Wills, Trusts & Estates Prof Blog

Texas Attorney Ernest Cannon is Suing His Estate-Planning Lawyer Over His Ranch's $8.78 Million Loss

Ernest Cannon, a legal legend and longtime rancher, has filed a legal malpractice suit claiming his ranching operation lost $8.78 million over seven years. The "beef" is with Cannon's estate-planning attorney, Crady Jewett McCulley & Houren partner Jay Houren of Houston, Houren's firm, plus two accountants and an accounting firm. Cannon alleges that they made a mistake in his estate plan that that caused an $8.78 million ranching operation loss to come out of a trust he established for his son. 

Cannon has represented legendary Houston litigator John O'Quinn as well as Art Brines, former Baylor University Football head coach, and also litigated against BP over the Deepwater Horizon disaster. 

According to the petition in Cannon v. Crady Jewett McCulley & Houren, Cannon hired Houren and accountants Gary Sult and Elizabeth Ann Minze in 2011 to set up his son's trust. Cannon alleged that Houren and the accountants set up an estate plan that structured the trust to own a principal asset of a 96% limited partnership in J Bar F Investments Ltd., which was allegedly worth millions of dollars. 

J Bar F held a portfolio of securities and also controlled affiliated companies in Cannon's ranching operations. One of these companies was the operating company of the ranching properties and equipment. This affiliated company had been losing money and J Bar F was covering for these expenses ($8.78 million) from 2013 to 2018. 

The petition in Cannon claimed, “This financial situation was inadequately brought to the attention of the trustees by its lawyers and accountants … even thought its lawyers provided legal advice, and its accountants handled the fiscal oversight of all related operations,” The plaintiffs in the case claim that it was professional negligence to include the ranching operations company in the trust. 

Houren advised Cannon to purchase the company in order to maximize the trust's assets, so Cannon purchased the company for $8.78 million in 2019 in order to restore the funds the company drained from the trust. 

The trust was set up to accumulate cash for the son's future needs, but instead the trust incurred expenses worth $8.78 million. The ranching operations company should not have been part of the trust and if the defendants had properly advised Cannon in the beginning, J Bar F would have never owned the company and Cannon wouldn't have had to buy the company, depriving the trust of earnings. 

What now? 

See Angela Morris, Texas Attorney Ernest Cannon is Suing His Estate-Planning Lawyer Over His Ranch's $8.78 Million Loss, Law.com, May 15, 2020. 

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

CLE on Medicaid: Qualifying Clients for Immediate Care and Protecting Assets

The National Business Institute is holding a webcast entitled, Medicaid: Qualifying Clients for Immediate Care and Protecting Assets, on Friday, April 17, 2020 at Central: 9:00 AM - 4:00 PM. Provided below is the description of the event.

Program Description

Helping Clients Secure Nursing Home Coverage Without Destroying Family Assets

Medicaid planning is most effective when done ahead of time. Sadly, most clients seek help when the need for nursing home is urgent or when the loved one is already in the facility. Do you have all the tools at your disposal for tackling such tough cases? This practical guide zeroes in on the very techniques that work in the crisis situations - when the penalty period is already triggered or care is already being provided. Learn what asset transfer approaches are still available and how to make certain to protect family assets. Help clients make the best of a tough situation. Register today!

• • Clarify what types of asset transfers will NOT trigger penalty periods of ineligibility.
  • Get all the tools you need to provide for the spouse staying in the community.
  • Draft caregiver agreements that are sure to qualify for Medicaid compensation.
  • Learn what can still be done with an adverse Medicaid decision.
  • Protect the family home with techniques tailored to specific family dynamics and circumstances.

Who Should Attend

This Medicaid planning guide is designed for attorneys. It will also benefit nursing home administrators, accountants, geriatric care managers, care coordinators, social workers and paralegals.

