly cost of ownership will generally be lower than renting. The increase in housing inventory also helps. More houses mean less pressure for a buyer to make a particular home a “must have” – buyers have more leeway to shop around. Houses are spending more time on the market, allowing buyers to make more careful and informed decisions. Sellers are beginning to adjust their expectations. There have also been indications that inflation is slowing, and mortgage rates may be coming back down to earth. People alive today may never see mortgage interest drop below 4 percent again, but the rates certainly won’t keep going up indefinitely. Some of my buyer-clients have taken the plunge, hoping that in a year or two a decline in interest rates will allow them to save money with a refinance. Options to Help Facilitate a More Affordable Home Purchase For example, the Federal Housing Finance Agency (FHFA) recently announced it raised the “conforming loan” limits. Mortgage loans that fit into conforming loan limits don’t have as many restrictions, expenses, or fees as non-conforming loans. With a “conforming loan,” you can arrange for a lower down payment, a lower mortgage rate, and get approved with a lower credit score. Plus, if the home you are seeking to purchase is in what the FHFA defines as a “high cost area,” you can buy a more expensive home and take advantage of the “conforming loan” benefits. (I plan to go more in-depth on the FHFA’s conforming-loan/high-cost-area advantages in a future blog entry). Another option, if a buyer can afford it, is to finance over 15 years rather than 30. Let’s take that same $200,000.00 home purchase with a $5K down payment that results in a $1,297.00 monthly payment of principal and interest. 15-year rates are usually a point to a point and a half lower – for the sake of example, we’ll use 5.9 percent. The monthly payment is higher of course — $1,635.00 per month. But you’ll save 65 percent on interest for the life of the loan. But where the 15-year concept will really come in handy is for those buyers who are taking the plunge now, with 30-year rates over 7 percent. While the monthly payment on the current 30-year fixed loan is 30 percent more than it was last year, if mortgage rates continue to moderate, those buyers can refinance in a few years after paying down their existing loan to a degree. Then, they can refinance at 15 years, at a lower rate and a significant savings on interest. While home prices are seeing a sharp decline, economists are not forecasting a housing crash like 2008. In fact, in areas like Chicago’s south side and the southern suburbs, where housing price increases were more modest than the rest of the country, we may see the market stabilize a lot faster as the rate of inflation slows. People will always be selling and buying homes. It will be tougher to do so in 2023 because of inflation and other factors. It won’t take long, however, for both buyers and sellers to adjust. Interest rates will eventually stabilize at rates that are higher than we’ve had the last few years, but with less volitivity. There will be a lot less of a “wild west” feeling in the market – no more bidding wars or paying more than list price. The pendulum will swing back – and a feeling of stability and satisfaction will return. (As I review this material before publication, the current mortgage rates for January 9, 2023 are 7.09 percent for a 30-year fixed, 5.96 for a 15-year fixed). In any event, no one should consider selling or buying real estate without getting an attorney involved. Here at John R. Russell, Ltd., we stand ready to assist you with the process of selling or buying. Feel free to contact us or john@jrusslaw.com.

ABC News in Chicago reported on May 7, 2022 that “an analysis of property values reveals new insight about the real estate market on Chicago’s South Side, which is also home to some of the city’s largest new development plans.” Apparently, the real estate market on Chicago’s south side can be summed up in one three letter word – “Hot!” Local realtors are reporting that because there is a lot of vacant property, there is a lot of opportunity for new development. This includes commercial, mixed use, and residential construction. The report shows lots of new townhomes, new condos, affordable housing, and single-family homes being sold at or above list prices. But here’s the catch – the prices are more affordable than what you would pay on the North Side of the city. The ABC7 Data team began a study a year before the pandemic, compiling property values from 2019 to early 2022. “It found Near North Side properties tend to sell for more and are more often on the market. But Near South Side properties have had larger property value increases over the last three years, with the largest increase in the Oakland neighborhood. South Side properties also spend less time on the market. And real estate on the South Side may benefit from new developments. Among them is a $3.8 billion redevelopment of the former Michael Reese Hospital site, with its own Metra stop. There’s also the nearly $1 billion Obama Presidential Center, where President Obama has reportedly asked Tiger Woods to take on the Jackson Park-South Shore Golf Project. While it’s far from a done deal, Woods came back with a plan that combines the two courses into one championship course designed to bring PGA events.” The increase in values is particularly impressive. Across the entire City of Chicago, home values have increased by 34% over the last five years, with a median value of $325,000.00. Of course, when you consider Chicago on a neighborhood basis, these values can vary greatly. Lincoln Park currently has a median value of $599,000.00. While southside neighborhoods like Kenwood, South Shore, and Woodlawn have lower values, it’s still amazingly strong – the south side’s median value is around $235,000.00. There are other advantages to buying a home on the south side of Chicago. Back in 1893, the World’s Columbian Exposition (also known as the Chicago World’s Fair) was erected in the Hyde Park area. After the fair was over, this allowed the City to establish a tremendous amount of park space and transit lines for the surrounding communities. For example, the neighborhoods that surround the University of Chicago have beautiful Washington Park connected to the Midway Plaisance, which is connected with Jackson Park, leading to the Museum of Science and Industry and its campus, winding up at a well-developed lakefront area with parks and boat harbors. There isn’t an area like it anywhere else in the City. Indeed, in the wake of the development after the 1893 World’s Fair, 60% of Chicago’s landmass is on the South Side, but only 40% of the population live there. The more open nature of these South Side neighborhoods can be very appealing. The redevelopment mentioned earlier is also a direct factor. Many South Side neighborhoods are thriving again after years of decline and neglect. This offers investors and entrepreneurs an opportunity to reprice and recharacterize property that has been undervalued or underused. These kinds of market opportunities are hard to find, and they give Chicago home buyers and business developers opportunities that may not be present in other real estate markets. The increasing value of residential real estate on the South Side is also driven in part by the geography of the neighborhoods and how they’re situated around amenities such as mass transportation and access to Lake Michigan. Home buyers who work in Chicago’s Loop want a place where they can get away from the pressures of downtown, but still be close to services and the major attractions of the cities. Add the proximity to the Lake, and these South Side neighborhoods become more desirable because they offer the same kind of amenities as North Side neighborhoods, but at a much more reasonable price. These real estate market trends have also led to a significant amount of diversity in the populations of the south side. Fine Dining and entertainment are finding their place. But the neighborhood “feel” is there. A generation ago, the values in these neighborhoods were declining, but all these recent trends and developments bring tremendous opportunities for someone to find not just a house, put a neighborhood atmosphere to call “home,” while having great investment value in the property, with lots of hope for future growth. Antje Gehrken, president of the Chicago Association of Realtors, said the real estate market in Chicago will likely get some breathing room in the near future, meaning interested home buyers won’t have to decide so quickly and the bidding wars should slow down a bit. But this is all encouraging news for all of us who live and work in the Southland, and for those who want to live and invest in these communities.

