Pennsylvania Estate Planning Lawyer & Attorney : Jakubik Law Firm : Serving Philadelphia, Chestnut Hill, Mt. Airy

Today's New York Times brings us  depressing news of yet another attorney fallen from grace for not being able to keep her hands off of the property of an elderly person over whom she had been appointed guardian. The Appellate Division has suspended Emani Taylor for allegedly converting the property of retired Supreme Court Justice John L. Phillips after saying that she had failed to cooperate with the court's investigation into her actions.

Yes, I said that the victim is a retired state Supreme Court  Justice! In fact, having once earned a 10th degree Black Belt, Justice Phillips was known as the "kung fu Judge". Now, thirteen years after he retired from the Bench, much of his property has been dissipated improperly and his financial future is in doubt.

The bottom line here is that NONE of us are immune to this kind of disaster. Have a plan for your own future as you get on in years and take special interest into how older loved ones are protected from avaricious and untrustworthy relatives, advisors (and yes, unfortunately, even trusted attorneys) . Do not be afraid to conduct your own investigation into the affairs of a loved one who appears to be experiencing some unexpected difficulties.

Most important, play an active role in the lives of your elderly relatives. Of course, by doing so you will be bringing much warmth, comfort and happiness into their lives (you will also be setting an example for your own children who some day will be charged with your care, feeding and general welfare). That way, you will be in a position to notice those changes which so often presage an elderly person falling victim to somebody they trust.  

Source: New York Probate Litigation Blog

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The issue of competence is quite often at the center of will contests. Until it can be proved otherwise, the mental competence of the decedent is presumed. Rebutting this presumption is entirely the burden of the objectant to a will -- and it is a heavy burden to overcome, but sometimes there may be ways of accomplishing this.

Keep in mind that different levels of competence are required to execute different documents and instruments. While a minimal level of competence is needed to execute one's will (we take into account the fact that final plans may not be made until well after the eleventh hour, when a testator's medical condition may be grave), considerably higher requirements are set for the execution of deeds, powers of attorney, contracts, brokerage house documents, etc.

A major key to determining the competence of a decedent may be found in records of medical care and treatment from times contemporaneous with the execution of the documents which are in question. A recent revision to New York's Mental Hygiene Law allows distributees of decedents to obtain these records without waiting for the issuance of Letters Testamentary or Letters of Administration. This may be especially useful where an executor is slow to provide authorizations to obtain medical records --and may also allow a potential objectant to a will to have a better idea of the chance of success before engaging in costly litigation. Where an in terrorem clause is involved, this allows the gathering of vital medical information before objections are filed and before the clause becomes operative.

Hospital, nursing home and rehab center records may contain a virtual treasure trove of information. It is usually worth the investment of several hundred dollars to purchase them in those cases where you are absolutely sure that Uncle Larry was not in his right mind when he signed over his ranch to his absolutely adoring 22 year old home health aide who consistently maintains that, to pass the time, Larry used to explain complicated theories of quantum physics to her . These records contain daily --sometimes hourly-- records of treatment. They report all of the medications being administered , some of which may have definite impact on one's ability to make business or estate decisions. Sometimes these medications may also interact with each other causing unexpected mental and emotional effects.

Being hospitalized or residing in a nursing home for an extended period may , in and of itself, lead to a depression or produce a "hospital psychosis" where even the best and brightest of us become somewhat disoriented and may exhibit some signs of dementia. All of this is recorded in the nurses notes which accompany the doctor's entries. These notes are often an intimidating scrawl which defies deciphering by a non-medical person.

Spend the money. Hire a qualified forensic nurse-practitioner to review and analyze the records. Sometimes the road simply leads to a dead end but at other times the results may be awesome. These notes reveal the decedent's  comments and behavior when he or she was on powerful medications and left alone to ruminate for long portions of the day. Sometimes they  paint a totally different picture of the Uncle Larry everybody knew, loved and came to for advice. Either way, medical information properly analyzed by a professional will provide a much better vantage point from which to determine whether or not a challenge to competency is warranted.

Source: New York Probate Litigation Blog

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A 40 percent contingent-fee agreement between New York law firm Graubard Miller and Alice Lawrence, the 83-year-old widow of real estate developer Sylvan Lawrence, was not unconscionable on its face, an appellate court said Tuesday, even though the agreement was executed in the final months of a decades-long estate litigation in which the firm had already received $18 million in hourly fees and three partners had further requested and received $5 million in "gifts."

