Financial Elder Abuse And Exploitation In Arkansas

I have written before about our aging population and the effect that it will have on estate, trust, probate and inheritance litigation in the decades to come.  This stems from a number of demographic trends including (1) massive numbers of Baby Boomers entering retirement age and (2)  medical advances allowing people to live longer than ever before (but often with decreased physical and mental abilities).

An increasing number of older and incapacitated people will naturally result in an increasing number of elderly adults who are susceptible to, and actually subjected to,  abuse and exploitation.  This elder abuse can take a number of different forms, including physical, emotional, sexual and financial.  While all of these are bad, my focus for purposes of this blog post is on financial elder exploitation.  

There are agencies and organizations which play an educational and preventive role when it comes to elder abuse, but while doing good work they are often   overworked, understaffed and underfunded.  For example, Arkansas Adult Protective Services---a division of the Arkansas Department of Human Services---has a hotline number and is charged with the responsibility of investigating and intervening where there are reports of abuse, neglect, and exploitation of adults who are physically or mentally impaired and unable to protect themselves from harm.  

According to the National Committee for the Prevention of Elder Abuse, 

"Elder financial abuse spans a broad spectrum of conduct, including:

• Taking money or property

• Forging an older person's signature

• Getting an older person to sign a deed, will, or power of attorney through deception, coercion, or undue influence

• Using the older person's property or possessions without permission

• Promising lifelong care in exchange for money or property and not following through on the promise

• Confidence crimes ("cons") are the use of deception to gain victims' confidence

• Scams are fraudulent or deceptive acts

• Fraud is the use of deception, trickery, false pretence, or dishonest acts or statements for financial gain

• Telemarketing scams. Perpetrators call victims and use deception, scare tactics, or exaggerated claims to get them to send money. They may also make charges against victims' credit cards without authorization

Who are the perpetrators?

Family members, including sons, daughters, grandchildren, or spouses. They may:

• Have substance abuse, gambling, or financial problems

• Stand to inherit and feel justified in taking what they believe is "almost" or "rightfully" theirs

• Fear that their older family member will get sick and use up their savings, depriving the abuser of an inheritance

• Have had a negative relationship with the older person and feel a sense of "entitlement"

• Have negative feelings toward siblings or other family members whom they want to prevent from acquiring or inheriting the older person's assets

Predatory individuals who seek out vulnerable seniors with the intent of exploiting them. They may:

• Profess to love the older person ("sweetheart scams")

• Seek employment as personal care attendants, counselors, etc. to gain access

• Identify vulnerable persons by driving through neighborhoods (to find persons who are alone and isolated) or contact recently widowed persons they find through newspaper death announcements

• Move from community to community to avoid being apprehended (transient criminals)

Unscrupulous professionals or businesspersons, or persons posing as such. They may:

• Overcharge for services or products

• Use deceptive or unfair business practices

• Use their positions of trust or respect to gain compliance

Who is at risk?

The following conditions or factors increase an older person's risk of being victimized:

• Isolation

• Loneliness

• Recent losses

• Physical or mental disabilities

• Lack of familiarity with financial matters

• Have family members who are unemployed and/or have substance abusers problems

Why are the elderly attractive targets?

• Persons over the age of 50 control over 70% of the nation's wealth

• Many seniors do not realize the value of their assets (particularly homes that have appreciated markedly)

• The elderly are likely to have disabilities that make them dependent on others for help. These "helpers" may have access to homes and assets, and may exercise significant influence over the older person

• They may have predictable patterns (e.g. because older people are likely to receive monthly checks, abusers can predict when an older people will have money on hand or need to go to the bank)

• Severely impaired individuals are also less likely to take action against their abusers as a result of illness or embarrassment

• Abusers may assume that frail victims will not survive long enough to follow through on legal interventions, or that they will not make convincing witnesses

• Some older people are unsophisticated about financial matters

• Advances in technology have made managing finances more complicated

What are the indicators?

