Wednesday, December 26, 2007

What's a Probate Litigator?

While preparing an outline for this topic, I searched the usual online data bases for some help in defining a probate litigator. Guess what? I couldn't find anything specific. Rather than pick a different topic, I decided to take a stab at creating a definition. I look forward to reading your constructive comments as I intend to send the finished product to Wikipedia for publication. Here's what I have so far:

Probate litigators are skilled trial attorneys who narrow the scope of their practice to probate related matters, such as contests and disputes involving wills, trusts, estates, powers of attorney, elder abuse, conservatorships and guardianships. Unlike their estate planning cousins, probate litigators usually don't get involved in the structuring, funding or managing of wills, trusts and estate plans. The biggest difference is that litigators are trial attorneys.

I'd like to improve on this definition. Do you have any ideas?

Sunday, December 23, 2007

Trustee Duties Most Often Ignored

Serving as a trustee is not a task anyone should take lightly. It is a serious job and should be viewed as one. It could get you into a lot of trouble if not performed properly. Like a "real" job you can be replaced for making mistakes, however it does differ in one important way. You may be held personally liable for intentional or gross misconduct. But that's not all, ignorance of your duties is no defense. You are expected to know what's required and to act accordingly. Here are some examples of the duties most commonly ignored by trustees:

1.) The duty to disclose. For some reason trustees are sometimes reluctant to keep all of the trust beneficiaries reasonably informed of the trust and its administration. Let me explain, the trustee must furnish each beneficiary all material information necessary to protect the beneficiary’s interest in the trust. That includes a complete copy of the trust and an accounting of the trusts assets, debts, income, liabilities and the trustee's actions pursuant to the terms of the trust, by law or upon request of a beneficiary.

2.) The duty of impartiality. The trustee has a duty to deal impartially with all beneficiaries of a trust. She must act impartially in investing and managing trust property, while at the same time consider the differing interests of all beneficiaries. Let me explain what I mean. If one beneficiary would rather collect income for as long as possible because the trust assets are getting a higher rate of return than her own investments and another beneficiary is living hand to mouth and needs her distribution as soon as possible, the trustee is called upon to act impartially that is to say, to follow the terms of the trust and where there is discretion, she must act reasonable under the circumstances. Blindly following the recommendation of the majority of beneficiaries, over objections of the minority, or those of her favorite or respected sibling does not satisfy the duty of impartiality. Impartially means that the trustee does not favor one beneficiary over the other, including herself.

3.) The duty of loyalty. A trustee may not seek any advantage from a beneficiary, nor wield power for his or her own “aggrandizement, preference, or advantage” to the detriment of the beneficiaries. For example, trustees may not threaten to withhold distributions until beneficiaries sign waivers releasing them of any wrongdoing or deduct the costs of an accounting from only those beneficiaries who insist on having one done.

4.) The duty to avoid self-dealing. A trustee may not deal with himself as an individual, even if the proposed transaction seems fair, equitable and is made in good faith. Trustees who temporarily divert trust funds to themselves are guilty of self-dealing. Improper self-dealing is a breach of trust. Sure there are times when a trustee, who is also a beneficiary, may have the right to purchase trust property, but outside those circumstances, they should avoid any direct or indirect actions that even suggest they are self-dealing.

5.) The duty to keep trust assets separate. The trustee must properly identify trust assets and keep those assets separate from his or her own personal assets. If a trustee ever combines trust assets with his or her personal assets, the trustee is in effect defeating the trust’s purpose, as there would be no need to even have a trust. Let me be a bit more specific, trustees should never commingle money they received from the trust with their own personal bank accounts. Those funds should, instead, be deposited into a separate bank account held by the trust.

Let me just quickly recap. It has long been held by the courts, that a trustee is a fiduciary of the highest character whose duty demands uncompromising integrity. A trustee is bound to act in the highest good faith towards his beneficiaries and may not obtain any advantage by the slightest misrepresentation. Yet, some still ignore those duties. If you as a beneficiary ever run into a renegade trustee consult with an attorney right away. You have rights, which include removing the trustee and appointing someone who will treat the office of trustee as an important job.

One last thing. Trustees must be reasonably informed about their duties and responsibilities as specified under the terms of the trust. That means they must actually read the trust and if they don't understand the scope of their duties, they should retain counsel to assist them in its administration. How many of you think the average person could read and comprehend a standard family trust and carry out the duties as the trustee without consulting an attorney?

Friday, December 21, 2007

5 Reasons to Remove a Trustee

People who create trusts usually appoint themselves as the trustees and someone else as the successor trustee. Problems usually arise when the original trustees are replaced by successor trustees. If for example your parents create a family trust and appoint themselves as trustees, they will need someone else to serve when they cannot do so themselves. When one spouse passes away or loses mental capacity, the other usually serves alone. When he or she passes away or loses mental capacity, the successor trustee, typically one of their children will take over. Unfortunately most trusts give their successor trustees too much power and discretion. They have complete and unfettered access to trust assets. Sometimes they take on a new personalities. Some of them have been known to ignore requests for copies of the trust and accountings. Soon all forms of communications break down and the waring begins.

