"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.

Common Mistakes When Serving As Trustee

My last post discussed the pros and cons of institutional trustees vs. family member trustees.  Regardless of whom is serving as trustee, in the course of my law practice there are common themes which repeatedly arise in the area of trust disputes and litigation.  Specifically, it is easy for trustees---especially inexperienced family member trustees---to make mistakes when administering a trust.  Some of these were nicely summarized in a recent article, published in Barron's Penta, entitled "The Five Biggest Ways To Bungle A Trust." 

(1) Not Keeping Good Trust Records---The Arkansas Trust Code, and presumably trust laws in most if not all other states, contain requirements mandating that trustees provide beneficiaries with accountings of trust assets, income, expenditures, etc.  The timing and extent of those accountings can vary based upon certain factors, including whether one is an income beneficiary or a remainder beneficiary.  However, at all times the trustee is to act in the interest of the beneficiaries, which includes maintaining comprehensive and accurate records.  Trustees who do not keep such records act at their own peril, as gaps and inaccuracies in documentation (even if purely innocent) can create an aura of suspicion and sometimes later liability for breach of trust, breach of fiduciary duty, etc. 

(2) Not Diversifying Trust Investments---Another duty which too often goes unfulfilled is the trustee's obligation to properly diversify trust investments.  Just because the trustee might handle their own investment portfolio in a certain manner does not mean that the investments are being properly handled with regard to the beneficiaries of the trust.  For example, if the beneficiary is an elderly person in need of income, having the trust's assets invested in 100% tech stocks is not likely to be deemed a wise investment strategy.  Arkansas has a Prudent Investor Act which must be reviewed and followed, and it is based upon a well-recognized uniform act that is utilized in many other jurisdictions as well. 

(3) Not Distributing Trust Assets Fairly---A trustee owes a fiduciary duty to current beneficiaries, as well as to remainder beneficiaries.  Sometimes this can create problems when a duty to one conflicts with a duty to another.  Also, sometimes in the case of family member trustees, the trustee is herself a beneficiary (e.g., perhaps the father named his daughter as trustee of his trust after his death, but also named her as a beneficiary like his two sons/her two brothers).  Especially when no trustee fee is involved (see below), we have seen cases in which the trustee is tempted to take extra distributions, etc. as purported justification for being saddled with the extra time and work associated with acting as trustee.  This can be dangerous as it can constitute an actual impropriety, or at least suggest an appearance of impropriety.  It is therefore wise to maintain clear and well-documented records of all distribution decisions.

(4) Not Properly Handling The Trustee Fee---The fact is that administering a trust can involve a lot of work.  It can be very profitable, which is precisely why institutional trustees exist.  Families often do not want to see their assets being consumed in part by the fees of an institutional trustee (notwithstanding some of the advantages to using one), and so often a family member is named as trustee.  The family member, however, might have a time-consuming occupation and/or an active family life.  Adding the trustee duties on top of an already-busy schedule can naturally trigger a desire for some sort of compensation associated with the extra work.  Whatever the trustee fee arrangement is (assuming trustee fees are paid at all), similar to asset distributions discussed above it is wise for there to be a well-documented record of how trustee fees will be paid, when they will be paid, and how they will be calculated.

(5) Not Watching Your Back---A trusteeship has been viewed as involving the highest duty owed another under the law.  It entails a tremendous amount of responsibility, and should not be lightly regarded.  Individuals named as trustee in a trust instrument often view it as an honor, which is fine so long as the trustee treats it as such.  However, money has an uncanny way of sometimes causing people---including trustees and beneficiaries---to engage in actions and behavior which they (and others) perhaps never previously conceived.  Occasionally this will result in nasty disputes between trustees and beneficiaries which can ultimately erupt into actual litigation.  A trustee might innocently take on that "oath of office," so to speak, never imagining that they might someday be mired in stressful, expensive disagreements with once-close friends or family members.  On that note, typically the trustee's dispute is not with the person who named them as trustee (i.e., in a revocable trust situation the grantor of the trust can simply remove or change the trustee)---instead, the fight will frequently be with the children or grandchildren of the grantor. 

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.

Frank Talk On Attorney's Fees

One of the first questions that a potential inheritance litigation client quite reasonably asks is some form of the following question: “How much is this ultimately going to cost me?”  While there is unfortunately little or no way of determining on the front end how much a legal matter might cost, how that cost will be calculated generally is capable of early determination.  There are typically three primary ways in which an attorney charges for his or her services, and of course occasionally a couple of these methods can be combined together to create a “mixed” fee arrangement.