Indicators are signs or clues that abuse has occurred. Some of the indicators listed below can be explained by other causes or factors and no single indicator can be taken as conclusive proof. Rather, one should look for patterns or clusters of indicators that suggest a problem.

• Unpaid bills, eviction notices, or notices to discontinue utilities

• Withdrawals from bank accounts or transfers between accounts that the older person cannot explain

• Bank statements and canceled checks no longer come to the elder's home

• New "best friends"

• Legal documents, such as powers of attorney, which the older person didn't understand at the time he or she signed them

• Unusual activity in the older person's bank accounts including large, unexplained withdrawals, frequent transfers between accounts, or ATM withdrawals

• The care of the elder is not commensurate with the size of his/her estate

• A caregiver expresses excessive interest in the amount of money being spent on the older person

• Belongings or property are missing

• Suspicious signatures on checks or other documents

• Absence of documentation about financial arrangements

• Implausible explanations given about the elderly person's finances by the elder or the caregiver

• The elder is unaware of or does not understand financial arrangements that have been made for him or her."

In Arkansas, if the elder abuse is bad enough it can actually constitute a criminal offense and be prosecuted.  For example, Ark. Code Ann. Sec. 5-28-103 prohibits the abuse or exploitation of an endangered or impaired person, and Ark. Code Ann. Sec. 5-28-101 defines certain terms in the statute which encompass many types of wrongdoing, including financial abuse and exploitation.  Depending upon the amount of money or property misappropriated, the crime can constitute (1) a misdemeanor warranting a substantial fine or (2) a felony punishable by substantial prison time.  

However, it seems that prosecutors are often so overwhelmed with "street crimes" involving drugs, violence, sex, theft, etc. that "white collar" crimes involving financial exploitation (which often can be more difficult to prove) are frequently not pursued as a practical matter.  Accordingly,  the person aggrieved---or commonly someone acting for or on their behalf (because the elderly person may be incapacitated, or unable or unwilling to take action)---may necessarily be forced to resort to a civil court rather than a criminal court.  While such legal action will not result in the wrongdoer being criminally punished, depending upon the facts, circumstances and evidence they may be assessed with compensatory or potentially even punitive damages, along with attorney's fees, costs, and interest on the amounts misappropriated. 

Matt House can be contacted by telephone at 501-372-6555, by e-mail at mhouse@jamesandhouse.com, by facsimile at 501-372-6333, or by regular mail at James, House & Downing, P.A., Post Office Box 3585, Little Rock, Arkansas 72203.

Brief Thoughts On Claims Of Undue Influence

As stated in my previous post regarding the capacity of a testator to execute a will or trust, the two concepts are closely related.  For example, incapacity relates to invalidation of a will, trust, deed, etc. because of the testator’s own deficiencies (typically mental impairment).  Undue influence, however, is when the will, trust, deed, etc. may be invalidated by the actions of others because they allegedly exercised such a degree of influence and power over the testator thatthey were induced to act by something other than free will.

As a general matter, the less testamentary capacity that one possesses, the less proof of undue influence will be necessary.  A presumption of undue influence may be triggered by a confidential relationship between the testator and someone who is receiving a benefit from the document, such that the burden of proof can shift to the proponent of the document to prove that there has in fact been no undue influence.  Unless there is “procurement” involved, in Arkansas the proponent merely has the burden of proving no undue influence by a preponderance of the evidence (more likely than not, as opposed to a higher standard such as beyond a reasonable doubt).

Obviously influence is ever-present and we are constantly influencing others to take certain actions.  This is especially true in the context of family and other close relationships.  However, mere influence doesn’t necessarily equate to taking advantage of someone.

Accordingly, while a testator may be legitimately influenced by his children, for example, the influence may go too far if the kids dictate or control the testator.  Likewise, the mere existence of a confidential relationship between the testator and the beneficiary, or a close and affectionate relationship, may not in and of itself constitute undue influence although it can in some instances have the effect of shifting the burden of proof.