Beneficiaries usually call and ask if there's anyway they can remove the successor trustee of their parents' trust. The short answer is yes. Below are 5 reasons to have a trustee removed:

1.) Refuses to deliver a copy of the trust as required;
2.) Fails to act pursuant to trust terms;
3.) Unable to act due to mental incapacity;
4.) Misappropriates trust assets; and
5.) Refuses to account for trust assets

This is not a complete list of causes for removal, but it does cover about 80 percent of the problems most beneficiaries experience when dealing with renegade trustees. The facts and circumstances of each case is unique, so please don't read too much into this list. If you are having difficulty with a trustee, consult with a competent probate litigator.

Tuesday, December 18, 2007

War Story No. 1: Brutal Trustee

Two years ago a 47-year-old man called my firm seeking help because his brother was freezing him out of his mother's trust. He was too ill to travel so I reluctantly agreed to make a house call later that evening. Upon arrival I did a double take because his house looked abandoned. The yard was covered with overgrown bushes and weeds, the front gate was hanging sideways, held up by a single hinge, and the paint was faded and chipped. The place was dark and spooky. Remembering the man's plea, I continued walking up the long walkway, instead of back to my car. As I approached the front door, I heard a tired voice say, come on in the door's open. As I entered the dark house, The man directed me to the kitchen table which was illuminated by a single candle. He didn't come too close, and walked slowly following me as I hurried to the table. He sat down across from me. For the first time I got a good look at him. His skin was pale and sunken, his eyes were yellow and he wore old baggy gray clothes and a civil war period mustache. While I was reaching for a notepad he said, "my brother stole my army issue cap-and-ball black power Colt revolver." For a minute it seemed like I was in the presence of a civil war era ghost.
Peter wasn't a ghost, he was a terminally ill man whose passing was being hastened by the disgraceful acts of a greedy brother named Richard. Richard was the trustee of their mother's trust. When peter took ill he was unable to work so moved in with his mother, at her request. A few months later, his mother unexpectedly died. She left a trust that provided for both brothers equally. Richard worked in Japan but returned home for a month to attend his mother's funeral. During that time he ransacked the house and tried to force Peter out. Peter was defenseless. He had no money, no place to go and was preparing to die. Rather than help, which was within his discretion as trustee of the trust, Richard insisted that Peter leave the house. To speed up the process, Richard canceled the utilities and had them specially locked so they could not be turned on without his permission. Within two weeks, Peter was without water, electricity and food. As the trustee of their mother's trust, Richard was suppose to distribute the assets between himself and Peter in equal shares. Although his mother left 75,000 in her savings account and $5,000 in her checking account, and both of those assets were in the trust, Richard refused to give Peter any money. He was waiting for Peter to die so he could inherit it all. According to the trust, if one of the settlor's (mother) sons died before getting his full share of the assets, his remaining share would go to the surviving brother. Richard was trying to take full advantage of that clause. But putting his interests first, is a clear breach of his duties as trustee.
Within two weeks we were able to convince the court to remove Richard, appoint a temporary neutral trustee and obtain a preliminary distribution on Peter's behalf. It wasn't much, but with the money Peter was able to turn on the utilities and get some food and medication. About one month later, Peter was under hospice care. He died two weeks later in his home with the support of a couple of strangers. Richard collected the balance of his mother's trust so I guess you can say he won that battle.

Cons Hide in Plain Sight

I am bombarded with emails and telephone calls from surprised people. They usually say something like you won't believe what just happened to me or can we meet right away, I have a case that will knock your socks off. Inheritance theft knows no boundaries. Folks we are talking about brothers pitted against sisters, step-mothers against step-children, caregivers, advisers and even ministers against families.

When someone with assets starts to lose mental capacity or dies, they, or their estates, are vulnerable to significant attacks from people within the their own social circles. The worst part is that nobody sees it coming. As sad as it might sound, I am never surprised to hear how the "responsible" older sister abused her power as trustee of her mother's trust to completely rip off her younger sister. It happens all the time.

"You Can't Con a Con"

Have you ever hear the phrase "you can't con a con?" It suggests that the con always wins confidence games, and it's true. Would a ballerina enter the ring with a sumo wrestler. Of course not, nor would a sumo wrestler compete against a ballerina in a dance contest. If you want to compete against the pros you better know how the game's played.

When it comes to inheritance theft there are a ton of rules. There are several different tools that can be used alone or in combination with other tools. The best you can do is understand the general and focus on the specifics when the time is right. Cons have the advantage, they have the first move. Your ability to see it coming and make a counter strike can determine the outcome.

Con Artists are Getting Rich on Your Inheritance

Your elderly parents are marked by con artists who have only one thing in mind, your inheritance. They know that your mother or father will leave assets when they pass and they are coming up with some pretty clever ways of making sure they get a piece of the pie.

Who are these con arists? Well that and much more will be disclosed as time permits. Here's a hint, they are much closer than you think. At the risk of educating future con artists, I will provide details on their tools, methods and strategies. More to come...