Home utility bills have been increasing for many consumers as more people spend more time at home. Extreme weather events also seemed to contributed to higher utility bills in 2021. In 2020, median household electricity usage rose by 8.2 percent year-over-year, and only declined slightly in 2021. Between April and October, the period of peak electricity, households across the United States were paying $55 more year-over-year in 2020 and again in 2021. Although the evidence supporting this date shows that the increase the findings is in part due to the COVID-19 pandemic, extreme weather has had much more of an impact on utility bills. The clearest example is the Texas ice storm in February 2021. This extreme weather event resulted in a 76.9 percent increase in average daily usage with a peak increase on utility usage happening at 144.9 percent on February 16th. Nearly 50 percent of U.S. households also experienced higher bills this past winter. This marked an increase of 30 percent over last year, according to the federal Energy Administration. Natural gas bills are expected to continue to average $746 from Oct 1st to March 31st, which is an increase from $573 during the same period last year. But What About Inflation? The recent rise in inflationary trends would indicate that this also might be a factor in rising home utility bills. However, electricity prices have been steadily increasing for the last 20 years, regardless of inflation. In fact, in the last 20 years, there were only three years where electricity did not significantly increase in price. Of course, inflation can occur when prices rise due to increases in production costs, such as raw materials. But if there is evidence of inflation in electrical costs, its more likely that the surges in demand for products and services causes inflation as consumers are willing to pay more for the product. Source: Greater Illinois Title Co. Real Estate Digest, March 2022

Well, at least like a lot of people have never seen. If forty years make a generation, then anybody under the age of 42 or 43 has never experienced inflation this high. The Labor Department has issued a report that US consumer prices soared 8.5% in March, 2022 from a year earlier for the fastest annual growth since 1981. Gasoline prices are the biggest reason, shooting up 48%, which makes up half of the increase. Speculators might switch from recommending investing in crypto currency to buying up boxes of Cocoa Puffs and Lucky Charms. Breakfast cereal prices are up 9.2%. But other grocery items are even costlier. Meat prices have increased 14.8%. For those planning a fancy location wedding this summer, the costs for men’s jackets, suits, and coats were up 14.5% for the year, and airline fares gained 10.7% in just the last month. Popular entertainment back in 1981 included horror movies like “American Werewolf in London,” and “Halloween II.” (They were only on the second “Halloween” movie in 1981?). But the top grossing movies at that time were exciting, but hopeful adventures, like “Raiders of the Lost Ark,” or “Superman II.” And while the current news about inflation seems more like a horror film, there is a little hopeful news. Used car prices, which have gone up 35% over the past year, fell from February to March. And “core CPI,” which subtracts volatile food and energy prices from the calculations, increased only 0.3% for the month vs. 0.5% as predicted. This “softer-than-projected” core CPI reading could indicate inflation growth has peaked in March. If that’s true, then maybe we can finally sort things out the way a suspense/thriller movie like 1981’s “Absence of Malice” or “Eye of the Needle” resolves the plot twists in ways we didn’t see coming. In the summer of 2021, federal experts considered inflation a “transitory” outcome of Covid-related supply chain bottlenecks. But shortages persisted. Consumer demand remained high. Russia invaded Ukraine, wiping out a chunk of food and energy supplies. China locked down Shanghai, which provides critical components to US factories. What happens next? How will this “runaway” inflation start to slow down? Unfortunately, inflation is something that usually must run its course. Trends that contribute to inflation eventually seem to adjust or go away. For example, supply chain problems that have gripped American commerce are likely to be smoothed out or eliminated by the businesses involved. When prices get too high, Americans will generally adjust to the inflationary trends and just spend less, helping to adjust the market demand. There is an old saying that is taught in Economics 101 — “the cure for high prices is high prices.” Those who set economic policy in the Government might also intervene. The President announced a change in EPA regulation to allow for higher percentage ethanol-blended fuels to be sold in the U.S. to make gasoline more affordable. The Federal Reserve has been increasing interest rates to raise borrowing costs for consumers and businesses. But even if all these hopeful concepts succeed, it may be years for price growth to return to the more conservative levels we’ve been used to the last 6 to 10 years. Source: morningbrew.com

After 2021 marked the largest home price gains on record, home prices seem poised to continue to grow in 2022. In 2021, the median sales price for a home rose to $346,900, up 17 percent from one year earlier, a gain of $50,200 for the average homeowner in just one year. Many economists cite this latest price increase as an all-time record. Home values could be considered even stronger than they were back in the days of subprime lending. But reasons for the current rising home prices are different this time than during the crisis that led to economic collapse 15 years ago. Congressional reforms enacted in the wake of the 2008 recession help ensure that people can actually afford the home loans they get. But the biggest reason for Home prices rising so fast in recent months is because there is a major shortage. December 2021 marked an all-time inventory low and there still seems to not be enough homes available for sale. While low interest rates have played a big role in driving demand, the Mortgage Bankers Association forecasts that those headwinds should diminish as rates for a 30-year fixed-rate loan increase to 3.5 percent in the second quarter of 2022 and rise to 3.7 percent in the third quarter. Finally, by the end of this year, rates are expected to reach 4 percent. But will this prove to finally slow this “hotter than ever” housing market? Will the inventory shortage catch up? Only time will tell. Source: Greater Illinois Title Co. Real Estate Digest, March 2022

