Wednesday, October 14, 2015
The Financial Industry Regulatory Authority (FINRA) is introducing new rule proposals that would let financial advisers pause orders if they suspected there to be any financial exploitation of senior investors. The proposed regulation notices would assist member firms in protecting elderly clients that have diminished capacity. One of the proposals creates a 15-day "safe harbor" period where advisers can hold disbursements into senior customer accounts if they suspect that fraud is taking place. Another proposal being released would require firms to obtain the information on trusted contacts belonging to the accounts of senior investors. A "senior investor" is any person that is 65 or older, or there is any other evidence of vulnerability. There has also been growing interest in congress for some federal legislative proposals in this area.
See Megan Leonhardt, FINRA Rolling Out Rules To Prevent Elder Financial Abuse, Wealth Management, October 13, 2015.
Friday, October 9, 2015
A Court has recently held that an attorney violated ethical rules when he drafted a Will for a wealthy client bequeathing $14 million for himself and his children, but that his actions did not invalidate the Will itself. The split decision by the Michigan Court of Appeals overturned a lower court ruling that invalidated the Will. The Court held that the onus is now on the attorney to prove that he did not exert undue influence on his wealthy friend and client.
The Michigan Rules of Professional Conduct prohibit attorneys from drafting Wills for non-related clients that include substantial gifts for the drafting attorney. If the Will would have been invalidated then the estate would have gone to the decedent’s brother and children via Michigan’s intestacy laws. The Michigan Appeals Court decision can be read here.
See Paul Egan, Court: Lawyer’s $14M inheritance unethical, not invalid, Detroit Free Press, October 9, 2015.
Monday, October 5, 2015
An attorney that was convicted of defrauding the people that he was supposed to protect passed away before he could be sentenced. Paul S. Kormanik was supposed to appear in Franklin County Probate Court today to answer a contempt of court charge brought on by his failure to pay back one of his victims. Back in August Mr. Kormanik plead guilty to four counts of stealing from wards that he was the court appointed guardian of, falsifying records, and taking tax payer money. Kormanik had bragged in the past that he had the most wards of any guardianship attorney in the State of Ohio representing over 400 wards. The disgraced attorney was one of several guardians highlighted in an investigative report from May 2014 titled “Unguarded.”
See Mike Wagner, Convicted guardianship lawyer dies before sentencing, The Columbus Dispatch, October 5, 2015.
Thursday, October 1, 2015
An appeals court in the State of Washington has held that an estate planning attorney does not owe a duty of care to the beneficiary of a client's estate. In this case the beneficiary, Jennifer Linth, wanted to sue estate planning attorney Carl Gay on legal malpractice for improperly executing estate planning documents. The Washington Court of Appeals affirmed the trial court's decision that Mr. Gay did not owe Ms. Linth any duty of care. Mr. Gays duty to the trustee does not extend to a non-client beneficiary. The full text of the Washington Court of Appeals decision in Linth v. Gay can be read here.
See Attorney Does Not Owe Duty of Care to Beneficiary of Client's Estate, Elder Law Answers, October 1, 2015.
Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.
Tuesday, September 29, 2015
The estate of late Detroit Pistons owner Bill Davidson is suing Deloitte Tax LLP over what it calls a risky and flawed estate plan. The suit claims that the tax planner intentionally used dubious planning techniques to create the perception of savings in order to draw in Davidson in as a high profile client they could use to lure other high net worth individuals. The estate seeks in excess of $500 million in damages to cover the increased tax the estate was forced to pay plus interest and penalties. As of now, no trial date has yet been set.
See Mark Hicks, Davidson estate sues Deloitte Tax over $2.7B IRS bill, The Detroit News, September 24, 2015.
Special thanks to Jim Hillhouse for bringing this article to my attention.