Matt House can be contacted by telephone at 501-372-6555, by e-mail at mhouse@jamesandhouse.com, by facsimile at 501-372-6333, or by regular mail at James, House & Downing, P.A., Post Office Box 3585, Little Rock, Arkansas 72203.

Brief Thoughts On Claims Of Incapacity

People often question whether a deceased person was mentally capable of executing or changing a will or trust.  Perhaps the person was suffering from dementia at the time.  The legal question involved in these situations is typically whether the decedent had the requisite “testamentary capacity.”  Testamentary capacity has generally been deemed to mean sufficient mental ability to (1) understand and remember, without prompting, the extent and condition of the testator’s property; (2) understand the “natural objects of their bounty;” and (3) understand to whom the property is being given and on what terms. 

Testamentary capacity is not a particularly high state of mental capacity, but it can be rebutted in some instances by evidence of Alzheimer’s Disease, severe forms of dementia, severe illness, intoxication, etc.  These conditions need to have actually existed at the time of execution of the instrument in question.  For example, the mere fact that mild dementia is diagnosed years before the execution of the instrument does not necessarily mean that the testator lacked capacity when they executed their will or trust, because even a lucid interval of capacity (and people suffering from dementia often have “good days” and “bad days”) can be deemed sufficient.    

Capacity issues are very fact-intensive determinations, and lack of capacity is often pretty difficult to prove.  This is why capacity claims are often coupled with “undue influence” claims, which are often related, frequently alleged in the addition or in the alternative, and sometimes easier to prove.  Undue influence will be discussed in my next post. 

Matt House can be contacted by telephone at 501-372-6555, by e-mail at mhouse@jamesandhouse.com, by facsimile at 501-372-6333, or by regular mail at James, House & Downing, P.A., Post Office Box 3585, Little Rock, Arkansas 72203.

Apparent End To The Huguette Clark $300 Million Estate Battle

In a middle-of-the-night deal during jury selection of a New York trial, it appears that a settlement has been reached in the infamous Huguette Clark estate dispute.  You can read all about it at this link.  I had written about this over 3 years ago back in August 2010 at this link.  This litigation serves as a very interesting case study in undue influence allegations and other issues commonly associated with estate and trust disputes.  A more comprehensive overview of the stories, videos, and other coverage of this saga can be found at this link.          

Matt House can be contacted by telephone at 501-372-6555, by e-mail at mhouse@jamesandhouse.com, by facsimile at 501-372-6333, or by regular mail at James, House & Downing, P.A., Post Office Box 3585, Little Rock, Arkansas 72203.

"Murder, Fraud, $2.2 Million Somewhere"

This week's issue of the Arkansas Times  contains a sad but fascinating story written by Mara Leveritt, who is well-known for her writing about so-called "true crime," including but not limited to her book about the West Memphis Three, Devil's Knot.  Specifically, Ms. Leveritt tells the tale of an older gentleman living in Washington state whose trust assets were swindled by a love interest with Arkansas ties, and how the gentleman's son has relentlessly pursued bringing the woman to justice and recovering the monies in question.  The story also contains a link to the family's own website detailing the ordeal, the criminal case, and the civil lawsuits stemming from the fraud.  Interesting reading. 

Matt House can be contacted by telephone at 501-372-6555, by e-mail at mhouse@jamesandhouse.com, by facsimile at 501-372-6333, or by regular mail at James, House & Downing, P.A., Post Office Box 3585, Little Rock, Arkansas 72203.

Stealing From Grandma And Grandpa---Inheritance Theft

A recent lengthy but interesting series of stories (Part I and Part II) on the odd heiress, Huguette Clark, appeared to prompt a good article yesterday from Bob Sullivan, who covers Internet scams and consumer fraud for msnbc.com.  Mr. Sullivan's posting focuses upon allegations and situations involving elder financial abuse, which is a significant portion of my own law practice.  I suggest that you read the article when you have a free moment, as it extensively summarizes a growing issue in this country and is obviously one in which you may very well have an interest if you regularly read or have merely stumbled upon my Blog.  