The COVID-19 pandemic has been a game-changer for interstate migration. MoveBuddha (an internet based company that advertises it helps coordinate cross-country moving services) conducted a study of over 400,000 relocation queries in 2021 to uncover Americans’ patterns for moving. Another company connected to helping people relocate, United Van Lines, did a survey of their own, tracking state to state migration patterns. Here are the trends they uncovered. The MoveBuddha survey found that just 8.4 percent of Americans reported that they were moving at the beginning of 2021, the lowest migration rate among Americans in more than 70 years. By the second quarter, moves were up slightly, with 13 percent of Americans reporting in August 2021 that they had relocated since March 2020. Certain States saw a sharp increase in net migration flow. While the two studies ranked the states differently, the trends were very much the same. MoveBuddha noted Florida’s ratio of inbound to outbound moves increased 43% in 2020. That means more than twice as many people moved into Florida as left it. Alaska saw even steeper gains in 2020, with a 68% more people moving in than out, and then an additional 38% in 2021. There were three people moving into Idaho for every two that moved out. But the biggest differential was for Montana, with 73% of total moves coming in, which translates into a 4 to 1 ration for move-ins versus move-outs. United Van Lines’ survey found Vermont as the state with the highest percentage of people moving in (74%). The rest of their top 5 were South Dakota, South Carolina, West Virginia and Florida. On the flip side, United Van Lines’s survey showed the states with highest rates of people moving out – New Jersey (71%), Illinois (67%), New York (63%), Connecticut (60%) and California (59%). MoveBuddah’s top three states people were fleeing were California, New Jersey, and Illinois. But when people are relocating to another state, where in that state did they tend to go? The two surveys had two very different results. MoveBuddah’s data showed that when people move out of a big city, they tend to relocate to another large city. When residents departed 30 of the nation’s largest cities, they relocated to a city 30% larger than the one they left. The United Van Lines’ survey data showed something different; it appeared the response to COVID-19 was a boost to the value of smaller, midsized towns and cities. While part of the reason to leave a high-density area like a major metropolitan area was the risk of infection, many movers experienced a transformation in how they were able to work, with more flexibility to work remotely. The MoveBuddha data helped confirm these trends, showing that the majority of the top 25 cities with the most growth in net migration were mid-size, with populations ranging from 10,000 to 200,000 and an average population of 130,000. This is much smaller than the total list of cities where migration occurred, which averaged 294,000 with an average in the bottom quartile of 177,000. The MoveBuddha report also revealed several cities that consistently attract more residents every year. These cities saw strong net migration in 2020 and higher inflow rates in 2021: Tampa, Florida.; Fort Worth, Texas; Tulsa, Oklahoma.; Anchorage, Alaska; and Miami, Florida. The MoveBuddha survey showed a general trend towards people moving to warmer climates in all but one of those cities, and it did not draw any socioeconomic or political conclusions about migrations. But there did appear to be a trend towards moves from higher-taxed blue states to lower-taxed red states and similarly from states with more restrictive COVID-19 policies to those that had less restrictive policies. United Van Lines also conducts an annual survey to examine the motivations and influences for Americans’ interstate moves. This year’s survey results indicated that 31.8% of Americans who moved did so to be closer to family. Additionally, 32.5% of Americans moved for a new job or job transfer, a significant decrease from 2015, when more than 60% of Americans cited a job or transfer. Another obvious trend saw the exodus of Gen Xers, many of whom retired early and “moved to Florida.” The data also confirmed the “return to small town America” trends, as they overwhelmingly favored less-dense cities such as Punta Gorda and Sarasota over population-dense locations such as Miami and Orlando. Sources: Greater Illinois Title Co. Real Estate Digest, March 2022; https://www.newsnationnow.com/us-news/study-top-10-states-people-are-moving-to-and-leaving/

For a half century, federal law has prohibited employers from discriminating against their workers based on religion. Title VII of the Civil Rights Act made it clear that employers must “reasonably accommodate. . . an employee’s or prospective employee’s religious observance or practice” unless the employer is “unable” to do so “without undue hardship on the conduct of the employer’s business.” 42 U.S.C §2000e(j). The question for an employer has been “Where is the line drawn?” If an employee’s religious practices require the employer to change its policies or make some special exception, at what point does it become an “undue burden?” In 1977, the U.S. Supreme Court decided Trans World Airlines v. Hardison, 432 U.S. 63 (1977). The case involved a Seventh-Day Adventist employee, whose religious beliefs required that he not work on their Sabbath Day – which was Saturday. The employee asked to have every Saturday off. Because the employer operated seven days a week, and scheduled its workers according to seniority, more recent hires like this employee were assigned to work on Saturday. Attempts were made to accommodate the employee, but if the employee didn’t work his assigned Saturday shift, the employer was forced to fill the shift with a supervisor, shift another employee over (which left that department undermanned), or pay premium wages for overtime. The employee was fired for refusing to work his assigned shift and brought an action against the employer via Title VII for failing to make a “reasonable accommodation.” Id. at 67-69. While the Court ruled in the employer’s favor, it was not the decision itself that made the most impact, but what the court said about “undue hardship.” “To require [the employer] to bear more than a de minimus cost” to provide the accommodation “is an undue hardship.” Id. at 84. Courts that have interpreted Title VII since then have understood that an employer has no duty to accommodate an employee’s sincerely held religious beliefs if the employer could demonstrate that the proposed accommodation would result in more than a minimal cost or expense for the business. Even when the Equal Employment Opportunity Commission investigated claims of religious discrimination, it adopted this position. However, in an opinion released June 29, 2023, the U.S. Supreme Court announced that this was