1.  HOURLY FEE

As Abraham Lincoln famously said, "A lawyer's time and advice are his stock in trade."  Accordingly, the most common fee arrangement is based upon an hourly fee, i.e., the lawyer charges an hourly rate for their time and the ultimate fee is determined upon how much time the lawyer has to spend on the representation.  For example, if I was retained by the trustee of a trust to defend against claims brought by a beneficiary of the trust, I would charge the trustee an hourly fee and the ultimate bill would be determined upon how much time I had to spend working on the trustee’s case.  The same goes for a beneficiary pursuing claims against the trustee.

Obviously, the more time-consuming the case the more expensive the representation (and vice versa).  Hourly rates in Arkansas are by and large considerably lower than in other, more populated and wealthier areas of the country, especially the East and West Coasts.  There are a number of factors which determine the hourly rate, including but not limited to the complexity of the area of law, the attorney’s experience and reputation, the attorney's location, etc.

2.  CONTINGENCY FEE

A second, but less common, fee arrangement in inheritance disputes (and other litigation for that matter) is a “contingency fee.”  This is an arrangement which is necessarily only used by the person bringing the lawsuit, as opposed to the person defending the action.  Specifically, the lawyer and the client agree that the lawyer will accept a percentage of whatever amount is recovered (if anything) as the lawyer’s fee for the representation.  A common percentage is anywhere from 25-50%, and rarely will the percentage stray outside of that range.  Usually the lawyer and the client will come to an agreement on the front end regarding who will pay for the various costs (filing fees, deposition expenses, copies, postage, etc.) and sometimes the lawyer will advance those expenses and then take them “off the top” in the event of any recovery.

As one can tell, under this arrangement the more favorable the recovery, the higher the lawyer’s fee.  However, there is also added risk for the attorney because if there is little or no recovery, or if the client prevails but the judgment is uncollectible as a practical matter (the defendant has no money, etc.), then the lawyer loses just like the client.  Given the fact that litigation can often take years, essentially the attorney is working for free for a long period of time before recouping out-of-pocket expenses much less any fee for the work performed.

This type of arrangement can be beneficial in situations wherein an individual might not be able to afford an hourly arrangement.  Again, the potential downside is that, unlike a rear-end collision wherein liability in a personal injury case might be very clear, liability in estate, trust, or probate litigation can often be quite unclear and unpredictable.  Therefore, in cases where liability is unclear or in cases in which the defendant could potentially have counterclaims against the plaintiff, contingency fee arrangements will probably not be the ideal arrangement.  Occasionally, a lawyer will be willing to combine a lower hourly fee (perhaps charging 2/3 of their regular hourly rate) with a lower-than-usual contingency percentage (perhaps 25% instead of 33% or more), therefore creating a mixed hourly/contingency fee arrangement.

 3.  FLAT FEE

Finally, the third and least common type of fee arrangement is simply a “flat fee” paid for a certain amount of services.  In other words, the lawyer and the client agree that a certain type of service or a certain number of actions will be taken by the lawyer to represent the client (drafting a certain amount of letters, preparing an agreement, etc.).  For that finite amount of services the lawyer and client agree on a specific fee.  This gives both the lawyer and the client a greater degree of predictability, but it is an often impractical arrangement in estate, trust and probate disputes because litigation is unpredictable and can rarely be reduced to only a certain number of actions.  However, in certain situations it can be used effectively and should not automatically be discarded.

In conclusion, the best fee arrangement in a particular situation will necessarily depend upon the facts and circumstances.  While the free market has resulted in lawyers no doubt being expensive, when it comes to the amounts of money and high stakes involved in inheritance litigation, many times the lawyer’s fee can be a mere drop in the bucket.  For example, if a plaintiff potentially goes without recovering some or all of a large inheritance that they were otherwise supposed to receive, then hiring an attorney can even be construed as a wise investment.  Likewise, if a trustee could potentially be removed from her office or is wrongfully accused of harming the trust and causing substantial damages, hiring representation is a necessity rather than a luxury (incidentally, sometimes trustees' attorney fees can be paid out a trust or reimbursed by a trust).  In certain situations (breach of contract, breach of trust, etc.) the prevailing party also may be able to recover some or all of their attorney’s fees expended.  In essence, every situation is different and unfortunately there are simply no guarantees when it comes to the outcome of a legal matter nor the attorney fees necessary to handle that legal matter.

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.

Inheritance Hijackers: Who Wants To Steal Your Inheritance And How To Protect It

At the recommendation of a client, I have recently started reading a fascinating book entitled Inheritance Hijackers:  Who Wants To Steal Your Inheritance And How To Protect It (Ovation Books 2009) written by a Florida attorney named Robert C. Adamski.  The book is primarily written for beneficiaries and potential beneficiaries of an inheritance.  Mr. Adamski's book sets forth an extensive discussion of the growing phenomenon which he calls "inheritance theft," and which of course is a primary component of what I do in my own law practice as well (representation of beneficiaries, but also fiduciaries such as trustees andexecutors, in estate, trust and probate litigation).  "Inheritance theft" is defined on page 2 of the book as "the act of diverting assets from the intended recipient to another person[.]" 

