Wills, Trusts & Estates Prof Blog

Editor: Gerry W. Beyer
Texas Tech Univ. School of Law

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Wednesday, October 29, 2014

Conservative Strategist Ends Up with Shady Money


Whitney Ball plays a large role in the conservative movement.  She controls DonorsTrust, a fund that has distributed more than $400 million to underwrite right-wing operations such as the National Rifle Association, the Heritage Foundation, and Americans for Prosperity.

Ball set up this fund fifteen years ago to act as a cashbox for wealthy conservatives who wanted to be sure their money would be used for conservative causes after they die.  The priority of DonorsTrust is to “safeguard donor intent.”

A few years ago, Ball became involved in an estate controversy when her father, a lawyer in Virginia, unethically handled the wills of three elderly people and Whitney Ball and her brother personally benefitted from his misconduct, with almost half a million dollars deposited into their bank accounts. 

According to the West Virginia Supreme Court of Appeals, which conducted a disciplinary proceeding regarding this matter, John Ball prepared wills for two octogenarian sisters. The court ruled that the “evidence in this case clearly established that Mr. Ball drafted three wills in which he gave himself excessive fees as an executor, drafted two wills that improperly conveyed property to himself and his wife, and assisted in changing a client's annuity to benefit" his children.

The court noted that Ball’s conduct was intentional and violated the rules of professional conduct.  Ball’s misconduct resulted in him receiving millions of dollars. The court annulled Ball’s law license and ordered he pay restitution of nearly $3 million to the three estates.  This amount included the money that went to his children. 

While Whitney Ball and her brother were not accused of wrongdoing or misconduct, the court acknowledged they did receive hundreds of thousands of dollars that had been transferred to them due to the unethical action of their father.

See David Corn, How a Top Conservative Strategist Ended Up With More Than $200,000 in Shady Money, Mother Jones, Oct. 27, 2014.

October 29, 2014 in Estate Administration, Estate Planning - Generally, Malpractice, Professional Responsibility, Wills | Permalink | Comments (0) | TrackBack (0)

Tuesday, October 21, 2014

Lawsuit Over Handling of Holographic Will

Holographic will

An Austin lawyer and her firm have been sued by fifteen family members, alleging she failed to hire a handwriting expert to show their deceased matriarch’s will was forged and they should have received more from the estate. 

The lawyer representing the plaintiffs, William Robertson, commented, “My clients disputed it from day one.  The allegation against the lawyer in this case is that there should have been a careful expert examination of the handwriting.  That was not done.” 

The October 10 original petition and request for disclosure said the plaintiffs hired Holly Gilman and her firm to contest the handwritten will of decedent Carolina Torres.  A woman named Lisa Navarro offered the will for probate.  Gilman contested the will, arguing it “was fabricated and provided that Lisa Navarro was to receive the largest portion of the assets of the estate of Carolina A. Torres.”  At the will contest hearing, no expert testimony was provided, rather writing samples were utilized. 

The court ruled against the plaintiffs and found the will to be valid.  The plaintiffs subsequently hired a new lawyer and continued to probate the case.  The court then made a final ruling and distributed assets in accordance with the will.  However, Robertson noted that the “distribution in the will was real lopsided.”   

After a handwriting expert was hired, the plaintiffs became aware that the holographic will of Carolina A. Torres was forgery and that Lisa Navarro had perpetrated fraud.  The plaintiffs are now suing for negligence, gross negligence and breach of contract.

See Angela Morris, Handling of Handwritten Will Lands Lawyer In Legal-Mal Lawsuit, Texas Lawyer, Oct. 17, 2014.

October 21, 2014 in Estate Administration, Estate Planning - Generally, Malpractice, Professional Responsibility | Permalink | Comments (0) | TrackBack (0)

Friday, October 3, 2014

Fiancee's Suit Sinks for Lack of Privity


Despite a $250,000 judgment at trial, the fiancée of a deceased postal worker came up short in the District Columbia Court of Appeals, based on lack of privity between her and the lawyers who mismanaged the decedent’s divorce. 

In Scott v. Burgin, the fiancée and the decedent had lived together for years, and he filled out forms to make her the beneficiary of his Post Office retirement benefits.  In January 2006, the fiancée met with a lawyer and asked him to take care of decedent’s divorce from his wife, while also discussing the pension issue with him. 

Almost two years later the lawyer served a divorce complaint on decedent’s wife.  However, when decedent died in April 2008 he was still married, and therefore the Post Office denied the fiancée’s claim to survivor benefits, which went to decedent’s wife. 

