Involuntary Redistribution of Assets (IRA)
“The act of reaching into one’s own pockets to help a fellow man in need is praiseworthy and laudable. Reaching into someone else’s pocket is despicable and worthy of condemnation.”
-Walter E. Williams, professor of economics and regular guest host on The Rush Limbaugh Show, Compassion Versus Reality, June 6, 2007
An industry exists in which lawyers, accountants and other unethical participants - sometimes with complicity from probate and other courts - can separate any of us from our property when certain (not that unusual) circumstances occur. These situations can also be orchestrated at the behest of disgruntled family members or wannabe heirs. Whether through the misuse or abuse of wills, trusts, guardianships or other probate-related scenarios, Involuntary Redistribution of Assets (IRA) actions can and do occur as a means of calculatedly diverting assets away from intended heirs/beneficiaries.
The drive to acquire wealth dates back to beginning of man. Having the most skins or the largest cave equated to power and status. The same still applies today, but morality associated with the accumulation of wealth has seriously degraded. By adopting an “end justifies the means” attitude, too many people these days are minimally hesitant to engage in less-than-ethical activities as a way to bolster their financial position. Concepts like “earning one’s keep” and “paying your own way” are rapidly becoming obsolete.
With an entitlement mentality as a guiding force, if a way - especially with cover from the law – can be found to transfer financial holdings from someone to yourself, that’s a victory akin to a winning lotto ticket or a Las Vegas jackpot! An added incentive exists if the process, hopefully limited to cursory review, can appear clean and innocuous.
As people get older or incapacitated, the potential of being targeted for IRA increases. Sadly, it can be a known, trusted family member or friend or it can be a stranger who works their way into a person’s life gaining their confidence along the way. In either case, the consequences can be life-altering for a person and their loved ones.
To understand how our society has come to the point where people can (and do) position themselves so as to find ways in which they can acquire other people’s money, thought should be given to the evolution of how resources change hands.
The Direct Approach
Once upon a time, the involuntary separation of property from a rightful owner required some type of physical act. Be it knocking the person over the head and taking their money, utilizing a weapon in a threatening way to provoke the relinquishing of said assets or simply breaking into another’s domicile in order to remove the property from its rightful custody, some not-to-be-missed overt act generally took place as a crime was committed and one lost access to their resources.
Behind the Scenes: Clean Hands Doing Dirty Deeds
Since the 1939 introduction of the term “white-collar crime” by sociologist Edwin Sutherland, the definition of such crime has been vigorously debated. The Federal Bureau of Investigation defines white-collar crime as “. . . those illegal acts which are characterized by deceit, concealment, or violation of trust and which are not dependent upon the application or threat of physical force or violence. Individuals and organizations commit these acts to obtain money, property, or services; to avoid the payment or loss of money or services; or to secure personal or business advantage.” (USDOJ, 1989, p. 3)
Regardless of how one defines white-collar crime, we are all affected by such activities. These crimes seem on the upswing as technological advances and legitimized corruption have joined forces with social isolation and advanced moral degradation. Media forums, regardless of their ideological persuasions, have no shortage of stories reflecting a wide array of white-collar criminal activities. We’ve all heard the stories of non-violent, “clean” sounding tales from high-visibility corporate scandals like Enron to individuals like Judith Leekin, the Florida woman charged with fraudulently adopting 11 children and forcing them to exist in horrid conditions while she lived off reportedly more than $1 million of taxpayer funds meant to finance the children’s care.
As reporting opportunities constantly increase, the stigma associated with such stories seems in a decline. As long as people aren’t overtly violent, are more actions being viewed as “victimless”? Is this leading to a general desensitization to dishonest behavior? Might deceit and deception be someday viewed as a new “norm”? What could this mean for our society? Bernie Madoff aroused public anger, but many lower level Madoff-type shysters operate with near impunity. Top government officials broke laws in not paying federal income tax, but that matters little as well.
Maybe Not Illegal, But Does That Mean It’s “Right”?