Course Content

• • What Happens in an Emergency Medical Situation
  • Asset Purchase and Transfer Strategies
  • How to Transfer a Residence
  • Using Promissory Notes to Help Clients Currently in the Nursing Home
  • Life Care Contracts Between Parents and Children
  • Contesting Denial of Benefits, Penalty Period Dates and Other Adverse Medicaid Decisions
  • Providing for the Community Spouse
  • Legal Ethics in Medicaid Practice
  • Emergency Medicaid for Non-Qualified Non-Citizens and Undocumented Individuals

CLE on Financial Exploitation of the Elderly: Estate Plan Strategies to Protect You and Your Client

The American Law Institute is holding a webcast entitled, Financial Exploitation of the Elderly: Estate Plan Strategies to Protect You and Your Client, on Wednesday, March 25, 2020 at 1:00 – 2:30 pm Eastern. Provided below is a description of the event.

Why You Should Attend

Financial exploitation of vulnerable adults is not a new phenomenon. Exploitation of and by prominent celebrities such as Brooke Astor, Anna Nicole Smith, and Stan Lee has shined a spotlight on financial exploitation, bringing it increased attention among practitioners, lawmakers, and Congress. Sadly, this kind of exploitation is not going away. In fact, its prevalence will likely increase because perpetrators are becoming more sophisticated, leveraging technological advances to exploit their victims. Prepare yourself and protect your client with an estate plan that hopes for the best in people but insulates you both from the worst in people. You will learn how to do this and more with the teachings in this webcast.

What You Will Learn

During this webcast, our expert faculty will talk about the planning instruments that will protect your client from financial exploitation, provide you with ethically permissible mechanisms to stop and reverse financial exploitation, without compromising your relationship with your client. Topics of discussion include:

• • Congressional efforts on elder abuse, including funding of state Adult Protective Services (APS), amendments to the Older Americans Act (OAA), and effects of the 2018 federal budget on available services
  • Understanding and identifying victim profiles
  • Discussion of typical scam scenarios
  • More sophisticated exploitation vehicles: power of attorney abuses, mortgage scams, and home maintenance sources
  • Spotting your clients’ indicators of financial exploitation
  • The engagement letter: Identifying the client and taking direction from the client under Model Rule 1.2
  • Prevention planning: disability planning, benchmarking capacity periodically to comply with Model Rule 1.14, and permissible disclosures under Model Rule 1.6 when incapacity is suspected
  • Handling financial exploitation in the absence of a power of attorney or health directive
  • Using guardianships and conservatorships and important considerations under the Uniform Adult Guardianship Protective Proceedings Jurisdiction Act (UAGPPJA)

Who Should Attend

Estate planners, elder lawyers, and general practitioners who handle the affairs of the elderly will benefit from this ALI CLE webcast.

East Grand Forks Woman Sues Lawyer, Claiming he Redrafted her Husband's Will to Leave Millions to Foundation on Whose Board he Serves

Randy Driscoll passed away on December 7, 2015 after a five year struggle with leukemia and culminated in a failed bone marrow transplant. Shortly after his diagnosis he drafted a will that left his long-time wife, Cindy, $2.4 million of his estate and a Grand Forks farm property that had been in his family for more than six generations to his nephews. But a month before his death - while on chemotherapy and 60 medications - Cindy claims that her husband's attorney, Gerard Neil, advised her and her husband to sign an unknown document, believing they dealt with the estate's taxes.

Randy had appointed his brother, Bruce, as his personal representative, and he was called in for a meeting with Neil after Randy's death. That was when Bruce found out nearly all of the $5 million estate had been left to the Sacred Heart Church in East Grand Forks, where Randy had not been a member. The non-profit had been incorporated in May 2014 with Neil listed as the registered agent and currently sits on the board of directors. Bruce was shocked and asked if anything could be done, and he claims Neil told him no, and did not explain the process of a will contestation.

Instead of $2.4 million, Cindy received a rifle and pistols, use of the house, items of personal property and grounds-keeping equipment during her lifetime, income of $54,000 per year, up to $5,000 per year for a vacation and full-coverage health insurance, in total valuing about $300,000. After a lawsuit against Sacred Heart Church that ended with a dismissal, Cindy is now attacking the attorney head on, suing him for malpractice, negligence, fraudulent misrepresentation, breach of fiduciary duty, and other allegations, and is demanding $700,000 in damages.

See Hannah Shirley, East Grand Forks Woman Sues Lawyer, Claiming he Redrafted her Husband's Will to Leave Millions to Foundation on Whose Board he Serves, Grand Forks Herald, March 8, 2020.