While the book is available for sale at Mr. Adamski's own website, Amazon.com, and I'm sure other places, a good overview of the phenomenon can be found below which is directly from a prior post by Mr. Adamski: 

1.  Who steals inheritances?

Inheritance theft is a crime of opportunity committed by those we place our trust in. These are family members, close associates, care givers and others we depend on as we grow older. Inheritance hijacking is always a surprise to the victim, who never expected a trusted family member or friend to betray their trust.

2.  Who are the victims of inheritance hijacking?

There are always two classes of victims. The first is the person who intended to give the inheritance. The second is the person or persons who were the intended recipient of the inheritance. As we age we are all potential victims because we become weaker in our physical and mental ability. We then are forced to rely upon and put our trust in others. This gives the trusted persons the opportunity to hijack our inheritance.

3.  How are inheritances hijacked?

The hijacker's bag of tricks includes undue influence, duress, forgery, theft by an administrator, marriage, and more. Administrators of probate estates and trusts are common hijackers. They have the opportunity and ability to take advantage. Marriage is the 'Silver Bullet" in the world of inheritance theft because it is all but impossible to overturn a marriage which hijacks an estate. Care givers earn the trust of their victims and as a result are often inheritance hijackers. An important element of inheritance theft is the trust which is gained by the hijacker and later betrayed. Without that element of trust it would be very difficult to hijack an inheritance.

4.  How can I determine if my inheritance is at risk?

Take the Inheritance Risk Quiz at www.ProtectYourEstate.Net to determine the risk to the inheritance you intend to give or the inheritance you expect to receive.

5.  How do I protect the inheritance I intend to give or the inheritance I expect to receive?

Self education and proper estate planning are the first steps. But it does not end there. It is vital to understand how inheritances are hijacked and how to guard against inheritance hijacking. The book, INHERITANCE HIJACKERS: Who Wants to Steal Your Inheritance and How to Protect It, was written to help people protect their families from inheritance theft. Learn more about the book at www.ProtectYourEstate.Net

**********

I have not yet finished Mr. Adamski's book, but can already tell that I will be recommending it to beneficiary-clients, and potential clients, who anticipate possibly receiving inheritances.  The book contains an immense amount of valuable information for a very reasonable price. 

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.

Michael Jackson's Father Making Push For Allowance And Say-So In Deceased Son's Estate

At my house we just started giving allowances to our kids so long as they do certain chores around the house, and hopefully the experiment will teach them a number of lessons including personal responsibility, teamwork, the value of hard work, budgeting, saving, etc.  Each of our children will receive one dollar (per year of their age) per week, i.e., our 7 year old will receive $7 per week so long as he does his chores every day (and is docked a buck if he doesn't get them done).  I am hopeful that this will work, but the jury is still out as they have not yet caught on, for example, to the requisite bedmaking every morning.

That allowance, of course, is a mere pittance to the allowance that Michael Jackson's father is claiming from his son's estate.  I wrote about Michael's death a few weeks ago, and sure enough it appears that there are some post-funeral disputes with respect to who will benefit from the assets in his estate.  Specifically, an article today reveals that the gloved one's controversial father, Joe Jackson, recently filed a 60-page motion seeking a $15,000 monthly allowance to help cover his expenses.  Apparently Mr. Jackson's only income other than his son's assistance has been a $1,700 monthly Social Security check.  His alleged monthly expenses evidently include $1,200 for rent for his Las Vegas home (his wife of 50 years lives north of Los Angeles), $2,500 for eating out, $1,000 for entertainment, gifts and vacations; $2,000 for air travel; and $3,000 on hotels.  That actually does not sound too unreasonable considering Vegas prices, separate and distinct from the issue of whether Mr. Jackson should receive a dime to begin with . . .  

Anyway, a judge has ruled that Mr. Jackson can pursue his motion to receive a family allowance from the estate because he claimed his son had long been supporting him, but simultaneously ruled that he will not inherit any of his famous son's assets because he was not named in the will.  Mr. Jackson was deemed not to have standing to pursue his litigation, and therefore also will not be able to challenge the appointment of the executors chosen by the singer to handle the administration of his estate.  There is some indication from the article that an appeal may be forthcoming, but given the well-publicized strained relationship that Michael and Joe Jackson have had in the past it seems unlikely that an appellate court would overrule the trial judge's factual findings as to Michael's intent in drafting his will.