* A couple in their late 70s was persuaded to invest nearly 90% of their net worth in an annuity, a wildly inappropriate high-commission product that had no reasonable place in their plan.
* Under the guise of helping an elderly client whose competency was beginning to wane, a lawyer met with her weekly. At the end of each meeting, he had her write a substantial check, ostensibly to cover the costs of the session. To obscure his trail, each meeting was followed up by a memorandum that included a detailed bill.
* A social worker serving as a care manager gradually became her client's confidante and inserted herself into all meetings with the client's advisors. She ultimately influenced, and in some cases even directed, personal estate planning decisions, while billing for multiple meetings each week.
* A caregiver who assisted an elderly woman for the last 18 months of her life took his charge to a new lawyer, who drafted a will leaving him the entire estate. The nieces and nephews who had been beneficiaries under prior wills ended up receiving nothing. The prospective cost of a legal challenge was beyond what they could afford.
* A daughter was part of her father's CPA practice for many years. When her father was ailing, she took him to a new estate planning attorney, who drafted a will bequeathing the per capita exemption amount to trusts for each of his grandchildren. Since the daughter has five children and her brother has only one child, this effectively shifted most of the exemption amount to her own family. She also had herself named sole trustee of all of the trusts. This plan also cut her mother out of a large portion of the estate that was to have been available for her later years.
* An elderly couple consulted their CPA for a referral to an estate planning attorney. Their goal was to provide for each other and then for their children equally. But the attorney proposed a charitable lead trust to minimize estate taxes. The referring CPA was named executor and sole trustee. He was vested with total discretion to distribute each year's annuity amount to whatever charities he chose. The annuity rate was set at 10%, with the effect that little, if anything, would be left for the heirs. Meanwhile, the CPA as trustee would effectively be spending down the entire estate in donations to charities he chose, all while earning fees.
DIFFICULT RECOVERY
Financial abuse is difficult to challenge, and recovering what was stolen is even harder. The victims are often aging or suffering from a progressive disease. By the time the abuse is discovered, if it ever is, the victim's cognitive and physical condition may have deteriorated. Frequently, abuse is committed by someone who is in a position of trust: a family member, close friend, trusted professional or home health aide. In many cases, the abuse is discovered only after the victim's death. Even if fraud is discovered sooner, the cost and difficulty of a challenge can often dissuade those hurt from pursuing it.
In the case of the CPA who effectively deprived her own mother of financial security, the daughter was able to successfully defend herself against a legal challenge to her actions. She cited the purported tax benefits provided by the plan, which she claimed her father had devised. The reality is that a bypass trust for the benefit of the wife, children and all descendants would have provided the same generation-skipping tax-planning benefits while safeguarding the wife. But the court was not persuaded. Meanwhile, the widow spent down her IRA, with commensurate income tax costs, trying to fight her own child. She was devastated financially and emotionally.
The CPA who hoodwinked his clients into the charitable lead trust plan almost succeeded, but the scheme was discovered in time and the clients wrote new wills with an independent attorney. Had the clients died, this abuse would have been very difficult to overturn. How could it be proved that the charitable trust was not the couple's intent?
The CPA's position would likely have been that it was the charities, not him, who benefited. He might have contended that the plan was created to save estate tax. While that might be true, the plan itself dissipated the estate.