Special thanks to Carissa Peterson (Hrbacek Law Firm, Sugar Land, Texas) for bringing this article to my attention.

CLE on Annual Probate and Estate Administration Conference in Pennsylvania

The National Business Institute is holding a conference entitled, Annual Probate and Estate Administration Conference in Pennsylvania, on Wednesday, April 22, 2020 at 9:00 AM - 4:30 PM at the Hilton Garden Inn Lancaster in Lancaster, Pennsylvania. Provided below is a description of the event.

The Latest Information for Handling Trusts and Estates

Probate and estates practice is in flux. Do you have all the current knowledge and tools you need? This practical legal course gives you the fundamental tax, legal and procedural guidance from experienced attorneys and probate court staff. Get an overview and crucial updates on laws and local procedures, tax planning and reporting, and key case law affecting trusts and estates. Register today!

• • Walk through the key estate procedures and get sample forms to help speed up the process.
  • Hear what probate court judges want you to know about top mistakes attorneys, trustees and executors make.
  • Get an overview of current aging and disability issues affecting your clients' estates.
  • Plan for and administer all types of assets, including digital, real estate and property in other states.
  • Ensure will validity at drafting and administration.
  • Get tax saving and reporting tips from the pros.
  • Review common trust issues at drafting and administration and get effective workarounds.
  • Guard your professional reputation with a legal ethics guide tailored to the trusts and estates practice.

Who Should Attend

This basic level seminar is designed for:

• • Attorneys
  • Accountants
  • Tax Professionals
  • Executors
  • Trust Officers
  • Paralegals

Course Content

• • Probate Judges Share Mistakes They've Seen
  • Affording Nursing Home Care and its Effects on the Decedent's Estate
  • New End-of-Life Options and the Effects of Voluntary Death on the Estate
  • Sale of Real Estate and Special Proceedings
  • Locating and Accessing All Assets Without the Traditional "Paper" Trail and Handling Digital Assets
  • New and Tricky Forms of Wills and Their Authenticatio
  • Determining Testator Capacity and Spotting Undue Influence
  • Tax Basis Reporting Requirements in Estate Administration
  • Tax Returns and Tax Saving Tidbits Under TCJA
  • IRA Beneficiary Designations and Inherited IRAs Update
  • Modifying Broken Trusts and Other Trust Management Conundrums Today
  • Legal Ethics Update

Article on How to Not Lose Your Head When Your Client is Losing His: Operating in the Gray Zone of Diminished Capacity

Matt G. Lueders recently published an Article entitled, How to Not Lose Your Head When Your Client is Losing His: Operating in the Gray Zone of Diminished Capacity, Est. Plan. & Cmty. Prop. L.J., Vol. 12 Book 1 (Fall 2019). Provided below is the introduction to the Article.

    As our population ages, it is increasingly important for estate planning professionals not only to assist clients with planning for eventual death, but also to aid clients with developing a plan with potential diminished capacity and incapacity. The increasing frequency of incapacityy in our society has caused many issues for estate planning attorneys and the manner in which he or she counsels and represents their clients. Attorneys must be aware of the possibility of client incapacity, and the proper steps for determining handling a client's diminished capacity or incapacity.

    The estate planning attorney must understand substantive tax techniques, distribution mechanisms, and probate laws that accompany an estate planning and administration; however, the attorney cannot stop there. He or she must also embrace the human side of estate planning - the side involving a client's emotions, mental and psychological state, and relationships among family members and friends. This article will discuss the awareness surrounding applicable legal standards of capacity, the legal and ethical rules important to estate planning attorneys with respect to capacity and undue influence, and the practical steps than an estate planning attorney can undertake when representing a client with diminished capacity or incapacity. This article will not spend a great deal of time discussing drafting for incapacity. For detailed discussion in that regard, the reader is encouraged to see Wesley L. Bowers' article "Mind the Gap: Advanced Planning Techniques for Incapacity" presented to the State Bar of Texas 2016 Estate Planning & Probate Drafting Course.

Lawyer Who Can't Find Testators for Over 500 Wills Can't Toss Documents, Ethics Opinion Says

The New York State Bar Association released an ethics opinion on January 23 stating that a lawyer who possessed more than 500 wills could not dispose of the documents but in fact must retain the documents "indefinitely." Many of the wills had testators that could not be located, and even some were created more than 70 years ago.