Matt House can be contacted by telephone at 501-372-6555, by e-mail at mhouse@jamesandhouse.com, by facsimile at 501-372-6333, or by regular mail at James, Fink & House, P.A., Post Office Box 3585, Little Rock, Arkansas 72203.

Arkansas Court Of Appeals Rules Dying Woman Not Competent To Execute Deed

Sorry for no posts as of late---I've been tied up preparing for, and then engaged in, a lengthy trust litigation case in which the jury, after a 6 day trial in Pulaski County Circuit Court, returned a significant verdict for our clients.  I'm just now trying to catch up on other work, but hope to resume regularly updating this blog again soon. 

One case that I read about since my last blog post demonstrates that although it is difficult to prove the invalidity of a deed, will, trust, etc. by proving that the person signed the will was not competent (whether due to mental illness, undue influence, duress, etc.), occasionally such claims are successful.  For example, in Munzner v. Kushner, 2010 Ark. App. 196 (an appeal from Washington County Circuit Court), the Arkansas Court of Appeals affirmed the trial court's ruling that a deed transferring property was invalid due to the incapacity of the grantor.

Specifically, a mere 36 hours before her death, Mrs. Kehoe executed a deed conveying her home to her brother, Mr. Munzner.  Mrs. Kehoe apparently had to sign the deed with an "X" as she was too weak to finish the signature of her name when she lost her place.  Her daughter, Ms. Kushner, sued asserting the invalidity of the deed.

At trial, Mrs. Kehoe's doctor testified that just prior to her death she had been administered morphine (utilized for severe pain and suffering), a medication that fights anxiety and sedation, a medication which causes confusion, and a powerful narcotic.  The doctor testified that it would be ill-advised to make any life decision while taking any of the medicines and that they would have impaired her ability to make decisions related to her property. 

On the other hand, friends and relatives who spoke to Mrs. Kehoe that day testified that she was competent.  Moreover, Mrs. Kehoe's attorney, who spoke to her about the deed on that day, also stated that she was competent. 

After considering all of the evidence, the trial court ruled that because Mr. Munzner was Mrs. Kehoe's brother and she had a close confidential relationship with him, he had the burden of proving that his sister was competent to make the deed.  This was especially the case in light of the lack of any consideration (exchange of money or property) for the deed.  The trial court then found that Mrs. Kehoe had been too mentally impaired to execute the deed and ordered it set aside.

Mr. Munzner appealed but the Court of Appeals affirmed.  Specifically, the Court held that Mrs. Kehoe's mental impairment was debilitating to the point that she could not function appropriately to execute the deed regardless of whether she may have been exposed or susceptible to any undue influence.

Under Arkansas law, the determination of whether a deed is void because of the mental incapacity of the grantor is generally measured by her mental ability at the time of execution of the deed.  Andres v. Andres, 1 Ark. App. 75, 83, 613 S.W.2d 404, 409 (1981).  If the grantor is mentally competent at the time that the deed at issue is executed, the deed will be deemed valid.  Id.  In this case the Court held that Mrs. Kehoe's mental impairment was so debilitating that she was unable to function in a capacity to execute the deed, due to her medication and due to her medical condition.  Because the trial court placed great weight upon the physician's opinion, and because a trial court generally has great discretion with respect to considering the credibility of the various witnesses who testify at trial, the Court of Appeals did not find that there was sufficient reason to reverse the trial court's ruling.   

Matt House can be contacted by telephone at 501-372-6555, by e-mail at mhouse@jamesandhouse.com, by facsimile at 501-372-6333, or by regular mail at James, Fink & House, P.A., Post Office Box 3585, Little Rock, Arkansas 72203.

