Estate planning, size no deterrent to probate looting actions

Four probate cases recently made news showing estate hijacking as a thriving activity with “proper estate planning” and estate size being no deterrent to the growing threat of Involuntary Redistribution of Assets (IRA) actions in which probate venues and/or probate instruments (wills, trusts, guardianships or powers of attorney) are used to loot assets of the dead, disabled and incapacitated.  Texas’ growing population and prominence as a retirement destination creates special appeal, but the “up for grabs” nature of property targeted via probate should be a great concern for all Americans.

American inheritance rights threatened

The 15-year legal battle in which Anna Nicole Smith (and now her estate) claim rights to the estate of J. Howard Marshall II is returning to the Supreme Court under the name of Stern v. Marshall.  This recent announcement indicates the court’s interest in jurisdictional authority of the bankruptcy court rather than actual merits of the case.  Nonetheless, the case having endured for these years illustrates an effective weaponization of the legal industry for an assault on property rights.

People close to J. Howard Marshall were aware he was providing for Smith during his lifetime, not upon death.  Smith’s claim that Marshall verbally expressed the intention to leave her half his estate was never substantiated and in fact, was contradicted by Marshall’s elaborate estate planning instruments.  A Houston jury spent seven months hearing testimony and evaluating evidence.  They did not find Smith or her claim credible.

Venue shopping in the form of the California bankruptcy action – not case merits – allowed Smith’s legal team to keep their estate extraction efforts alive.  As with this return to the Supreme Court, the case’s initial path to Washington D.C. was always far more about legal jurisdiction than entitlement.

A baseless claim and venue shopping has created a seemingly never-ending legal and financial assault against legitimate Marshall heirs.  If the Smith side of this battle were to prevail, two dangerous precedents would be set.  First, forum shopping outside applicable state jurisdictions becoming an acceptable practice allowing probate challengers to select the court venue most likely provide a favorable judgment would unleash more speculative legal actions against designated heirs or beneficiaries.  And secondly, a clear, properly executed estate plan being overturned based on an unsubstantiated oral claim would again open the door to all sorts of frivolous claims.  And more importantly understand, these actions would in no way be limited to “high value” estates.  Estates of all sizes would become appealing targets.

Power, position trumps final wishes

Wilson Lucom, a former American diplomat became wealthy through a series of marriages. He died in 2006 and his estate has become another example of how estate plans are disregarded and assets functionally looted.

With no children of his own, speculation was that Lucom’s $50 million estate would go to his third wife Hilda, a member of one of Panama’s most elite and powerful families, and her grown children.  Instead, Lucom directed the bulk of his estate be used to feed starving and malnourished children in Panama.  Though it reportedly would have been the largest single charitable donation in Panama’s history, the children of Panama will never benefit from Lucom’s generosity.

Instead of respecting her husband’s final wishes, Lucom’s wife launched a legal battle against Richard Lehman, Lucom’s longtime lawyer and trustee of the would-be foundation for poor children.  The assault on Lehman brought his being charged with “15 criminal charges including negligent homicide in Lucom’s death, forgery, extortion and perfidy.”  The Guardian recently quoted Lehman characterizing these actions as a “smear campaign” and said this of the case’s final outcome:

Several lower courts upheld the will as reflecting Lucom’s last wishes but Panama’s supreme court declared it void last month, arguing that Lucom’s reference to his “beloved wife” showed he really wanted her to inherit the estate, not poor children. Critics – including a former US ambassador – have in the past accused Panama’s justice system of favouring the rich and powerful.

Bottom line.  Disgruntled family members, wannabe heirs routinely use legal gamesmanship to disregard a decedent’s final wishes.  Legal industry assistance is easily accomplished.  Attacking anyone seeking to uphold legitimate plans is standard fare as also is finding that friendly court to provide the looter’s desired outcome.  This estate may have been worth $50 million, but it can (and does) just as easily happen with estates of more modest values.

Government-initiated looting

Josephine Smoron, an elderly Connecticut woman, believed estate planning documents executed in 1996 and 2004 would ensure her longtime caretaker Sam Manzo’s inheritance of Smoron’s 80-acre farm and cows valued at more than $1 million.  Recognizing local interest in developing her property, Smoron was adamant that churches previously involved in a dispute over her brother’s estate have no claim to her estate.  As Smoron’s health deteriorated, Manzo briefly served as her conservator until being replaced by a court-appointed conservator under the orders of Southington Probate Judge Bryan F. Meccariello.