all wrong. In Groff v. DeJoy, the Court ruled that a “small or trifling” burden is not the kind of “undue hardship” that justifies an employer refusing to accommodate an employee’s religious beliefs. Id. at 17. Instead, employers must accommodate employee religious beliefs unless they can show that “granting an accommodation would result in substantial increased costs in relation to the conduct of” employer’s business. Id. at 18. The facts of Groff are similar to Hardison. The employee was an evangelical Christian who believed that Sundays must be reserved for rest and worship. He began working for the employer (the U.S. Postal Service) in 2012, He was disciplined for refusing to come to work when scheduled to work on Sundays and resigned in 2019. Id. at 2-3. The Court, in a unanimous opinion, spent a great deal of space explaining the Hardison decision. Justice Alito’s opinion explained that courts interpreting Hardison have construed “undue hardship” to mean “any effort or cost that was more” than minimal, but that this interpretation is “a mistake.” Id. at 19. Hardison’s focus had been on whether federal employment discrimination laws required an employer and labor union to accommodate employee religious practices at the expense of bargained-for seniority rights of the established employees. Hardison barely discussed the question of what constituted an “undue hardship.” Id., 16-18. Indeed, Hardison relied on an express finding of the District Court that the employee’s proposed accommodations “would have created an undue burden on the conduct of [employer’s] business (Hardison, 42 U.S., at 84, n.15) and that “accommodation is not required when it entails “substantial” “costs” or “expenditures.” Groff at 3. The Court noted that the phrase “undue hardship” required a higher standard. “Hardship” itself is a term that means “something hard to bear,” and “more than a mere burden.” Id. at 16. With the additional modifier, “undue,” the concept must be “excessive” or “unjustifiable.” Id. The Groff employee argued that employers must accommodate religious practices unless the employer would experience “significant difficulty or expense.” The Government argued that an “undue hardship” meant an employer would suffer” substantial expenditures” or “substantial additional costs.” The Court concluded that “it is enough to say that an employer must show that the burden of granting an accommodation would result in substantial increased costs in relation to the conduct of its particular business.” Id. at 18. So, if “undue hardship” does not mean “de minimus” anymore, but rather means “substantial increased costs,” how are employers to interpret that? The Court, while refusing to establish any kind of clearly established “bright line” test, noted that the burden of granting an accommodation would result in substantial increased costs in relation to the conduct of its particular business.” Id. at 18 (emphasis added). This is not a one-size-fits-all standard. A small business operating at one location with 15 employees might face substantial increased costs accommodating an employee like the one in Groff, while a Fortune 500 company could allow this same employee the leeway necessary to accomplish the basic functions of his job while not violating his conscience. The Court also noted that the employee/plaintiff wanted the Court to apply the same standards used to determine when a suggested accommodation becomes an undue hardship from the standards under the Americans with Disabilities Act (“ADA”). Id. at 18. Under the ADA’s Enforcement Guidance, “undue hardship” also means “significant difficulty or expense.” The guidance encourages an analysis “which focuses on the resources and circumstances of the particular employer in relationship to the cost or difficulty of providing a specific accommodation. Undue hardship refers not only to financial difficulty, but to reasonable accommodations that are unduly extensive, substantial, or disruptive, or those that would fundamentally alter the nature or operation of the business.” EEOC Enforcement Guidance on Reasonable Accommodation and Undue Hardship under the Americans with Disabilities Act. [Washington, D.C.] EEOC, Notice No. 915.002 (October 17, 2002). The Groff decision seems to suggest the Title VII standard for establishing undue hardship is lower than the ADA standard, noting that the suggestion that decades’ worth of ADA caselaw should serve to guide the courts “goes too far.” Groff, at 19. I think it’s a closer call than Justice Alito suggests. I guess we will wait for the lower courts to figure this out. But the Groff Court has made it clear that employers must do more than simply determine if a particular possible religious accommodation suggested by an employee is reasonable. For example, in the Groff example, giving the Sabbatarian employee every Sunday off will force other employees to work overtime, meaning an increased payroll, which the employer concludes is an “undue hardship.” Id. at 20. The employer will need to consider other options, such as voluntary shift swapping, incentive pay, or shifting employees from one worksite to another. Id. at 20-21. “Title VII requires that an employer reasonably accommodate an employee’s practice of religion, not merely that it assesses the reasonableness of a particular possible accommodation or accommodations.” Id. at 20. Other factors that might be relevant when an employer considers the impact of a religious accommodation is how it will affect the productivity or morale of the other employees. However, “a hardship that is attributable to employee animosity to a particular religion, to religion in gen­eral, or to the very notion of accommodating religious practice, cannot be considered “undue.” Bias or hostility to a religious practice or accommodation cannot supply a defense.” Id. at 5. The Court remanded the case back to trial, specifically instructing the District Court to consider all possible accommodations, some of which may have been overlooked because of the “de minimus” threshold. Id. at 21. The Groff employee’s high court victory may prove hollow. The evidence that there were multiple efforts by the employer to accommodate the employee’s request to have Sunday off that were not considered at trial, and that the trial court found there to a be genuine issue of material fact regarding whether the employee’s resignation was an “adverse employment action” for purposes of Title VII indicate a strong possibility that the employer will still prevail. Id. at 3, n.2. But the Groff Court’s clarified standard for what constitutes an “undue burden” for religious accommodation under Title VI will offer employees who seek religious accommodations more negotiating power, and force employers to take such requests more seriously.