In recent years, Involuntary Redistribution of Assets (IRA) activity has taken on a new look as lawyers and other parties not constrained by the boundaries of honesty and truthfulness use the legal system to influence situations in their favor. Laws may not be technically broken, but ethics violations and breaches of trust often leave people with the same feeling and the same net financial result as experiencing that physical hit over the head prior to assets being taken.
Stealing $250,000 from a bank illicits a far different law enforcement response than stealing the same amount from an estate. Estate disputes are occasionally, but not often treated as criminal matters. They usually are relegated to the civil court system. Many people pulled into IRA battles are simply ill-prepared for the fight. Not everyone has first-hand knowledge of the legal or court systems, especially those whose lives center around being productive, law-abiding citizens. If your life experience hasn’t included things like divorce, child custody disputes, bankruptcy, DWI/DUI charges or exposure to other criminal activity, chances are your first-hand contact with a courtroom may be limited to an occasional stint of jury duty. With that, you may not realize what a “racket” the court system can be and the amount of good money that can be thrown away on legal fees and court costs with the disposition of even a simple case.
Ironically, the money sometimes targeted for IRA exists because of a responsible lifestyle in which people avoided legal entanglements yet the avoidance of such experiences later creates a real disadvantage in dealing with IRA practitioners familiar with the jurisprudential system either as members of the legal profession or through personal life circumstances.
The Scoop on Not Becoming a “Dupe”
America’s senior citizens are particularly at risk of being duped out of resources that a lifetime was spent accumulating or resources that represent the hard work and values of a multi-generational family effort. People with any means need to understand that our world contains predators seeking to separate you from your wealth – by Involuntary Redistribution of Assets (IRA), if necessary. Remember also that money, like many other things, is relative. What may seem modest or respectable to you could be a veritable fortune to someone feeling desperate or someone whose poor life choices has left them unacquainted with having financial resources.
Our aging population is a magnet for all types of scams and dishonest enterprises. In his book, People Get Screwed All the Time, attorney Robert Massi provides insight as to the creativity and boldness of IRA practitioners operating amongst us. Many of the situations addressed by Mr. Massi illustrate how legal maneuvering and basic business practices can be used to separate unsuspecting people from their money or prized assets.
Individuals must beware the threats posed to their property and their heirs’/beneficiaries’ rights of inheritance. IRA can happen anywhere, but areas with large retirement populations can be especially appealing to financial predators. Some communities may have to take a stand in support of their residents’ property rights and in opposition to IRA property poachers. As public officials and prominent community members have been known to participate in these illicit activities, doing the right thing may take some courage.
With many people’s ever-increasing sense of entitlement, a troubled economy and the transfer of wealth that is getting ready to occur in the next 20 or so years, Involuntary Redistribution of Assets cases will skyrocket. Next time you are at grocery store, health club, playing bridge or even in church, take a look to your left, take a look to your right. The field of people willing to participate in IRA activities is varied and growing. Never doubt that some of America’s best cons are taking place in our nicest neighborhoods.
Guarding Against Guardian Abuse
Involuntary Redistribution of Assets (IRA) actions via misuse of probate instruments or abuse of probate venues are becoming more common occurrences. Wills, trusts and powers of attorney generally involve property, but guardianships pose an even more potentially intrusive threat as they assign control of an individual’s life and/or property to another person - maybe a complete stranger.
Within an estate plan, a person might designate a specific individual to act as guardian in the event of incapacitation, but when the courts become involved, the growing professional guardianship industry is sometimes viewed as a more desirable alternative. Indeed there are cases in which no family member is suited to assume this role thus necessitating an outside appointment. A trend, however, is emerging in which unwarranted, inappropriately-assigned or overly intrusive guardianships are being exposed and the public needs to understand how guardianships can allow the functional hijacking of a person’s freedom and property. A disabled or incapacitated person of any age can be subjected to a questionable guardianship, but the elderly are an especially vulnerable population segment.