Shortly before Smoron’s June 2009 death, Meccariello approved a change in Smoron’s will designating all property be given to three area Catholic churches.  The property was divided between two trusts, Manzo was not notified of being disinherited and there appeared no evidence this change reflected Smoron’s wishes.  The change was per an application by John T. Nugent, the court-appointed conservator and a deacon at one of the named churches.  Meccariello was reportedly the only hearing attendee.

Not surprisingly, a purchase agreement with a local developer promptly surfaced and plans for Smoron’s farm becoming home to an $18 million indoor sports complex were announced.  With $200,000 of new tax revenue estimated, Southington officials rejoiced.

Manzo ultimately filed a complaint with Connecticut’s Council on Probate Judicial Conduct that resulted in Meccariello being “censured” for the second time in three years.  The public admonishment brings no punishment or consequences though the judge has withdrawn his bid for re-election.

With the improprieties made public, the churches are declining interest in the trusts.  Nugent, Smoron’s former conservator, is now trustee of the trusts he created.  An attorney for the developer says the land sales contract is still valid.  Sam Manzo, the rightful heir, is suing to overturn Meccariello’s disregard of Smoron’s estate plan and diversion of her assets.  And though the censure describes Meccariello as functionally defrauding Smoron’s estate, criminal charges don’t seem likely.

Josephine Smoron was victimized by the state of Connecticut in life and the state’s ongoing denial of her wishes continues the victimization despite her death.  Manzo may one day gain control of the property, but this hijacking will cost him money and time that will never be recovered.

Another case of betrayal

Raymond Simmons, a retired Nashville firefighter, also engaged in “proper estate planning” with a will designating the Tennessee Children’s Home as sole beneficiary of his $800,000 estate.  Instead of distributing the assets as Simmons clearly directed, estate executor Daryl Bornstein wrote checks totaling $100,000 to himself.  In addition to losing an unspecified amount of estate funds investing in Iraqi currency, Bornstein lost $340,000 with Hanover Corp., a now bankrupt capital investment group whose two top officers are under federal indictment for an $18 million Ponzi scheme.

Bornstein has been replaced as estate executor by Bill Alsup, the children’s home director of development.  About $50,000 remains including a $25,000 retainer returned from an unnamed attorney who previously represented Bornstein.  With the estate described as “almost a fully liquid estate,” this retainer is curious.  Recovery of additional funds through the Hanover Corp. bankruptcy action is being investigated, but the estate has largely been squandered.

Raymond Simmons was betrayed when Daryl Bornstein elected to disregard the retired firefighter’s final wishes.  Current and future staff and residents of the Tennessee Children’s Home are indefinitely harmed as Simmons’ estate would likely have been used to update or replace the home’s aging facility.

Civil litigation against Bornstein is fruitless if he has no assets, but even with assets, it could easily become cost prohibitive.  Criminal charges wouldn’t ordinarily occur, but with media visibility and the children’s home being a sympathetic victim, they might.  Still, the estate is gone.  And interestingly, this case would probably never have received attention had a reporter not been in the Nashville probate court one Friday back in August covering a Danny Tate conservatorship hearing.

Stealing estates sometimes works, sometimes doesn’t.  It can be outright or more subtle – gaining direct control of assets or process-oriented wherein a contrived dispute generates billable hours or other financial/tactical benefit for the looters.  These cases happen in plain sight, but often only on the radar of those directly involved.  That adds to their appeal as also does the fact that criminal charges rarely occur.  Whether initiated by disgruntled family members, wannabe heirs or government, legal industry participation on the part of attorneys, judges and other court-appointed personnel is a common component.  This additionally helps keep consequences of exposed looting efforts minimized to sometimes no more than public embarrassment.

While “proper estate planning” is always the prudent course, don’t believe this preparation or having only a modest-sized estate wards off the threat of probate corruption or estate abuse.  Probate and switch happens every day and those $500,000  to $1.5 million estates can be the most appealing of all — enough to be worth pursuing, but not necessarily enough to cost effectively defend.

An unsuspecting public needs to learn what is already known to the legal industry and growing numbers of other unscrupulous individuals – people who are no more than modern-day grave robbers and other property poachers.  Everything you have could depend on it.  Beware.

Lou Ann Anderson is an advocate working to create awareness regarding the Texas probate system and its surrounding culture.  She is the Online Producer at www.EstateofDenial.com and a Policy Advisor with Americans for Prosperity – Texas Foundation.  Lou Ann may be contacted at info@EstateofDenial.com.

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