Reversing the trial court, the court of appeals held that the fiancée lacked standing and was not within the lawyer’s “ambit of care.”  The court further stated that lawyers have duties to their clients, not to third parties.  The take away from this case is to recognize that a lawyer has a duty of care that can extend beyond those strictly in privity with the lawyer-client contract.  Because jurisdictions differ, it is important to evaluate and analyze your risk of exposure to claims from third parties.

See Karen Rubin, Lack of Privity Sinks Fiancee’s Suit Against Divorce Lawyer, The Law for Lawyers Today, Sept. 25, 2014. 

October 3, 2014 in Estate Administration, Estate Planning - Generally, Professional Responsibility | Permalink | Comments (0) | TrackBack (0)

Wednesday, September 10, 2014

Judge Gives Nine Year Sentence for Insider Trading


On Monday, Judge Paul Gardephe handed down one of the longest prison sentences for insider trading.  Mathew Martoma, the portfolio manager who worked for an affiliate of Steve Cohen’s SAC Capital Advisors hedge fund firm, was found guilty of obtaining material non-public information about the development of an Alzheimer’s drug from a doctor and trading the information to make more than $200 million in profits.  The judge sentenced Martoma to nine years and ordered that he pay back the $9 million he received in bonuses for himself. 

The evidence accrued against Martoma was large, including the testimony of an 81-year-old doctor.  Although some lawyers and reporters were baffled by Martoma’s decision not to settle the case, some suggest his ability to obtain a good settlement was hindered after it was discovered he had been expelled from Harvard Law School for doctoring his transcript to make up better grades. 

See Nathan Vardi, Mathew Martoma Sentenced to Nine Years For Insider Trading, Forbes, Sept. 8, 2014.

September 10, 2014 in Estate Planning - Generally, Malpractice, New Cases, Professional Responsibility | Permalink | Comments (0) | TrackBack (0)

Sunday, September 7, 2014

The Ethical Side of Asset Protection Planning

Asset protection

Many clients are concerned with safeguarding their wealth during their lifetime, also known as asset protection planning (APP).  APP goes beyond traditional estate planning, and focuses on minimizing estate and inheritance taxes, avoiding probate and providing for heirs.  Accordingly, estate planners are expected to have knowledge of asset protection stratagems, including the use of asset protection trusts (APTs).  Many practitioners avoid APTs, fearing this is unethical.  However, that fear unfounded as it is usually based on lack of knowledge in the area.

Attorneys must examine cases and ethics opinions of the state in which they practice as individual states take slightly different approaches to what constitutes ethical representation.  All states have statutory provisions exempting certain assets from creditors’ claims, and more than 15 states have enacted domestic asset protection trust (DAPT) legislation.  This legislation supports the position that APP is ethical.  Even though APP is ethical, it can be practiced unethically.

The key to an ethical practice is to know your client and state laws.  Once you have determined whether a client may be represented in an APP matter, you must avoid communication failures, especially allowing unreasonable client expectations. 

See Patricia Donlevy-Rosen, Ethical Considerations in Asset Protection Planning, Wealth Management, Sept. 3, 2014.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.

September 7, 2014 in Estate Planning - Generally, Estate Tax, Professional Responsibility, Trusts | Permalink | Comments (0) | TrackBack (0)

Tuesday, September 2, 2014

Article on Discretionary Distributions

Leslie kiefer aman

Leslie Kiefer Amann (Sentinel Trust Company LBA) recently published an article entitled, Discretionary Distributions: Old Rules, New Perspectives, Estate Planning and Community Property Law Journal, Vol. 6 No. 2, 181-220 (2014).  Provided below is a portion of the article’s introduction:

The “discretion” exercised by a trustee includes all aspects of administration, but making payments out of a trust—the discretionary distribution—often seems to be the greatest challenge.  This material was originally created for the Texas Bankers Association Annual Graduate Trust School.  Over a period of nearly fifteen years, it has been gradually expanded to include illustrations and materials from other states; however, the primary focus remains on the information needed to make excellent fiduciary decisions and draft clear fiduciary instructions under Texas law.

Although many of the citations are to Texas law, some principles are universally applied, and regarding those, this article will draw on the case law of other states and sources. 