In Lawrence v. Graubard Miller et al., a 4-1 majority of the New York Appellate Division, 1st Department denied Ms. Lawrence's motion to dismiss Graubard Miller's petition to compel payment of the contingent fee and said further proceedings would be needed to determine the propriety of the arrangement.

"[W]hile at first blush such agreement might arguably seem excessive and invite skepticism, before any determination regarding unconscionability can be made, the circumstances underlying the agreement must be fully developed, including any discussions leading to the agreement, as well as the prospects at that time of successfully concluding the litigation in favor of Mrs. Lawrence," Justice Richard T. Andrias wrote for a majority that included Justices David Friedman, George D. Marlow and Eugene Nardelli.

But in a blistering dissent, Justice James M. Catterson said he would not only have found the fee agreement invalid on its face but would also have referred the Graubard Miller lawyers to the Departmental Disciplinary Committee.

"Regardless of the procedural aspects of the parties' negotiations, no court can condone such an exorbitant fee," Catterson wrote.

Ms. Lawrence first retained the law firm, then known as Graubard Moskovitz McGoldrick Dannett & Horowitz in 1983, to represent her in a suit against Seymour Cohn, her late husband's brother, business partner and executor.

At the time of Mr. Lawrence's death in 1981, the brothers held a 12-million-square-foot real estate portfolio that included the former Port Authority building at 111 Eighth Ave. and a number of Wall Street office towers. It was estimated to be worth over $1 billion. Ms. Lawrence, who inherited 75 percent of her husband's interest, sought the portfolio's sale, but Cohn, who died in 2003, long opposed her.

Over the next 20 years, some $350 million was distributed from the estate, but the litigation dragged on until a final settlement was reached in May 2005 by which Cohn's estate would pay Ms. Lawrence and her children $105 million. Graubard Miller is seeking 40 percent of this amount, or around $42 million. Ms. Lawrence has sought rescission of the agreement as well as the return of all previous fees on the grounds of unjust enrichment and breach of fiduciary duty.

Though contingent fees of such magnitude are not uncommon in personal injury cases, they are rarer in estate cases. Moreover, such deals normally date from the beginning of the litigation and are in lieu of hourly fees, meaning a law firm bringing a case on a contingent-fee basis normally faces a risk of nonrecovery.

But Graubard Miller's contingent-fee deal was signed in January 2005, only months before the settlement. The 1983 retainer agreement in effect prior to that only specified hourly billing. In his dissent, Justice Catterson said the contingent fee might have been reasonable if agreed upon at the beginning of the case or if the firm had agreed to refund its previous fees.

"Without the costs and risks generally associated with contingency fee arrangements, such a fee agreement is nothing short of plain greed," he wrote.

The contingent-fee arrangement was proposed to Ms. Lawrence by Graubard Miller partner C. Daniel Chill. In 1998, Chill had also allegedly asked Ms. Lawrence to pay him and two other partners multimillion-dollar "gifts," telling her that such payments were typical in longstanding attorney-client relationships.

Ms. Lawrence subsequently wrote a personal check to Chill for $2 million and also wrote $1.6 million and $1.5 million checks respectively to Graubard Miller partners Elaine Reich and Steven Mallis. At Chill's alleged request, she also paid $2.7 million in gift taxes. She is also seeking the return of these payments.

But the appellate court majority said the propriety of both the retainer agreement and the gifts depended upon Ms. Lawrence's capacity at the time she entered into it, and that her advanced age was not dispositive of the issue. In its decision, the court cited the recommendation of a referee appointed by former Manhattan Surrogate Renee Roth.

The referee, former Court of Appeals Judge Howard Levine, had concluded that there was no legal authority for finding a contingent fee unconscionable solely on the basis of its size and without any inquiry into the discussions between client and attorney.

Levine was also last month appointed one of the administrators of the late Brooke Astor's estimated $190 million estate. Tuesday, the Manhattan District Attorney's Office announced criminal fraud and larceny charges against Astor's son and his former lawyer.

In Ms. Lawrence's court filings, she claimed her capacity at the time she agreed to the contingent fee was diminished because of a recent surgery, for which she was taking pain medication.

Graubard Miller's lawyer, Mark Zauderer of Flemming Zulack Williamson Zauderer, said Tuesday that Ms. Lawrence was a sophisticated woman who had entered into the fee agreement with full knowledge. He said the firm was delighted with the 1st Department's decision.