Monday, September 28, 2015
A former estate planning attorney that is facing an extensive 33-count Federal indictment will likely face prison time after making a plea agreement to five of those counts. Sarah E.K. Laux faces allegations that she took advantage of elderly clients that came to her for estate planning and trust services. Federal investigators got involved in this case when allegations surfaced that she had stolen up to $3 million from two wealthy clients. More lawsuits and investigations followed leading to the current plea bargain agreements. “Laux will plead guilty to five of the 33 counts in the indictment, one each of bank fraud, mail fraud, wire fraud, money laundering and filing a false tax return.” Prosecutors are agreeing to a below the guidelines sentence provided that Laux reveals everything she stoles and assists them with recovering the lost assets.
See Bruce Vielmetti, Estate planning lawyer facing prison in fraud plea deal, Milwaukee-Wisconsin Journal Sentinel, September 27, 2015.
Thursday, September 24, 2015
A Washington D.C. Appeals Court has recently held that an attorney disciplinary board needs to investigate whether there was a conflict of interest when two attorneys represented both a mother and a son in a conflict involving a trust. The attorney disciplinary board will need to determine if the two attorneys had to have informed consent from both the mother and son. This dispute centered around a trust created in 2002 by Genevieve Ackerman. The son, Dr. Stephen Ackerman, hired two attorneys "John T. Szymkowicz and his son, John P. Szymkowicz, to challenge the trust." The attorneys ended up representing both the mother and son in the suit. The court held that even though the interests of Dr. Ackerman and Ms. Ackerman might be aligned there was still a substantial risk of a divergence of interests. The District of Colombia Court of Appeals decision can be read here.
See Discipline Board Must Examine Whether Attorneys’ Representation of Both Mother and Son Was a Conflict, Elder Law Answers, September 24, 2015.
Tuesday, September 15, 2015
Texas Attorney General Ken Paxton is facing questions about his past involvement as attorney ad litem for the daughters of Tanner Hunt after Mr. Hunt committed suicide. Tanner Hunt was the son of late Billionaire Ray Hunt. This article goes into detail discussing some of the circumstances surrounding Ken Paxton’s role as attorney ad litem. One big matter of controversy is what some view as a very low settlement offer of $750,000 that Paxton put forward with the estate. Hunt’s daughters could have potentially had inheritance claims of $2 million yet he settled for what could be considered a small amount. There are concerns described in this article that Paxton may have had a conflict of interest. Ken Paxton has since defended his work on the inheritance case.
See Lise Olson and Lauren McGaughy, Questions raised on deal for heirs; Paxton defends work, The Washington Times, September 6, 2015.
Friday, September 11, 2015
Gerry W. Beyer (Texas Tech University School of Law) recently published his article entitled, Avoid Being a Defendant: Estate Planning Malpractice and Ethical Concerns, 5 St. Mary's J. Legal Mal. & Ethics 224-284 (2015). Provided below is an excerpt from the article:
An estate planner may become a defendant in a case involving an estate he or she planned in two main ways. First, the attorney may have performed his or her services in a negligent manner potentially creating exposure to malpractice liability. Second, the attorney’s conduct may have lapsed below ethically acceptable standards.
This article reviews the exposure an estate planner may have to malpractice liability with emphasis on Texas law and then focuses the reader’s attention on ethical issues that may arise while preparing or executing the plan. I hope that by pointing out potentially troublesome areas, the reader will avoid the ramifications of drafting a flawed estate plan or having a lapse of ethical good judgment which may lead to the frustration of the client’s intent, financial loss to the client or the beneficiaries, personal embarrassment, and possible disciplinary action.
Saturday, September 5, 2015
A financial advisor taking on the position of executor does not violate FINRA policies, but it is still a responsibility that he or she should be cautious about undertaking. There are many firms that might have their own policies against advisors serving as executors so it might be a good idea to call a compliance officer. According to National Compliance Services Attorney Alan Foxman taking on the position of executor is a potential “minefield” that advisors should think twice about. It is important to note that an executor and trustee is not the same thing and the tasks involved with being an executor require a lot of work and headaches. There could also be additional expenses and fiduciary responsibilities that the advisor would have to take on.
See Andrew Shilling, Understand the Challenges of Being an Executor, Financial Planning, August 30, 2015.
Special thanks to Jim Hillhouse for bringing this article to my attention.