September 2, 2014 in Articles, Estate Administration, Estate Planning - Generally, Professional Responsibility | Permalink | Comments (0) | TrackBack (0)

Saturday, August 30, 2014

Article on Fiduciary Selection

BeyerI recently published an article entitled, A Guide to Fiduciary Selection, Estate Planning Developments for Texas Professionals (July 2014).  Provided below is the abstract from SSRN:

Your clients must exercise great care in selecting fiduciaries such as executors, trustees, and agents. These decisions may affect the client and the client’s family members for many years. Decisions regarding the appropriate persons to select are, naturally, for your clients to make. However, you have a duty to explain to your clients the factors they should consider before making designations in wills, trusts and powers of attorney. This article focuses on these considerations.

The article begins with a discussion of legal criteria based on the law of Texas. 

The remainder of the article has general application and discusses the factors from a practical standpoint which a client should consider as well as the pros and cons of using a corporate fiduciary and of appointing co-fiduciaries.

August 30, 2014 in Articles, Estate Planning - Generally, Professional Responsibility, Trusts, Wills | Permalink | Comments (1) | TrackBack (0)

Saturday, August 23, 2014

Article on the Distribution of Funds to Beneficiaries of a Commingled Trust

TrustChristian Chamorro-Courtland (Zayed University) recently published an article entitled, Demystifying the Lowest Intermediate Balance Rule: The Legal Principles Governing the Distribution of Funds to Beneficiaries of a Commingled Trust Account for which a Shortfall Exists (July 16, 2014), Forthcoming, Banking & Finance Law Review. Provided below is the abstract from SSRN:

There has been much legal uncertainty in Canada regarding the best method for distributing commingled trust funds to beneficiaries where a shortfall occurred due to fraudulent misappropriation committed by the trustee or as a result of other operational risks. The case law in this area has been riddled with legal uncertainty. This article analyzes a series of dicta from the Ontario courts that have considered the relevant rules for the distribution of the remaining trust funds in these situations, with a focus on the Ontario Superior Court decision in Boughner et al. v. Greyhawk Equity Partners Limited Partnership (Millenium) et al. (2012). It observes that the judges have continuously muddled up the ‘Basic Pro Rata Approach’ and the ‘Lowest Intermediate Balance Rule’ because there has been a misunderstanding of how these rules operate in practice. Furthermore, it presents a logical method for insolvency administrators and the courts to determine which rule to apply in these situations. It argues that the intention of the beneficiaries should be the main factor determining the method of distribution to be applied.

August 23, 2014 in Articles, Estate Planning - Generally, Professional Responsibility, Trusts | Permalink | Comments (0) | TrackBack (0)

Friday, August 22, 2014

Booklet Series on Managing Someone Else’s Money

CFPB_LogoThe Consumer Financial Protection Bureau has released a series of informative guides entitled, Managing Someone Else’s Money. Here is a description of the series from the CFPB website:

Millions of Americans are managing money or property for a loved one who is unable to pay bills or make financial decisions. This can be very overwhelming. But, it’s also a great opportunity to help someone you care about, and protect them from scams and fraud.

We are releasing four easy-to-understand booklets to help financial caregivers. The Managing Someone Else’s Money guides are for agents under powers of attorney, court-appointed guardians, trustees, and government fiduciaries (Social Security representative payees and VA fiduciaries.)

The guides help you to be a financial caregiver in three ways:

  • They walk you through your duties.
  • They tell you how to watch out for scams and financial exploitation, and what to do if your loved one is a victim.
  • They tell you where you can go for help.

August 22, 2014 in Books, Disability Planning - Property Management, Estate Planning - Generally, Guardianship, Non-Probate Assets, Professional Responsibility, Resource Links, Trusts | Permalink | Comments (0) | TrackBack (0)

Wednesday, August 20, 2014

Morgan Stanley Liable to Banamex

Morgan stanley

Citigroup Inc’s Bnamex unit alleged that a unit of Morgan Stanley permitted funds from a family’s trust account to be used to repay third-party loans without its authorization.  A Financial Industry Regulation Authority (FINRA) arbitration panel found Morgan Stanley liable for negligence and ordered the firm pays $4.5 million to Banamex.

The trust at issue was created in 2007 with proceeds from the sale of property that a group of adult siblings and their mother inherited.  Banamex and the trust beneficiaries procured a broker at Morgan Stanley to manage their accounts the same year.  The accounts were set up in such a way that prevented the assets from being used as guarantees to pay off third-party loans taken by another family member’s account.

See Suzanne Barlyn, Morgan Stanley Must Pay $4.5 Million to Banamex: Panel, Reuters, Aug. 18, 2014.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.

August 20, 2014 in Current Affairs, Estate Planning - Generally, Professional Responsibility, Trusts | Permalink | Comments (0) | TrackBack (0)