Carl Hansberry was a real “renaissance man.” He had been a deputy U.S. Marshall. He was an inventor with several patents. But he ultimately excelled at being a business entrepreneur – as a banker and as a real estate broker. He founded and was President of Lake Street Bank in Chicago and was one of the most successful real estate agents of his time. His general level of prosperity seemed to demand that he relocate his family consisting of a wife and four young children to a more prominent neighborhood in the City. But Carl Hansberry had limited options. The year was 1937, and he was African American. In addition, he lived in the public eye. Besides being the founder of one of Chicago’s first black-owned financial institutions and an objectively wealthy man, Carl Hansberry was an activist. He designed the businesses he built for the betterment of the black community. He helped organize and fund philanthropic organizations that advanced African American interests. He took political risks as well, at a time when speaking out was dangerous; he created the “Hansberry Foundation,” and wrote, published, and distributed pamphlets advocating for black civil rights. The Chicago Defender, a newspaper that catered to African American and urban issues, had dubbed Hansberry a “race man,” a title reserved for blacks who selflessly and tirelessly worked to contribute to the betterment of the community, and bravely stood against the ideas, people, and institutions in society that threatened and sought to limit the well-being and prosperity of his people. The prominent neighborhood where Hansberry chose to purchase a home in 1937 was Chicago’s Woodlawn neighborhood. Today, Woodlawn has mostly African American residents. But back then, it was a white neighborhood on Chicago’s south side. Despite a huge influx of black residents into Chicago at the time, African Americans were shut out of neighborhoods like Woodlawn because of racially restrictive covenants. A “restrictive covenant” is an agreement in a deed to real estate or in a plat of development that limits the future use of the property by any subsequent owner. An example might be “no fence may be constructed exceeding six feet in height,” or “no structure may be erected less than 5 feet from the lot lines,” or “basketball and tennis courts are prohibited.” Any new owner who violates these covenants can be fined, penalized, or legally enjoined and forced to comply. In 1928, a group of white businessmen organized a homeowner’s association in Woodlawn, establishing restrictive covenants to cover the entire neighborhood. Every owner of the 500 homes that joined the Woodlawn Property Owners Association purportedly agreed to a restrictive covenant that “no part of the land should be sold, leased to, or permitted to be occupied by any person of the colored race.” This was enforceable in court just like any other contractual commitment. If an African American sought to move into one of the homes in Woodlawn in violation of the covenant, the other homeowners could file a lawsuit to seek to prevent the sale or enjoin the new occupants from taking possession. These kinds of covenants effectively boxed African Americans into certain areas of Chicago. As more white neighborhoods adopted racially restrictive covenants, segregation was all the starker, and blacks were forced into ever shrinking spaces in poorer neighborhoods. The black population had tripled since 1900, yet by 1934, only 3% of blacks lived where 95% of the whites did. By 1937, there were 50,000 more black people than available housing units, resulting in African Americans paying up to 50% more than whites for comparable housing. At the same time, the Depression had reduced the demand for white housing. The white population in Woodlawn had decreased by 14% from 1930 to 1934. The economic atmosphere of the 1930s made it so many white families couldn’t afford houses in Woodlawn. Because of this dip in the white market share, many homes in Woodlawn that were for sale or rent sat vacant. In a strange twist of fate, the only market for these vacant homes were wealthy African Americans– people like Carl Hansberry. White property owners ended up covertly leasing their properties to blacks for exorbitant rents, risking the penalties for violating the covenants rather than suffer financial loss. It was into this environment that Carl Hansberry stepped, but he did not blaze the trail alone. Like so many other ground-breaking cases that eventually make it to the United State Supreme Court, there is a sense that everything here was “set up” to achieve the desired outcome. The authors of this set-up consisted of two African American attorneys and one of the white Woodlawn property owners. Both attorneys had been involved in promoting life insurance in the black community, substantially expanding economic opportunities for African Americans. Now they were trying to open the door for blacks to own their own homes. The first, Earl Dickerson, was also instrumental in helping African Americans qualify for the mortgage loans they needed to purchase real estate. In 1937, Carl Hansberry sought out a loan from Dickerson to buy a home in Woodlawn. Dickerson knew that if Hansberry tried to purchase this house, the Association would attempt to thwart the transaction. Dickerson was able to convince the lender (a black owned business that Dickerson had helped start) that any risk was consistent with its social goals, and that the chance of an ultimate victory in court were good. The second attorney, Harry Pace, was specifically on the lookout for an opportunity to test the validity of the Woodlawn racial covenants in court. He just needed a connection. But Pace’s connection was not with an African American buyer, but with a white seller. Pace found James Burke, a white Chicago policeman, and the owner of a 3-flat located at 6140 South Rhodes Avenue in Woodlawn. Burke had been one of the men who had helped found the Woodlawn Property Owners Association and may have had a hand in drafting the racially restrictive covenant. He had served on the Association’s board of directors, and his wife had been one of the plaintiffs in a lawsuit that had successfully enforced the covenants. In that 1934 case, Burke v. Klieman, which was brought as a class action by the Association, the Illinois Appellate Court had determined that an owner could not lease his property to an African American, and that the covenants were valid not just for current owners, but for the future. But, by 1937, Burke had experienced a falling out with the Association. The history of it is not clear – Burke and his wife had since divorced, and perhaps he bore her ill will, or maybe it was an issue with the entire association — but Pace and Burke became unlikely allies. When Burke had resigned his position with the Association, he had declared that he wanted to “put negroes in every block” of Woodlawn. Whether Burke was a noble man or not, Dickerson, Pace and Hansberry had their opening. Pace guided Burke to sell the property to Hansberry through a third party. Even before Hansberry and his family could move in, the Association filed suit to enforce the covenant. The complaint alleged that through fraudulent concealment, Burke, Price, and the lender (represented by Dickerson) had tried to hide the fact that Hansberry was black. The great irony was that Burke was now a defendant in Hansberry’s case, which sought to overturn the ruling in the prior lawsuit brought by his wife. At trial, the Woodlawn Association alleged that the restrictive covenant was valid and enforceable because 95 percent (or 475) of the 500 members of the Association had signed it. Hansberry v. Lee. 311 U.S. 32, 38 (1940). This was supported by the decree in the Burke decision from four years before, where the court had accepted a stipulation by the parties regarding the 95 percent acceptance rate. Hansberry responded that he had not been a party to the Burke case, so he was not bound by it, and to use it to deny his right to litigate the issue violated due process. Id. After hearing all the evidence, the trial court found that only 54 percent of the owners had signed the covenant, making the stipulation relied on in the Burke case fraudulent. Id. Yet, the trial court ruled that the validity of the covenant was res judicata (the principle that once a matter has been decided by a court it cannot be relitigated by the same parties), and therefore could not be challenged, regardless of any other evidence. The court ruled in favor of the Association. Id. On appeal, the Illinois Supreme Court adopted the trial court’s reasoning, finding that the 1934 Burke v. Klieman case was a “class or representative case,” and that “other members of the class are bound by the results in the case.” Lee v. Hansberry, 372 Ill. 369, 373 (1939). Agreeing that the Burke case’s ruling was res judicata, the question of the covenant’s validity had already been litigated and decided, and the trial court’s ruling was affirmed. Hansberry, 