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Helping Families Navigate the Financial Challenges of Age Transitions

Category: Fiduciary Issues (Page 3 of 3)

Attorneys Suspended for Mismanagement of Elderly Clients Money

August 23, 2019 /

In a case that speaks of the importance of choosing a qualified trustee who has proper internal controls and procedures, and who is governed by an appropriate regulatory body, The Ohio Supreme Court suspends two attorneys for one year after they negligently managed an elderly woman’s affairs. Cleveland Metro. Bar Assn. v. Zoller and Mamone (Ohio, No. 2014-1389, Nov. 8, 2016).

The client, a widow of a former mayor of Cleveland and a former justice of the Supreme Court of Ohio, retained the law firm to administer the estate of her late husband. Having come to increasingly rely on the partners in the firm, the client later engaged the firm to manage her money, to pay her bills, and to handle other aspects of her financial and personal life. The client sought to be able to live independently in her own home, to afford around-the-clock care, and to make generous gifts to her family members and charitable causes.

In it’s findings, the court stated:

[The Respondents] assumed the responsibilities of operating and maintaining the special account when they opened the account and agreed to be authorized signatories. But they failed to ensure that the account was a separate, interest-bearing trust account for [Client’s] benefit during the six-year period in which substantial client assets passed through it. They also failed to maintain even a modicum of oversight over the account by failing to accurately record each transaction that affected the account and failing to reconcile the account against the monthly statements issued by the bank. Their abdication of these most basic duties to [client] resulted in more than 30 overdrafts of the account and $1,000 in associated bank fees. Respondents’ failures to act also facilitated the misconduct of their father, [name removed], who not only wrote and signed checks on the special account (even though he was not an authorized signatory) but who also collected excessive and undocumented legal fees from [client]—fees that averaged approximately $55,000 each year for six years, though more than $250,000 of those fees was actually collected in just the first two years of the representation.

For the full text of this decision, go to:

 http://www.supremecourt.ohio.gov/rod/docs/pdf/0/2016/2016-Ohio-7639.pdf

Another Case of Sibling Rivalry

August 22, 2019 /

An Indiana Court of Appeals opinion underscores the importance of accountings in trust administration, but also raises questions about why families place siblings in adversarial positions to begin with.

According to an article posted by the Indianapolis law firm of Faebre Baker Daniels,  the original case involved three siblings, Scott, Jeff and Stacey – and arose after Scott and Jeff began to question some of Stacey’s actions as trustee of their respective trusts – specifically, her handling of the trusts’ joint ownership of multiple parcels of real property. Shortly after the siblings executed a mediated settlement agreement and partitioned the properties, Scott sued Stacey, as trustee of his trust, alleging she failed to provide an accounting and had misused trust assets. Scott also alleged misappropriation of $107,000 of trust assets, which were characterized as trust expenses – which were in fact legal fees Stacey had incurred “years before the most recent trust-related litigation,” apparently with other family members.

One of the duties of a trustee (known as fiduciary duties) is to keep trust property separate and to maintain – and make available to trust beneficiaries – adequate records, which Stacey admitted she had failed to do. Unfortunately for Scott, he did not bring his complaint until after the two-year statute of limitations had expired, and the trial court found Stacey did not commit a breach of trust as to the accountings.

Scott also demanded reimbursement for his attorney’s fees for bringing the complaint against Stacey, which after being denied by the trial court was reversed by the Indiana Court of Appeals and Stacey was ordered to pay Scott’s legal fees.

While the crux of the case deals with a trustee’s responsibility to maintain adequate records and provide them to a trust’s beneficiaries, the real story in this case is the human one – that of a family of siblings now divided – at least partly – because one was put into an adversarial position with the others. I wonder if the trustee fee savings was worth it?

Source: Indiana Court of Appeals Opinion Upholds the Importance of Accountings in Trust Administration | Publications | Insights | Faegre Baker Daniels

Did you sign up for this when you agreed to be trustee?

August 21, 2019 /

In the Matter of DREXEL ANDREW BRADSHAW, Attorney Drexel Andrew Bradshaw was charged with five counts of misconduct related to his position as the successor trustee of a client’s trust and his involvement with a construction company that repaired the client’s home. The case demonstrates the liability exposure that fiduciaries have and the extent to which they have to defend their actions, even if those actions were appropriate and in good faith.

To summarize, Bradshaw became the court-appointed conservator and trustee of a trust for an elderly client ruled incapable of managing her financial affairs. The client lived in an older home in San Francisco that needed significant repairs for the client’s living ability and care. Bradshaw hired a construction company that he had helped the owner of the company start by providing legal services and initial funding loans. To pay for the repairs, Bradshaw petitioned the court to allow him to obtain a reverse mortgage (followed by a 2nd one two years later).

The [California] Office of Chief Trial Counsel of the State Bar (OCTC) charged Bradshaw with four counts related to his handling of the trust:

  • engaging in a scheme to defraud the trust,
  • breaching his fiduciary duties to his client and the trust beneficiaries,
  • misappropriation of trust funds, and
  • making several misrepresentations to the probate court and other government agencies.

The hearing judge found Bradshaw culpable of three of the charges (with the exception of misappropriation) and recommended that he be disbarred. Both Bradshaw and the OCTC appealed.

The appeals court found in Bradshaw’s favor and dismissed the case for “lack of clear and convincing proof.” In its ruling the appeals court stated:

Upon our independent review of the record (Cal. Rules of Court, rule 9.12), we do not find clear and convincing evidence to support culpability as to the charged misconduct. We reject OCTC’s premise that Bradshaw wanted to start a construction company and used his position as trustee to start his “corrupt” enterprise. Bradshaw served as the successor trustee for a client years after his firm drafted the client’s trust and estate plan, and only after the first two successor trustees were unable to serve. He managed the trust according to its stated purposes and terms in a reasonable and proper manner, including engaging a certified specialist in probate and trust law to assist him in his duties. Further, he adhered to his client’s clearly expressed desires to be cared for in her San Francisco home, and that the equity in the home be used to accomplish that goal. To that end, Bradshaw used the trust assets, which consisted mostly of the home’s $1.6 million equity, to provide his client with quality nursing care and for necessary repairs to ensure her safety in the home…

For the full transcript of this case, see http://www.statebarcourt.ca.gov/Portals/2/documents/opinions/Bradshaw_%2016-O-15558_%20Opinion_and_%20Order.pdf

The Case Files – Episode 1: “Fool me once, shame on you…”

August 19, 2019 /

Wealth and Honor is a website dedicated to helping families navigate the financial challenges of age transitions. The site now has a YouTube Channel to host “edutainment” videos featuring non-legal commentary on actual court cases involving will disputes, elder financial abuse, estate litigation, fiduciary liability, and other issues of aging, death, and wealth.

Court transcripts are condensed into a factual summary with popular sitcom characters providing faces to the actual characters of the case, followed by a non-legal commentary of lessons to learn and missteps to avoid.

https://youtu.be/6gBLpiWQX9c
The Case Files Trailer

The first episode covers the case of Lintz vs Lintz, a 2014 case decided in the California Appeals Court, that includes claims of breach of fiduciary duty, elder financial abuse, undue influence, among other claims. Viewers are encouraged to first watch a presentation of commonly used terms before watching the case episodes.

For a full text of the court transcript, click here.

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