According to The Texas Probate Web Site, guardianships are defined as:
a court-supervised administration for a minor or for an incapacitated person. A person — called the guardian — is appointed by a court to care for the person and/or property of the minor or incapacitated person — called the ward. In some other states, guardianships are called conservatorships, but in Texas they are called guardianships.
The site provides these definitions of a “minor” and an “incapacitated person”:
A minor is a person younger than 18 years who has never been married or who has not had his or her disabilities of minority removed by judicial action. A minor is considered an incapacitated person. An adult who, because of physical or mental condition, is substantially unable to provide food, clothing or shelter for himself or herself, to care for his or her own physical health, or to manage his or her own financial affairs is considered an incapacitated person. The definition of incapacitated person also includes a person who must have a guardian appointed to receive funds due the person from any governmental source.
Two types of guardians/guardianships exist: a guardian of the person and a guardian of the estate. The guardian of the person takes care of a ward’s physical well-being while care of a ward’s property may be assigned to a guardian of the estate. A ward may be assigned only one type of guardian, but in other cases, both types of guardians are assigned with sometimes the two guardianship roles being filled by one person.
Guardianships are sometimes needed and certainly not all guardians are dishonest or exploitive of their charges, but this capacity is often misunderstood. The term guardianship sounds as though it might describe a nurturing, security-enhancing relationship, but the practical reality is that the guardian’s responsibility is to ensure “the best interest of the ward” and input or approval of any action by the ward or the ward’s family is not required. Preservation of the ward’s assets is also not a benchmark further setting the stage for potential conflict between a guardian and ward’s family. The general public should take additional note as it’s not uncommon for guardians to “spend down” a ward’s assets leaving taxpayers the responsibility of funding care for a formerly self-sufficient person.
Courts or third parties becoming involved in a person’s affairs via the appointment of a guardian or conservator is a way in which Involuntary Redistribution of Assets (IRA) occurs. Estate looting or questionable enrichment can be accomplished through excessive or unaccountable billing, the retention of other “professionals” to provide services allegedly related to estate management (lawyers, accountants, etc.) or even the use of “friendly” vendors - especially those involved with the liquidation of property.
Families who suspect wrongdoing must self-fund any legal recourse while a guardian can use estate resources to defend against challenges of his/her position. It’s not uncommon for judges to be deferential toward court-appointed personnel.
If desired, guardians’ capacity to block family contact can work as an intimidation tool to deter complaints or serve as a means of masking improprieties. While court-appointed guardians are a potential source of probate abuse, family members serving as guardians have been known to commit many of these same actions so they should never be viewed as immune from taking similar advantage of their status to perpetrate IRA actions.
These things happen. They happen every day. Don’t think it can’t happen to you. And again, not all guardians are by any means dishonest or abusive, but those that are operate under a system that could not be better designed for untoward acts.
IRA targets - including those affected by abusive guardianships - and their families become trapped in a realm of frustration never previously known to exist. The legal industry defends questionably acting attorneys, elected officials look for “feel good” legislative initiatives and judges are too often impervious to the pleas of IRA targets being “legally” robbed of their property, freedom and sometimes both. Family members come to recognize the emotional and financial futility in trying to fight a legal system which is supposed to protect the people it’s destroying.
People from the legal and social service industries might try to characterize guardianships as a status in which compassionate individuals “take care” of your loved ones and their property, but beware - sometimes what’s taken is the person’s freedom and everything else they have.
How the Goods are Gotten When the Will Gets in the Way
The looting of estate assets, also known as Involuntary Redistribution of Assets (IRA), can occur through the use of various probate instruments - wills, trusts, guardianships, powers of attorney - and with the actual acts configured in different ways. Guardianships or powers of attorney can provide for estate looting while a person is alive, but asset diversion can be perpetrated posthumously via wills or trusts. Whether these acts are instigated by greedy lawyers, disgruntled family members or wannabe heirs (or often a combination), the sad reality is that death doesn’t necessarily bring the closure one might expect. Death, even with the most meticulous of estate plans, in no way ensures the honoring of a decedent’s wishes or heirs’ avoidance of IRA.