311 U.S. at 39-40. Hansberry’s legal team, now bolstered by an all-star lineup of attorneys from the NAACP, appealed to the U.S. Supreme Court. The centerpiece of Hansberry’s argument was that the res judicata issue should not apply to him because he was not a party to the Burke suit and was thus not bound by its ruling. In addition, the revelation at trial that the racially restrictive covenant had not been properly adopted meant that upholding its validity based on a fraudulent stipulation denied Hansberry’s due process rights under the 14th Amendment. Id. at 38. The U.S. Supreme Court, however, sidestepped the Constitution completely. Instead, the court hyper-focused on technicalities related to class actions, overlooking the obvious racism and the blatant unfairness of the entire process. The Court determined that the class action plaintiffs did not “adequately represent” absent members of the class. Id. at 40-43. In Hansberry’s case, the U.S. Supreme Court determined that the Burke judgment did NOT adequately represent his interests. The court explained that the restrictive covenant did not create a joint obligation, and that an inherent conflict existed between homeowners who sought to enforce the covenant and those who sought to challenge its validity. The interests of all the owners could not possibly be the same. Also, the defendants in the Burke case were not treated as if THEY were representing a class, and that the judgment, though binding on them, could not effectively bind the rights of anyone in the future. Id. at 44-46. Because of this, the Court reversed the judgment of the lower courts. Hansberry was the winner after all! In its conclusion, the court made a veiled reference at what might have been the reason for its decision. In explaining how the defendants’ interests in the Burke case did not necessarily line up with the defendants in Hansberry’s case, the Court noted that the Burke defendants were “nominal defendants,” and that “it does not appear that their interest in defeating the [covenant] outweighed their interest in establishing its validity.” Id. at 46. While not saying so directly, the Court seemed to imply that the Burke defendants, who were ostensibly all white homeowners, really didn’t have a vested interest in whether they won or lost the case. The defendants in the current case, however, included African Americans, whose interests in invalidating the covenant were clear. But there was also a white defendant in Hansberry’s case who had a unique position. James Burke would have been considered one of the class action plaintiffs in Burke. Indeed, his wife was the named plaintiff of the class. There would have been no doubt at the time Burke was litigated in 1934 that James Burke was one of many plaintiffs seeking to enforce the racially restrictive covenant. The evidence showed he had signed the covenant, leading to the implied conclusion he intended to be bound by it. But here he was, six years later, a defendant in a similar legal action seeking to invalidate the same covenant. Was Justice Harlan Stone, the opinion’s author, specifically thinking of James Burke when he defined the defendants as “nominal?” Regardless, the judgment against Carl Hansberry had been reversed, and his purchase of James Burke’s property went forward. The U.S. Supreme Court’s ruling was trumpeted in the black community as a tremendous victory. The Chicago Defender proclaimed to its largely black readership that “The iron band of restrictive covenants which has checked the eastward movement of the Race on Chicago’s South side was pierced at one point by a decision handed down by the United States Supreme Court.” In the same edition, an interview with Hansberry indicated he had purchased the property for the “purpose of trying to have the theory of restrictive covenants once and for all abolished, or declared as against the public policy of the state and nation.” But the ultimate legality of racially restrictive covenants had not been directly addressed, and Hansberry’s new neighbors were not pleased with the result. After his family moved in, they were subject to mob violence. A brick thrown through a window nearly killed his youngest daughter. His wife always carried a pistol with her and kept close watch over the children. Those children were subjected to open humiliation, and were spat upon, cursed at, and beaten as they walked to and from school every day. These daily struggles and the anxiety they caused took a terrible toll on Carl Hansberry. His health appeared to be in decline. He tried to continue his activism, and ran for Congress later that year, but lost. Depression began to set in. He became extremely disillusioned. He began to feel that the great victory he had won in court had all been in vain. Chicago’s neighborhoods were still as segregated as ever. He decided to relocate his family to Mexico, to escape the country whose noble ideals he now felt had betrayed him. While visiting Mexico, he suffered a cerebral hemorrhage, and died there on March 17, 1946. Sadly, had Carl Hansberry lived another two years, he would have seen the fruit of the seeds he had planted when he bought the 3-flat in Woodlawn. On May 3, 1948, the U.S. Supreme Court issued its decision in Shelly v. Kramer, 334 U.S. 1 (1948), which held racially restrictive housing covenants cannot be legally enforced and were unconstitutional because of the 14th Amendment’s Equal Protection Clause. Justice Harlan Stone had also died in 1946, and none of the same attorneys were involved. Chief Justice Fred Vinson wrote the opinion, which was a unanimous 6-0 decision. But doesn’t the U.S. Supreme Court have nine members? Yes, but three of the justices had to recuse themselves because they owned homes which had racially restrictive covenants. There was one other product that grew out of Carl Hansberry’s home purchase and social experiment. His youngest daughter – the one who had dodged the brick – grew up to be a playwright. In 1959, Lorraine Hansberry’s play, A Raisin in the Sun, premiered on Broadway. The play told a fictionalized version of her family’s story, about a black family who decides to purchase a home in an all-white neighborhood in Chicago. It was the first time an African American female author had a play performed on Broadway. The title of the play comes from a Langston Hughes poem, “Montage of a Dream Deferred,” “What happens to a dream deferred? Does it dry up like a raisin in the sun? Or does it explode?” Had Carl Hansberry lived to see his daughter’s work, he would have seen his “renaissance man” concept come full circle. His daughter portrayed his activism and idealism in the face of the racial injustice and oppression he fought so hard against in the character of “Mama,” the matriarch of the family in the play. Mama is determined to get her family out of a ghetto tenement. She rejects the community group’s cash offer to stop her family from moving into its all-white neighborhood, saying to her son, eager to take the money: “I come from five generations of people who was slaves and sharecroppers — but ain’t nobody in my family never let nobody pay ‘em no money that was a way of telling us we wasn’t fit to walk the earth. We ain’t never been that — dead inside.” Carl Hansberry never felt it himself, but he was vindicated. Vindicated in his court victory. Vindicated after death by the Shelly case. Vindicated by his daughter’s portrayal of his ideals on stage, and her life dedicated to civil rights activism. Carl Hansberry’s story is Chicago-centric, but with universal appeal. It’s a shame that when the concept of the 14th Amendment and equal protection is presented in American law schools, the name “Shelly” is remembered, and not “Hansberry.” SOURCES: Shelly v. Kramer, 334 U.S. 1 (1948). Hansberry v. Lee. 311 U.S. 32, 38 (1940). Lee v. Hansberry, 372 Ill. 369, 373 (1939). Burke v. Kleiman, 277 Ill. App. 519 (1934). Anna Price, Hansberry v. Lee: The Supreme Court Case that Influenced the Play “A Raisin in the Sun,” IN CUSTODIA LEGIS, Library of Congress, January 24, 2023, https://blogs.loc.gov/law/2023/01/hansberry-v-lee-the-supreme-court-case-that-influenced-the-play-a-raisin-in-the-sun/ Radiolab: The Vanishing of Harry Pace: Episode 2, WNYC STUDIOS (June 18, 2021), https://radiolab.org/episodes/vanishing-harry-pace-episode-2 Ron Grossman, Flashback: A Chicago Family Defied a Racist Real Estate Covenant. The Backlash and Legal Fight Inspired ‘A Raisin in the Sun,’ Chicago Tribune, July 10, 2020, https://www.chicagotribune.com/history/ct-opinion-flashback-hansberry-house-restrictive-convenant-20200710-dslzaju35ngmpghgwazpcodosq-story.html Becky Beaupre Gillespie, A Dream Deferred, Advanced, and Remembered, The University of Chicago Law School, April 29, 2020, https://www.law.uchicago.edu/news/dream-deferred-advanced-and-remembered Alan R. Kamp*, The History Behind Hansberry v. Lee, 20 U.C. Davis L. Rev., 481 (1987). (*Allen Kamp was a Professor at John Marshall Law School when the author was a student there).