Many of  the documents were obtained from acquired law practices that had themselves obtained the wills from acquired practices. The lawyer has been unable to find the testators, executors or even beneficiaries through a diligent search of office records, the internet and the county surrogate’s court.

The ethics opinion sums up its advice this way: “A lawyer may not dispose of wills, whose testators’ locations and/or circumstances are unknown. The wills constitute property, and the lawyer must safeguard the wills indefinitely unless the law affords the lawyer an avenue to file or otherwise dispose of the wills.”

See Debra Cassens Weiss, Lawyer Who Can't Find Testators for Over 500 Wills Can't Toss Documents, Ethics Opinion Says, ABA Journal, January 27, 2020.

Court Cites Student Loans as Reason to Deny Bar Admission to New Lawyer

Some states allow people to have professional licenses suspended or even revoked due to student loan debt, and these occupations widely and include nurses, doctors, and even truck drivers. Typically, these statutes only kick in if a borrower is delinquent or in default on their student loans.

Other occupations require a character and fitness exam or background check to obtain a professional license, including becoming an attorney. For Cynthia Marie Rogers, her student loan debt played a major role in the Ohio Board of Bar Commissioners denying her admission to the Ohio bar to practice law as an attorney there. When she graduation from law school, her student debt topped $300,000. Combined with her husband's student loan debt, their balance was nearly $900,000.

The amount was not the only factor, of course. The Board noted testimony from Rogers where she stated that neither she nor her husband were repaying their loans because their income was too low to require making payments. Under these types of programs borrowers earning below 150% of the poverty level for their family size are not required to make any payments on their federal student loan debt and after 25 years on the program the remaining debt will be forgiven. Rogers said she "knew there was no way for twenty years that I would ever be able to pay all that back" and that she would only work in legal services part-time.

This seemingly obvious dedication at not paying back her federal student loan debt coupled with the fact that she had filed nearly 60 civil lawsuits during the course of her lifetime, many of them frivolous, and that she failed to disclose this full history to the people who had recommended her for admission to the bar, was enough to deny her entry.

See Adam S. Minsky, Esq., Court Cites Student Loans as Reason to Deny Bar Admission to New Lawyer, Forbes, January 22, 2020.

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

Article on Life Insurance Advice under New CFP®s Practice Standards

Barry Flagg, Ray Ferrara, & Paul Auslander recently published an Article entitled, Life Insurance Advice under New CFP®s Practice Standards, Wills, Trusts, & Estates Law eJournal (2019). Provided below is the abstract to the Article.

CFP® Professionals are responsible for complying with the new Code of Ethics and Standards of Conduct as of October 1, 2019, with enforcement beginning June 30, 2020. These new Standards re define the meaning of “clients" best interests” for life insurance product recommendations to be consistent with other fiduciary rules, requiring CFP® professionals to “act with care, skill, prudence, and diligence” based on evaluation of “costs that the Client may incur” (among other things). Previously, due diligence for life insurance product recommendations was governed by the National Association of Insurance Commissions (NAIC) Life Insurance Illustrations Model Regulation #582, which doesn’t require disclosure of any costs, and as such is now considered “misleading”, “fundamentally inappropriate” and unreliable by financial, insurance and banking industry authorities. This commentary will, therefore, contrast decision support for life insurance product recommendations under CFP® Standards versus NAIC Regulations, and provide practical guidance for life insurance advice under new CFP®s Practice Standards.

Article on Supported Decision-Making: A New Approach for Older Clients with Cognitive Impairment

Margaret Castles published an Article entitled, Supported Decision-Making: A New Approach for Older Clients with Cognitive Impairment, Elder Law eJournal (2018). Provided below is the abstract to the Article.

There has been a flurry of law reform activity around elder rights in the last few years. In 2017 the Australian Law Reform Commission’s Report “Elder Abuse – a National Legal Response” made far reaching recommendations. Earlier this year the Commonwealth Government published the results of its Inquiry into the Quality of Residential Aged Care in Australia, and has recently announced a Royal Commission into Aged Care Quality and Safety.