"They affirmed Graubard's right to a hard-earned fee in a very complex case," he said.

Leslie D. Corwin of Greenberg Traurig, the lawyer for Ms. Lawrence, said Tuesday that he strongly agreed with Justice Catterson's dissent and felt the case should be decided on the law, with no need to elicit further facts. Though he said he was still conferring with his client on her options, he said the likelihood of an appeal was strong.

Source: Law.com

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Today's New York Times business section tells us of  the mysterious death in Florida of 44 year old hedge fund manager Seth Tobias this past September 4th. From all appearances, he had suffered a fatal heart attack and was found in his swimming pool. Initially, there were no suspicions raised by the death of this man who had controlled a 300 million dollar hedge fund and whose estate is estimated at about 25 million dollars.

Of course, large amounts of money can lead to king-sized claims. Mr. Tobias' four brothers have already filed a lawsuit against his widow Filomena amidst claims that she had drugged and murdered her husband even though she has not been charged with any crime. The Jupiter Florida police have not opened a criminal investigation --and are not likely to do so until the results of the medical examiner's toxicology tests are known.

Meanwhile, Florida subscribes to the doctrine that one cannot profit by one's own wrongdoing and therefore a killer cannot inherit from his or her victim.The stakes here will be extremely high in all respects --and it looks as if we will be treated to a lurid and exciting wild ride which will, incidentally, provide us with more than a few lessons in the law before it is over.

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A high-profile trust fund fight spilled over into state district court Thursday when Albert Hill III, the first great-grandson of H.L. Hunt, sued the trustee for two family trust funds, alleging mismanagement of about $3 billion in assets.

Mr. Hill III also sued his father, Al Hill Jr., and two aunts, saying in the complaint that they, along with trustee Tom Hunt, conspired to force him and his family out of the trust after he didn't go along with a plan to split the trust money among themselves and sell off interest in Hunt Petroleum Corp.

"Al Hill III didn't sue his father until after his father sued him and said he was not the beneficiary of these trusts, fired him from the family business and filed documents in probate court that made certain claims that would oust Al and his grandchildren from any interests in these trusts," said William Brewer, attorney for Albert Hill III, in an interview.

Attempts to reach Tom Hunt, trust adviser William Schilling, and family attorney Ivan Irwin Jr., who are all named in the suit, weren't successful Thursday.

H.L. Hunt created separate trusts for the six children he had with his first wife, Lyda, to pass along the fortune. In the suit, Mr. Hill III states that he became a direct beneficiary of the trust when his father, Mr. Hill Jr., "disclaimed" most of his interests in the Margaret Hunt trust March 22, 2005.

That "irrevocable disclaimer" made Mr. Hill III a direct beneficiary of the Margaret Hunt trust when she died June 14, according to the suit. Margaret Hunt Hill was Al Hill Jr.'s mother.

Tom Hunt, H.L. Hunt's 84-year-old nephew, and the other Hill family members "conspired" to break up the Margaret Hunt Trust Estate and the Harold Lafayette Hunt Jr. Trust and "partition" it among themselves by selling the assets they contained, primarily control of shares of Hunt Petroleum Corp.

When Mr. Hill III, 37, confronted the parties, he was told he wasn't a direct beneficiary but rather a "contingent beneficiary" of the trust. In a phone conversation, Mr. Hill III told Tom Hunt that the document his father had signed was witnessed by Tom Hunt himself; Tom Hunt then hung up on Mr. Hill III, the complaint said.

When Mr. Hill III's father and other family members sensed he wouldn't go along with the plan to change the trust, they began a campaign of "emotional and financial" threats designed to force Mr. Hill III to go along, the suit said.

Mr. Hill III was disinherited from his father's will and was forced from the family business by terminating his personal services contract. The suit also names Alinda Wikert and Lyda Hill, the two aunts.

The suit alleges broad financial mismanagement of the two trusts in how assets were handled, saying their management violated federal racketeering laws.

It asks for a full accounting of the finances of the trusts, the removal of Tom Hunt as trustee, appointment of receivers for the two trusts, and unnamed damages along with punitive damages against the defendants.

Source: Dallas News

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Michael Bonasera asks a couple of interestin questions at his Ohio Trust & Estate Blog:

After you have done a revocable living trust for client, is there a requirement (implicit or otherwise) on the lawyer to insure that the trust is funded or mechanisms are in place to allow for it to be funded?