Arkansas Court Of Appeals Rejects Cousin's Attempt To Set Aside Gifts To The Decedent's "Yardman"

One common thread running throughout this blog since its inception has been the issue of competency, i.e., the ability of a person to make informed decisions.  Conflicts often arise when ill or elderly people are claimed to have made signficant decisions regarding disposition of their property shortly before they died---sometimes the decision will be legitimate, the culmination of some long, thought-out plan that just never was memorialized on paper until shortly before their death---whereas sometimes the "decision" will be illegitimate, the product of undue influence or overreaching by a dishonest relative, family friend, or advisor.  Whatever the facts and circumstances, it can be difficult to prove that the person did not have competency to make the decision that they purportedly made.  A recent Arkansas Court of Appeals decision demonstrates that the outcome of these disputes usually boils down to the specific evidence that was presented to the trial court, and ultimately what evidence that the trial court found to be the most credible. 

For example, on March 3, 2010, the Court of Appeals ruled in the case of Deslauriers v. Marilyn Irene Deslauriers Revocable Trust, 2010 Ark.App. 211.  An appeal from Lonoke County Circuit Court, the appellant (Killeen) attempted to invalidate certain documents (quitclaim deed, revocable trust, will, etc.) executed by her cousin, the deceased, during and after her 2005 stay in a hospital due to a stroke.  As a result of those documents, the appellee (Richard, the deceased's "yardman") received the bulk of the cousin's estate.  Killeen filed suit after the cousin's death to contest the validity of the documents in question, contending that the cousin was not competent to execute them due to her medical condition. 

Under Arkansas law, the party contesting the validity of a will generally has the burden of proving, by a preponderance of the evidence ("more likely than not"), (1) that the decedent lacked mental capacity at the time the will was executed or (2) that the decedent was acting under undue influence.  The Deslauriers Court affirmed the trial court's ruling that the cousin attempting to set aside the documents did not satisfy that burden. 

Killeen presented the testimony of multiple doctors who had treated the deceased around the time of her execution of the documents, and they all testified  that she suffered from dementia and would purportedly be incompetent to sign the documents (though they were admittedly not in attendance at the signing).  Medical records also demonstrated a range of impairment (from mild to severe) at different times during the relevant time period.  Killeen likewise presented the testimony of two non-medical witnesses, one of whom contended that  the deceased was mentally incompetent (in their experience) and both of whom testified that the deceased intended to keep her property "in the family."

Richard presented the testimony of the lawyer whom the cousin used to prepare the documents in question, and he testified that he was very careful to determine whether his client was legally competent to execute the documents.  The attorney also testified that he had been hired to prepare a power of attorney so that Killeen and Richard could be placed in charge of the deceased's business affairs, and that Killeen herself believed the deceased to be an odd person but very competent.  Two other witnesses also testified, in a manner favoring Richard's position, to the extent that they were disinterested employees working at the hospital where the deceased was treated and they observed her as competent when they witnessed her signing of the will.   Richard also offered other evidence in the form of the attorney testifying that he met with the deceased several times after her initial execution of the documents, and in the  form of a doctor who treated the deceased remarking that he was impressed how mentally capable (though not physically capable) she remained after her stroke.

In sum, the trial court concluded that the cousin did not prove incompetency and that the deceased was sufficiently competent at the time that she executed the documents.  The Court of Appeals affirmed, holding that while proof of medical condition around the time of the execution of the documents is relevant and important, ultimately the medical condition at the time of execution is paramount.  The Court seemed to attach particular significance to the testimony of the witnesses who were actually in the room when the decedent signed the documents in question.  Observing that it is possible for a testator to execute a document during a "lucid interval" in a period where they may otherwise be incompetent as a general matter, the case generally demonstrates the difficulty that a party can have in attempting to prove a testator's   incompetency. 

American Bar Association Releases "Legal Guide For The Seriously Ill: Seven Key Steps To Get Your Affairs In Order"

Estate, trust and probate litigation often involves allegations that elderly adults' estate planning desires were not carried out after their deaths (either by someone's intentional acts or negligence), or that those elderly adults were taken advantage of and their estate planning desires were thwarted while they were still living (albeit without their knowledge or consent).  With respect to the latter scenario, sometimes the claims are true, and sometimes they aren't.  Issues of (in)competency, illness, undue influence, and fraud are often raised in these types of proceedings.   Each case is different and we have certainly represented those doing the accusing as well as those being accused. 