I am a legal news junkie. Although my various responsibilities connected to my family, my business, my church, and as a Village Trustee often require so much of my time that I can’t possibly keep up, I try to stay “tuned-in” to what’s happening in the legal world. Whether I read the legal news, listen to legal-themed podcasts, or try and keep up with case summaries, I think it’s important, as a lawyer, to stay informed. In particular, I try to follow the news related to the decisions of the U.S. Supreme Court, as it has far reaching effects for our day to day lives. Recently, I discovered an interesting case presented for legal argument before the U.S. Supreme Court. On November 9, 2021, the Court considered the case of U.S. v. Jose Luis Vaello-Madero, which involved a man born in Puerto Rico who had been living in New York City since 1985. He was disabled, qualifying for “Supplemental Security Income,” or “SSI.” This is a Social Security program which helps supplement the incomes of older, disabled Americans. Mr. Vaello-Madero, aged 67, began receiving the benefits in 2012 while living in New York. In 2013, he relocated back to the place of his birth, San Juan, Puerto Rico, to help care for his wife. Mr. Vaello-Madero continued to receive SSI benefits until 2016, when he was informed that he was now ineligible because he had moved to Puerto Rico. To add insult to injury, the Social Security Administration filed suit against him, demanding he pay back over $28,000 in benefits he had received while living on the island. To Mr. Vaello-Madero, this must seem like a cruel joke. Because Mr. Vaello-Madero was born in Puerto Rico, he is automatically a U.S. Citizen. When he resided in New York, there was no question he qualified for the benefits. How could a citizen who qualifies for federal benefits lose them simply by changing his address? This is all because of Puerto Rico’s status within the U.S. federal system. Puerto Rico is one of the “Insular” territories of the United States. Article IV, Section 3, Clause 2 of the U.S. Constitution gives Congress all authority over “territory or other property belonging to the United States.” This has been interpreted to mean that a U.S. territory not already a part of one of the 50 states is under the exclusive control of Congress, without regard to the reach of the constitutional principles that protect the rights of those who are citizens of the 50 states. This was not always so. Prior to the 20th century, the U.S. government considered territories that were not already parts of states to have the complete protection of the Constitution. Up until the 1890s, the expectation was that all the U.S. territories then in existence at that time – Oklahoma, New Mexico, Arizona, and Alaska – were being developed to become states themselves, and indeed, they all did; Oklahoma in 1907, New Mexico and Arizona in 1912, and Alaska in 1959. But the politics of that era caused a shift in government policy. America was trying to assert itself as a great world power. The European nations the U.S. was competing with all had colonial empires. Having such an “empire” became part of American foreign policy. The U.S. tried to follow the British model. The United Kingdom was the premier world power at that time because its powerful Navy controlled the seas. U.S. leaders sought to build a comparable navy that would control the ocean. But to control the ocean, there was a need for ports around the world. So, the U.S. needed islands and seaports far from North America. But these islands and ports would not be on the path to statehood as past territories had been. These new territories were a means to an end. There was no thought to incorporate the land or people into the United States. These were merely investment property, to be used for the good of the people back home. The first of these territories was Hawaii, annexed in 1898, which certainly fit into this “colonial empire” model. But Congress apparently was still in the established “territorial” mode, and treated Hawaii like Oklahoma or Arizona, passing legislation granting the new territory full Constitutional protection. Other new territories acquired that same year after victory in the Spanish-American war, however, did not receive the same consideration. The U.S. acquired Puerto Rico, Guam, and the Philippines as spoils of war. In 1900, the U.S. took control over the islands now known as American Samoa, and in 1917, the Virgin Islands. The attitude of American leadership towards these new territories was condescending. President William McKinley saw America as the “great benefactor” of these “rescued peoples.” After McKinley’s assassination, his successor, Theodore Roosevelt, reveled in “the expansion of the peoples of white, European blood” into territories whose residents were “mere savages.” But it was the United States Supreme Court that created the legal framework to make this condescending attitude a legal reality. Starting in 1901, the Court issued a series of opinions interpreting the legal status of citizens of these new territories. These decisions, known as the “Insular Cases,” would amplify Teddy Roosevelt’s mindset and make it constitutionally sacrosanct. It should be noted that the Supreme Court justices who decided the Insular Cases also decided Plessy v. Ferguson, the 1896 case which allowed “separate but equal” racial segregation. A review of some of the Insular cases shows the very same mentality towards ethnic minorities. The first case is Downes v. Bidwell. The question presented was whether shipments moving between New York and Puerto Rico were interstate or international. The Court concluded that Puerto Rico was part of the United States. But the Court determined that a territory was either “incorporated” with the U.S., or “unincorporated.” If a territory was incorporated (like the State of New York, or the territory of Arizona), it enjoyed the full protection of the Constitution. Puerto Rico and the other new territories, however, were all unincorporated. The Court reasoned that these territories were “inhabited by alien races.” Therefore, trying to administer them “according to Anglo-Saxon principles may for a time be impossible.” Puerto Rico (and the other insular territories) were now “foreign in a domestic sense.” In 1904, the Court defined what being “unincorporated” meant to the citizens of the insular territories. Gonzales v. Williams involved a woman born in Puerto Rico who relocated to New York. The New York authorities detained her as an “alien immigrant.” In a strange turn, the Court ruled that she was an American, but not a citizen. Basing its decision on the practices of how European empires classified their colonial subjects, the court defined her as a “noncitizen national.” In 1917, Congress passed legislation granting American citizenship to Puerto Ricans. Congress eventually granted the same rights to the other territories. However, the people of Samoa cling to the “noncitizen national” label, making them truly citizens of no country (some Samoans do not want citizenship in order to retain their cultural distinctiveness). Then