Further, if the trust is not funded when the client dies (leading to a larger probate estate than would have otherwise been necessary if the trust had been funded), is the attorney who drafted the trust liable for malpractice?

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From this week's New Jersey Law Journal. It may well be that the lawyer here did not actually do anything improper, but anyone concerned about appearances might have acted differently. Anything that even looks like it might be self-dealing should be inherently suspect and avoided:

A New Jersey attorney and his client, who last May escaped conviction on charges they unduly pressured an elderly widow to name them as executor and beneficiary of her multimillion dollar estate, now are trying to avoid punitive damages.

A New Jersey appeals court ruled last December that although Ronald Casale and his client, Dr. Ronald Sollitto, could not be forced to pay attorney fees to the beneficiary they effectively disinherited, a jury could still assess punitive damages against them.

Last week, Casale and a lawyer for Sollitto argued to the state Supreme Court that to allow such a remedy would clog the courts and drastically alter the law of trusts and estates.

The case, In the Matter of the Estate of Madeline Stockdale, A-121-06, stems from a challenge to a 2000 will drafted by Casale that named Sollitto, his friend and longtime client, as the chief beneficiary of Madeline Stockdale's estate and Casale the sole executor. The challenger was the Spring Lake First Aid Squad, which under an earlier will would have received most of the estate.

Casale drafted the later will for Stockdale, a nonagenarian, while she was in a rehabilitation facility recovering from a hip fracture. It was executed on Jan. 3, 2000, a day before she had throat surgery.

The same day, Stockdale also signed a real estate contract -- drawn up by Spring Lake, N.J., solo Thomas Foley on instructions from Sollitto -- by which she agreed to sell Sollitto her Spring Lake home for $1.3 million. The contract required only a $1,000 initial deposit, followed by a second deposit of $56,000, with Stockdale taking back a purchase money mortgage for the rest. The will drafted by Casale excused Sollitto's obligation to pay off the mortgage, since as residuary beneficiary the money would go to him anyway.

Stockdale also gave Sollitto power of attorney over her affairs. Stockdale died three months later.

Superior Court Judge Ronald Reisner of Monmouth County, N.J., refused to admit the 2000 will to probate, saying it appeared to be the product of "sharp dealing" by Casale and Sollitto. He also refused to enforce the sale of the house.

Reisner denied the squad's claim for punitive damages but awarded it $1,193,726 in counsel fees against Sollitto and Casale, relying on In the Matter of the Niles Trust, 176 N.J. 282 (2003). That case held that an estate executor or trustee who benefits from undue influence to the detriment of the estate may be required to pay counsel fees.

The Appellate Division reversed, holding Niles did not apply because Sollitto was not an executor or fiduciary, neither he nor Casale had depleted the estate and there was no attorney-client relationship between the squad and Casale.

However, the court remanded for reconsideration of punitive damages, finding Reisner apparently had mistakenly thought the fee award was the equivalent of a punitive award. Casale and Sollitto appealed.

On Oct. 9, Sollitto's lawyer, Frederick Dennehy, urged the state supreme court to reject the squad's claim for punitive damages and counsel fees.

"The question of fee shifting hovers like a ghost over all settlement negotiations" in disputes over wills and estates, said Dennehy, of Woodbridge, N.J.'s Wilentz, Goldman & Spitzer.

"Punitive damages are a much larger issue," he added. "We have the possibility that in ... virtually every will contest, there will be an application and a claim to entitlement for punitive damages."

The result, said Dennehy, would be to clog the courts with estates that cannot be settled because of the possibility of fee shifting and punitive damages.

"Why are you so fearful?" asked Justice Roberto Rivera-Soto.

"This would be a seismic change in the law of estates and trusts," Dennehy replied.

Rivera-Soto wasn't convinced, asking Dennehy why rules concerning fee shifting and punitive damages should not apply in will contests the way they do in tort claims.

Dennehy said those rules could apply if there were clear indications of fraud, but not of undue influence.

"Undue influence covers a very wide spectrum," Dennehy said.

Casale, arguing pro se, said Niles did not apply here because there was no diminution of the estate as in Niles. "In Niles, the Court had to send a message out," said Casale, a former head of the New Jersey State Bar Association's Real Property and Probate section.

Rivera-Soto asked about the circumstances under which punitive damages might be awarded. Casale said they could be available if there were compensatory damages, but since there were none in this case, punitive damages cannot be awarded, he said.

Casale added that there is no evidence he exerted influence over Stockdale.