In December 2006, Austin American-Statesman reporter Tony Plohetski wrote a special report entitled Breach of Trust. In this article, Plohetski detailed how “Texas estate laws make stealing from the dead a relatively easy crime.” These are nothing more than cases of postmortem IRA. He described not only the estate theft activities of Austin attorney Terry Erwin Stork, but Plohetski also pointed out how Texas probate laws do little to ensure that people’s belongings reach those designated in the decedent’s will. The article also depicted a loose approach to oversight on the part of some probate judges.
The Statesman report prompted law makers to introduce several reform-oriented bills during the 80th Texas Legislative session. Effective September 1, 2007, S.B. 593, as per the Texas Senate Research Center, requires the personal representative of a decedent’s estate, within a certain time period of an order admitting a will to probate, to give notice to each beneficiary named in the will whose identity is known or, through reasonable diligence, can be ascertained, and to file an affidavit with the court listing the beneficiaries notified. The bill also sets out what the notice must contain which is a good thing as estate administrators previously having been on the “honor system” didn’t seem to workout so well. This legislation can seem (and might be) a helpful “first step,” but as IRA practitioners routinely ignore laws and bypass normal business/legal courtesies, more than an assumption of compliance is needed.
Stork ultimately plead guilty to three counts of felony theft and in September 2008, was sentenced to 15 years in jail. Attempts to reconcile what’s due to each estate continue, but heirs will likely recover few of the assets left to them.
It is important to note the inaccuracy of believing these type situations only occur with high dollar estates. The three estates from which Stork stole had a combined value of less than $1 million. Another misconception to dispel is the absolute protection provided by “proper estate planning. The estates outlined in the Austin American-Statesman article belonged to people who took the proper steps to ensure the orderly distribution of their assets. They, however, fell victim to IRA due to a betrayal by the attorney they trusted for assistance.
The legal industry won’t tell you this, but an estate executor can basically do anything they want with an estate. Realistically, judicial oversight is minimal - most judges believe what attorneys tell them and perform little or no independent follow-up. Heirs believing something is amiss must mount their own challenge. The Stork case was unique in that it was prosecuted as a criminal case, but most heirs pursuing “justice” in an estate dispute are relegated to the civil court system which is a pay-to-play venue open only to those willing and capable of expending significant sums of money for an eye-opening, but rarely confidence-inspiring experience. Steal $250,000 from a bank, people get excited. Steal the same from an estate, it’s hard to get law enforcement or any other officials to care. These points are never lost on today’s grave robbers or other property poachers while an unsuspecting heir has no idea the web of deceit and gamesmanship into which they are entering with a civil estate dispute case.
Dishonest estate administrators sometimes use under-handed tactics to draw legitimate heirs or beneficiaries into litigation of which their participation is self-funded while the administrator/executor can use the dispute as justification for additional billing against the estate of his/her time along with legal or other applicable professional services.
The threat of legal action can also be used to pressure heirs into forfeiting or sharing rightful bequests rather than risk being the target of a contrived dispute. It’s been called an inheritance litigation tax, but extortion when defined as “iIllegal use of one’s official position or powers to obtain property, funds, or patronage” also sounds familiar. Either spend time and money fighting or get out - it’s that simple, it’s that ugly.
As people’s entitlement mentality grows, probate has become an excellent venue for weaponization of the legal system by grave robbers, property poachers, asset looters and walker stalkers looking to divert assets in a manner contrary to the stated intentions of honest, hard-working Americans. Losing the ability to determine the final distribution of one’s assets is a tragedy for Americans individually, as families and for us as a country in that the intergenerational transfer of assets has historically helped to strengthen our social and economic fabric.
