Wealth Law Blog : Oregon Asset Protection Lawyers & Attorneys : Samuels Yoelin Kantor Seymour & Spinrad Law Firm : OR Estate Planning, Fiduciary Litigation

From time to time we will publish local opinons of interest:

Background:  

Plaintiff, director of a charitable organization (Wintercross) and the entities controlled by the organization (Jensen), engaged in self-dealing in the course of making investments on behalf of the organization.  Plaintiff failed to pay the mandatory charitable contributions, which resulted in tax penalties. During this time, however, Plaintiff maintained possession of items of personal property that could have been distributed to another qualifying entity, thus reducing or eliminating tax penalties. Plaintiff also structured the sale of an apartment complex that both she and Jensen had an ownership interest in such that she received cash and Jensen carried the balance of the deferred purchase price.  Then, when the purchaser was unable to pay, Jenson faced 100% of the loss.  Finally, acting against the advice of an accountant, Plaintiff invested the proceeds of that sale in a second apartment complex.  The value of the complex decreased substantially and resulted in a loss of millions in assets.  And, upon Jensen’s management and/or acquisition of each apartment complex, Plaintiff purchased a home that adjoined such complex.  Plaintiff then allowed maintenance personnel to occupy the home.  Although Plaintiff arranged for the complex to pay for both the mortgage and utilities associated with the home, title to the home remained with Plaintiff. Finally, Plaintiff used Jensen’s assets to pay for her attorney fees associated with this proceeding. 

Holding:

Plaintiff abused her authority as a director and officer of Wintercross and was removed, with millions awarded for damages. Although Plaintiff did not directly divert Wintercross assets to herself, she used her control to benefit personally when such benefits should have been allocated to Wintercross. Plaintiff did not act prudently when she: (1) refused to follow the advice of the accountant; (2) failed to make sensible investments, resulting in substantial loss; (3) failed ensure that the mandatory minimum charitable distributions were made; and (4) used the organization’s assets to fund a personal proceeding. The court determined that Plaintiff’s claim of ignorance was ill-founded and did not create a defense to her liability because she took on the responsibility of handling the affairs of Wintercross, and in doing so, engaged in self-dealing.

Ellis v. Department of Justice and Wintercross Foundation

Clatsop County Circuit Court Case No. 09-2215

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Jay Folberg recently wrote the four page article,
 "Mediating Family Property and Estate Conflicts"
in the ABA's December 2009 issue of Probate &
Property.  I've distilled it into the top five reasons
why you want to heed his advice to mediate rather
than litigate:

1.       Expense.  Litigation is ridiculously expensive.  It takes
untold hours for partners, associates, and paralegals to wade through
discovery documents, take depositions, fight numerous pre-trial battles,
and properly prepare a case to proceed to a hearing or trial.  Don't get
me wrong - that's how I make my living and sometimes there is no other
choice, but it takes a tremendous amount of time and money to litigate.
Settlement at any stage of litigation stops the bleeding of attorneys'
fees. 

2.       Publicity.  Certain family members are good at starting a fight
without looking down the road to see where that path leads.  When the
mud between disgruntled family members starts to be tossed around, it
may feel good for the person that starts the fight to file their
salacious allegations, but those become public documents for curious
gawkers to review.  And the responsive documents filed could turn out to
be even more salacious and damaging.  Early mediation avoids battling in
a very public forum. 

3.       Non-Party Participation.   The plaintiff or petitioner files
the lawsuit or petition and the defendant or respondent answers.  But
with family disputes, there are often non-party players that are pulling
the strings behind the scenes that have great influence.   With
mediation, the non-parties may be allowed to participate in the process,
which allows them to voice their opinions and can be beneficial in
allowing all to feel they have had their "day in court" without actual
litigation.

4.       Creative Resolution.  Often times in litigation there is a
winner and a loser, without much gray area in between.  Mediations are
opportunities to toss around creative resolutions that the court may not
have the ability to use.  For example, Folberg notes a settlement in
which one brother settled for income producing real property, because
that met with his needs and interest, and the other brother received the
real property with the development potential, because that met with his
very different needs and interest. 

5.       Family Communication.  Conventional litigation, with the
parties speaking through their attorneys, does not allow for the
interaction that may be necessary to help frustrated family members
resolve their conflict.  The right mediator and the right attorneys can
be powerful in guiding conflicted families back toward some sort of
relationship.  Can it happen?  Absolutely.  Does it happen?  Not nearly
often enough.       

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American Family Prepaid Legal Corporation and Heritage Marketing and Insurance Services Inc., with their co-owners, Jeffrey and Stanley Norman, just got nailed with a little under $6.4 million in fines from the Ohio Supreme Court for the illegal practice of law. 

The companies preyed on the elderly through telemarketing and in-person sales calls, with more than 3,800 acts of unauthorized law practice through a "trust mill" operation with overpriced and unnecessary legal plans and annuitities. 

The companies and their co-owners are now permanently barred from business in Ohio. 

TAKE AWAY:  Protect yourselves and your edlerly friends and family from these scams by obtaining qualified and reputable estate planning counsel.  When dealing with your personal and real property, get referrals from those you trust, check out the state bar association for complaints, and screen accordingly.  And as many times as you've heard it, I'll say it again  - if it sounds too good to be true, it probably is. 

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From time to time we will publish recent local cases or legislative bills:

Tupper v. Roan, 227 Or App 391, -- P.3d – (2009)

Background: As part of a divorce decree, the decedent promised to obtain a life insurance policy for the benefit of his wife as trustee for his child. Decedent never did this. Instead, he obtained a life insurance policy naming his girlfriend as the beneficiary. The ex-wife sued the girlfriend asking the court to impose a constructive trust on the portion of life insurance ($100,000 of the $600,000) that decedent promised to obtain.

Holding: In order to obtain constructive trust over the life insurance policy, the ex-wife must prove that the decedent gave the beneficiary property that originally belonged to the children and that the beneficiary knew or should have known of the wrongfulness of the decedent’s actions. The ex-wife must show the beneficiary is unjustly enriched. The fact that the divorce decree included a provision that stated the ex-wife would have constructive trust of any life insurance policy if he breached his obligation was unenforceable against the girlfriend because she was not a party to that agreement.

Note:  If not for the fact that the decedent was indeed deceased, his ex-wife would have killed him.

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