"There was not a single finding that I exercised any undue influence," he said. "I couldn't have. I didn't know the woman long enough." On May 11, a Monmouth County jury hung on conspiracy and theft-by-deception charges against Casale and Sollitto for allegedly bilking Stockdale out of her fortune.

Casale told the justices they would send a bad signal to the bar by ruling in favor of the rescue squad.

"I know a lot of practitioners who will stop doing wills and estates," he said. "It will just be too risky."

The rescue squad's lawyer, Spring Lake solo William Gearty, said the two did exert undue influence over an elderly woman in ill health.

"They were the 'driving force,'" said Gearty, quoting Reisner, even though Sollitto was not a fiduciary. By persuading Stockdale to change her will, they engaged in a "pernicious tort."

Several justices suggested it may not be possible to rule in the rescue squad's favor because there is no indication it suffered financially.

Gearty disagreed. "It's difficult for the squad to accept the fact that it was not harmed at all," he said. Stockdale's property is now worth about $5 million and, under the terms of her original will, the rescue squad was to be given the property after she died.

"They still don't have title to the property seven years after Mrs. Stockdale died," Gearty said.

Justice Virginia Long asked Gearty to respond to Dennehy's assertion that a ruling in the rescue squad's favor would jam up the Chancery Division with contested claims.

The court's ruling in Niles has not led to that result, said Gearty, and there is no reason to believe it would happen if the court ruled in the rescue squad's favor. "I don't see the floodgates opening in any fashion," he said. "This case is identical to Niles."

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Investment News reports on the latest in the oft litigated estate of the late Seward Johnson, scion of the founder of Johnson & Johnson. Needless to say, this latest round is an advertisement for the need for precision and clarity in the drafting of estate documents. Read the whole story below the fold:

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Seems like the saga of the Barnes Foundation, a venerable institution in the art world, isn't't over quite yet. Three years ago a Pennsylvania state court judge gave the institution, which has been on financial life support, permission to move from its location in the Philadelphia suburbs to new, as yet to be constructed quarters, in Center City Philadelphia. Today comes the news that a group of residents who are neighbors of the Barnes in its current location have filed a petition asking the court to reopen the case and reconsider its earlier ruling, and to put the Barnes into receivership. Many of the allegations in the petition, as reported by The Bulletin, are rather scandalous. If they are to be believed, the petitioners would have us believe that there has been a far reaching conspiracy, of which the participants included Governor Rendell, many prominent Philadelphia lawyers, business people and philanthropists, the board of trustees of a local university, as well as the board of the Barnes, and the CEO of Comcast, among others. The story seems more than fanciful and the petition is, I would predict, doomed to fail.

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When my children were little, one of their favorite expressions was, “But it’s just not fair.” And I often hear the same protest from a potential client who wishes to object to a loved one’s will on the grounds that they were either promised something, the will was supposed to have been rewritten, or the terms are not fair.

Unfortunately, in most cases, the message that I have to give in response is, “You are right, but the law in will contests is such that you don’t have a case.”

I

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Like many, I have been following with some interest the progress of Rupert Murdoch's bid to buy Dow Jones, the publisher of the Wall Street Journal. My interest has been especially piqued by the role that a series of what appear to be some very complex Bancroft family trusts play in the matter, not to mention the role that the family trustees and lawyers are playing. The weekend edition of the Journal ran an interesting story on the status of Mr. Murdoch's bid that outlined the divide among the Bancroft family members, as well as the role that the various trusts play in the drama. What especially caught my eye was this little bit:

Family lawyers were scrambling Friday to change the voting structure of the biggest Bancroft trust so it would better reflect the views of all the beneficiaries. The trust's overseers include Christopher Bancroft, a prominent family member who has been outspoken in his opposition to the deal. The restructuring could dilute Mr. Bancroft's influence over the stock now held in the trust.

I have not seen the trust documents that govern the trust in question, and I do not have any knowledge of the terms. I wonder, though, whether it is particularly appropriate for the lawyers to try and restructure the trust to suit the needs of particular beneficiaries under a particular set of facts. If its that easy, part of the purpose of the trust (and in the case of a family such as the Bancrofts. to be sure there are tax reaosns for the trusts) is defeated. It can't be that simple. I will be fascinated to see  how this plays out and, if Mr. Bancroft is on the losing side, whether there will be litigation over this effort to divide the trust. And of course there is a planning lesson here for others. If you have particular wishes, be sure that they are explicitly addressed in your planning.

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