came Balzac v. Porto Rico in 1922. Here, the Court held that the Constitution does not apply “in full” to the territories. Only the “fundamental rights” of the Constitution were in effect. But what constituted a “fundamental right” remained uncertain. The Balzac plaintiff was a newspaper editor accused of libel. Because Puerto Ricans had been granted citizenship, he argued that the right to a jury trial under the 6th Amendment was applicable. The Court said no. To this day, the right to a criminal jury trial is not applicable to local courts in Puerto Rico. The Balzac case also made it clear only “incorporated territories” were on track for statehood, and that the only way for a territory to become incorporated was by express declaration of Congress. This, of course, has never happened. All of this laid the foundation to allow for the federal government to treat the people of the insular territories in ways that seem at best thoughtless, or at worst, downright inhumane. For example, in 1955, the U.S. Supreme Court invalidated a divorce ordinance enacted by the local legislative assembly in the Virgin Islands because the law only required residency of 6 weeks to qualify. The Court held that this was just a ploy to attract people from other jurisdictions to visit the Virgin Islands for a divorce and had nothing to do with local interests. The court found it unbelievable that Congress would have given the Virgin Island Legislative Assembly the power to do what “no state has ever attempted.” In 1980, the Supreme Court ruled that the federal government could fund programs like Medicare or Medicaid at lower rates than in the States if there was a “rational basis” for doing so. Most recently, in 2017, Puerto Rico was devastated by a series of hurricanes. But laws that restricted shipping between “incorporated” and ‘unincorporated” territories would not allow vital aid to reach the island. The hurricane damage led to more indignity, as a financial control board put in place by the Obama administration took control of the island’s economy because Puerto Rico’s government was forced to declare bankruptcy. To establish financial stability, this board cut public health benefits, closed schools, and lowered the minimum wage. Puerto Rican locals see the board as a “colonial overseer.” This is the mindset that led to Mr. Vaello-Madero’s case regarding his SSI benefits. Apparently, Congress has determined that these types of benefits are just not available in Puerto Rico. His attorneys argued that there is no rational reason for excluding Puerto Ricans from SSI benefits, that is, to treat them differently from other citizens. And while Puerto Ricans have been excluded from SSI since its inception in 1972, Congress has provided for similar benefits under a different government program. But Mr. Vaello-Madero’s income is not low enough to qualify. His attorneys concluded their argument by saying the heart of the issue is “treating a citizen as though they are foreign” simply because they live in Puerto Rico is wrong. I’ve gone a long way, to great lengths, to explain all this. While I am sympathetic to Mr. Vaello-Madero’s situation, I really don’t have any idea as to exactly what to do about it. I am not advocating that Puerto Rico (or any of the other territories) be granted statehood. There is probably a laundry list of logical reasons as to why that won’t work, or at last won’t be easy. But is there any logic to determining that people who are American citizens don’t have the full protection of the Constitution? While the citizens in the insular territories can’t vote for president, does that also justify the concept that the commerce clause or equal protection doesn’t apply to them? During the oral argument in Mr. Vaello-Madero’s case, Justice Kavanaugh noted that the attorneys had made “compelling policy arguments” and suggested that the Constitution’s territorial clause may be something “people would want to change” — but he was firm in holding to the notion that this is not the role of the court. But on the other hand, under that same clause, in an instant, Congress could pass legislation that could extend constitutional protections to the citizens of the insular territories. I am at a loss as to specific suggestions. But the one thing that strikes me is a need for deeper understanding. Through all the tumult of the last 3- or 4-years regarding race, ethnicity, and immigration, I have come to realize that I had a fundamental lack of understanding. The social unrest resulting from the George Floyd incident led to important social interchanges in my church and village communities. African American leaders shared their hearts regarding the reality of systemic racism in our country, not just from historical examples, but from their own lives. The damage done beginning with the “Jim Crow” laws of the 1870s, the pervasiveness of the oppression that was borne out of Plessy-style segregation, and the ongoing attitudes of mistrust, fear, and lingering prejudice and even hate on all sides of the racial issues that still plague us today were not just abstract concepts anymore – I was understanding the reality of it in the lives of people who were my neighbors. Racism was not some abstract left over from the past. It was a reality in the lives of many of the people I knew as friends. I am not very good at suggesting ways to fix things, but the understanding of the reality that our country has allowed a pervasive evil in the form of racism to take root and cause devastation on so many different levels has caused me to realize that we must at least realize the pervasiveness of the problem in order to begin to work together to try and fix things. It is the same with the issues surrounding the insular territories. Just as the legacy of slavery and Plessy’s legally justified segregation was the foundation for so much that poisons our society to this day, the condescending, racist attitudes that led to the way the territories are governed is a faulty foundation. The legal principles that govern the people of the insular territories are based on the misconception that they are “aliens,” and “savages,” who need the guidance of enlightened, white, European people. Because of this, they did not deserve constitutional protection. But this is unjustifiable today. The Supreme Court’s 1857 Dred Scott decision held that blacks could not be citizens because they were descended from a “subordinate and inferior class of beings who had been subjugated by the dominant race.” Of course, the Civil War and the passage of the 15th amendment refuted that. I do not know what we as a nation can specifically do to repair the damage done by the insular cases. But I do know we cannot continue to base the legal authority for what we do in those territories on the idea that the people who live there are less than human. We need to apologize and try to figure things out from the right perspective. It may not mean that the insular territories will become states, or gain their independence, but it might allow the people who live there the rights they deserve as American citizens.