But one common theme that I have noticed in virtually all of these cases is that no matter how much estate planning that the elderly person actually did, in virtually every situation they probably could have done a bit more.  It might not have ultimately made a difference with respect to whether or not litigation would have resulted, but where more planning is undertaken that can frequently result in a lesser likelihood of later conflict. 

With this in mind, thanks to a tip on the Wills, Trusts & Estates Blog, the American Bar Association has apparently just released the "Legal Guide For The Seriously Ill: Seven Key Steps To Get Your Affairs In Order."  I've given the document an overview and  would heartily recommend it to anyone dealing with such circumstances (or anyone with a loved one who is dealing with this situation).

Avoiding Estate, Trust & Probate Litigation

Since one of my areas of practice is estate, trust & probate litigation, it is obviously not in my economic self-interest to counsel against getting involved in this type of litigation in the first place.  However, first and foremost is a lawyer's duty to his or her client, which while sometimes involves filing or defending a lawsuit can also mean trying to avoid that lawsuit altogether.  After all, Abraham Lincoln once advised:  "Discourage litigation. Persuade your neighbors to compromise whenever you can. Point out to them how the nominal winner is often a real loser---in fees, expenses and waste of time."  That is still generally solid advice, although sometimes the fight just cannot be avoided.

That said, U.S. News published a good little article over the Thanksgiving holiday entitled "8 Tips To Avoid Nasty Estate Surprises" which provides some good pointers for avoiding estate, trust & probate litigation.  In summary:

1.  Pick aa reputable, experienced lawyer who has not performed any work for any of the other beneficiaries.  Basically, you want an attorney who knows what they are doing in this area, who does not have a conflict of interest, and who will be representing your interests (only). 

2.  Pick an administrator who can get along with the family, maybe even a professional fiduciary (like a bank trust department) if no one else could practically fill this role.  This is a biggie---oftentimes when one beneficiary is chosen to act as executor or trustee it can cause consternation with respect to the other beneficiaries. 

3.  Talk about your intentions with family members before any will or trust is drafted, in order to preclude surprises and fights after death and making everyone aware of your plans and desires.  Open, honest communication can go a long way toward heading off battles over the family fortune. 

4.  Consider your state's laws and create trusts if necessary to bypass probate if it is particularly burdensome under applicable state law.  Again, our law firm engages in estate, trust & probate litigation---not estate planning---however we can refer you to some reputable attorneys in this area if needed.

5.  Update the will or trust often so that challenges are less likely.  One of the best ways to avoid litigation is to occasionally update your documents---under facts and circumstances (lots of objective, detached witnesses, etc.) demonstrating the absence of fraud and undue influence from others---so that it can be demonstrated you were polishing your estate and trust objectives up until the end your life.

6.  Be sure to title your assets properly so that the assets pass through or outside of probate as you originally intended.  Too many folks spend a lot of money creating fancy trusts and then never do the relatively simple work of actually transferring assets into the trust. 

7.  Think about including a no-contest clause tied to testamentary gifts of a degree sufficient to discourage legal disputes.  To help avoid post-death disputes it is worth possibly including a penalty clause that essentially poses a risk of losing their piece of the pie for any beneficiary who challenges the instrument  in question after your death. 

8.  Consider allowing some discretion with respect to distribution of assets so that beneficiaries can agree to a distribution that best meets their own needs and desires.  There is no one-size-fits-all strategy and of course none of us have a crystal ball, so sometimes providing for some flexibility is often a good practical solution. 

While not a fool-proof plan to avoid estate, trust & probate litigation, the foregoing reflects some good first steps to staying out of the courts with respect to the family fortune.  As we are in the heart of the Thanksgiving and Christmas seasons, I extend my best wishes to you with hopes for a fuss-free next few weeks.