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Estate Planners Get Sued Over Ponzi Scheme Investments

August 22, 2011

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Keeping with our recent coverage of the intersection between fiduciary litigation and Bernie Madoff and other Ponzi schemes, we again turn to Pennsylvania where last month a prominent Philadelphia couple sued their estate planning attorneys at Duane Morris over money that ended up in the hands of Bernie Madoff.

In Keating v. Duane Morris, Daniel J. Keating III and his wife, Sarah, sued Duane Morris and two of its attorneys for breach of contract, professional liability, and quantum meruit.  According media reports, the Keatings went to Duane Morris for help in crafting an asset protection plan and advice on long-term investment options.  The firm established one trust for the Keatings in 2005 with a trustee, trust protector, investment manager and custodian.  The problems allegedly arose from a second trust established in 2007.

Is The Law Unforgiving To Ponzi Scheme Victims?

August 19, 2011

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Alaska (and potentially Pennsylvania) law may be or so says the United States Court of Appeals for the Third Circuit.  In Michael S. Rulle Family Dynasty Trust v. AGL Life Assurance Company, the federal appellate court – applying Alaska and some Pennsylvania law – summarily dismissed a trust’s suit against a life insurance company for losses sustained through investments in four funds operated by Bernie Madoff.  In fact, the court went so far as to decide that each of the Michael S. Rulle Family Dynasty Trust’s eight claims against AGL Life Assurance Company failed to state a claim upon which relief could be granted, meaning they couldn’t even get to get into the good stuff through discovery.  Here’s the background:

Liability of Successor Personal Representatives

August 17, 2011

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The general rule is that a successor personal representative is not liable for the acts of its predecessor absent certain circumstances (e.g., the successor knew of a breach and permitted it to continue, neglected to take proper steps to redress a breach, etc.).  So, do these certain circumstances arise when the predecessor and successor personal representatives are partners in the same small law firm?  The Wisconsin Court of Appeals recently dealt with that issue and many more in In re Elegreet.

In addition to the successor personal representative liability question, the Court was faced with issues that come up all the time at the trial court level but which don’t often get appellate scrutiny: fees where the executor is also an attorney, attorney’s fees to a successful (or partially successful) beneficiary, and reduction in the personal representative’s fees.  So what led to this tangled web?

Estate Planning for Digital Assets

What are digital assets? Generally speaking, “digital assets” are any type of data in which a person has some right or proprietary interest.  A person’s digital assets may include (but are not limited to) information in his or her email accounts, information saved on his or her Smartphones, his or her computer files, picture files, video files, music files, social networking accounts, blogs, websites, word processing documents, and spreadsheets. 

Do digital assets have value?  Many digital assets have value.  Like tangible assets, digital assets can have monetary value (for example, blogs that generate revenue, or intellectual property rights, which – in some cases – may be extremely valuable), or sentimental value (family photos or video files, for example).  For this reason, it is important to establish a plan for what should happen to your digital assets in the event of your death or incapacity.  It may be necessary to access the digital

Who’s a Settlor? Apparently, It’s Harder to Figure Out than You Think.

August 15, 2011

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It’s not uncommon for one person to establish a trust, fund it with some nominal amount (say, $100.00), and then have another person come along and contribute a more significant amount to the trust (say, $70,000.00).  Under these circumstances, who is the settlor of that trust?  A federal appellate court recently answered that question in Roberts v. McConnell.  So, why did a seemingly simple question of “who was the settlor” have to go from a bankruptcy court, to a federal district court, to a federal appellate court?

Why Do I Need a Will? (Part II)

Why Do I Need a Will? (Part II)

August 12, 2011

Authored by: Kim Civins

(Please click here to see Part I of this series, entitled:  “Why Do I Need a Will?”)

If you divorce, you may need a Will (or an update to your existing Will) to prevent your ex-spouse from receiving assets at your death.

Here is a follow up to my post earlier this week.  In this recent article posted at AOL’s DailyFinance site, the author discusses the contents of Amy Winehouse’s U.K. Will.  The late Amy Winehouse had an ex-spouse, and the author mentions that English law may allow an ex-spouse to receive property bequeathed to him or her under their former (now deceased) spouse’s Will even if the divorce occurred after the Will’s execution.  This Forbes.com article implies that even if she had died without a Will at all, English law may look favorably upon an ex-spouse’s position and allow them to inherit.  Fortunately for Winehouse’s parents and brother, she

Hawaii Embraces Asset Protection

August 12, 2011

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Hawaii Embraces Asset Protection

August 12, 2011

Authored by: Luke Lantta

Last month, Hawaii added itself to the growing list of states that permit trusts that are both dynasty trusts and asset protection trusts by enacting the Permitted Transfers in Trust Act.  The Governor’s office described the law as “strengthen[ing] Hawaii’s trust laws and allow[ing] Hawaii to compete with other states in this growing industry.”

So, how does Hawaii stack up against other asset protecting states?

2011 Amendments to Delaware Trust Laws

August 10, 2011

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(This post originally appeared on Bryan Cave’s Fiduciary Litigation Team’s Blog.  Please click here to see the original post.)

Effective August 1, 2011, a number of new changes went into effect changing Delaware trust law. While the amendments make a lot of changes to the Delaware trust laws, below are some of the changes that are likely to have the biggest impact on litigation concerning Delaware trusts.

Wrongdoing:  The amendments have added a definition of “wrongdoing” to clarify its meaning within the definition of “wilful misconduct.”  For purposes of Delaware trust law, “wilful misconduct,” means “intentional wrongdoing, not mere negligence, gross negligence or recklessness.”  Apparently, there was some confusion over the meaning of “wrongdoing,” and, therefore, “wrongdoing” is now defined as “malicious conduct or conduct designed to defraud or seek an unconscionable advantage.”  To the extent that previously there was a benign interpretation of

Executor’s Duty to Preserve Evidence

August 10, 2011

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Last week, the U.S. Securities and Exchange Commission filed suit against the Estate of J. David Salinas.  Salinas is accused of bilking clients – including a number of prominent college basketball coaches – out of millions of dollars through an alleged Ponzi scheme.  Salinas committed suicide in July just days after being interviewed by federal investigators and reportedly left an undated note in which he claimed to be “fully responsible” for the allegedly criminal transactions.  The SEC requested that a federal court in Houston freeze the assets of Salinas’ estate.  The court granted the SEC’s request.

The court also entered an order prohibiting the defendants in the case from destroying documents related to the questioned transactions.  The court’s order highlights a potential area of liability for the executor of the estate of someone accused of unlawful acts.