Reform in this area will be difficult as the legal industry is powerful. However, the stories of estate abuse and probate corruption seem to increase almost weekly and as they do, a generally unsuspecting public is starting to awaken to the growing threat to their property rights and to their heirs’ rights of inheritance.
“Trust” – Should You?
Involuntary Redistribution of Assets (IRA) actions in which probate instruments or probate venues are used to loot assets of the dead, disabled or incapacitated are a growing threat to the property rights of hard-working Americans and their heirs’ or beneficiaries’ rights of inheritance. Living trusts are regularly touted by attorneys as a flexible estate planning document and a means by which to minimize legal fees, but they are also another instrument through which IRA can occur.
As with the guardianships and wills, honest management and execution as per the stated wishes of the trust founder is a critical factor. Without a commitment to integrity, today’s legal system and moral environment offer the opportunity for a high degree of IRA gamesmanship. Within this context, the estate arrangements, final wishes or distribution of assets can undergo a complete redistribution that is in no way reflective of the founder’s plan.
A trust is generally a private legal instrument that receives no routine court oversight. Trust theory touts language that outlines the trustee’s fiduciary duties and responsibilities to the beneficiaries. While sounding good on paper, the validity of trust management is realistically commensurate to the trustee’s level of integrity and desire for honest dealings with the beneficiaries.
If a trustee is viewed as having breached his/her responsibilities, beneficiaries can initiate a legal proceeding. As with contested guardianships and wills, the trustee will use trust resources to fund their side of any legal proceedings. The beneficiaries, on the other hand, must personally absorb their legal expenses. In some cases, a trustee can be held personally liable for his/her actions, but you run into the same dilemma as discussed with other estate cases in which how far does it make sense to go in pursuing legal action that is financially and emotionally exhaustive? And the IRA counterparts are ready to wait you out while simultaneously using your assets to compensate themselves for time spent on efforts contrary to your best interests.
Leaving the unethical trustee to their own devices can facilitate the depletion of financial assets. A court proceeding, however, can also provide trustees a guise under which to diminish trust assets. Increased trust management fees as well as legal fees can be assessed throughout the course of a legal dispute. It’s quite conceivable that beneficiaries could “win” in a court of law only to find that the trustee, as a matter of performing his/her “duties” with relation to the resolved legal battle, significantly reduced or even depleted the trust assets. The “losers” (trustee and their lawyers) end up with the trust assets. The “winners” (beneficiaries) are left with a stack of legal bills. Some victory!
Estates or trusts of any amount, even $500,000 or less, can be attractive to IRA practitioners. As any prolonged litigation (and count on your IRA adversaries for prolonged litigation) can easily run into six-figure expenditures for each side, IRA victims often recognize the absence of cost effectiveness in going to court. Much can be spent with little or nothing gained. Some attorneys may advise that certain estate amounts are not enough to fight over so the IRA family should “let it go” and save themselves additional grief and expense. Involuntary Redistribution of Assets practitioners know how to target and maximize these opportunities.
Betrayal can take on many different forms as illustrated by the New York Surrogate Court overseeing the estate of Leona Helmsley, once known as the “Queen of Mean.” With her August 2007 death, Helmsley’s final directive was to leave her estate, in the form of the Leona M. and Harry B. Helmsley Charitable Trust with an estimated value of $3 - 8 billion, “to the provision of care for dogs” along with another catch-all category granting broader discretion to the trustees.
The first reversal of Helmsley’s wishes came in June 2008. Of Helmsley’s four grandchildren, two were included in her will as well as made executors (along with others) of her estate while two were excluded from any inheritance. An estate contest from the disinherited grandchildren prompted estate executors to settle the dispute quickly by “amending the will.”
Executors changing a will to include otherwise omitted heirs is a blatant disregard of the decedent’s wishes, but per news reports, that’s what happened with the move approved by the New York Attorney General as well as a judge. How does this discounting of the clear intentions of a decedent not now set a dangerous precedent that could jeopardize the rights of inheritance of the deceased and other potential heirs?
Then, there’s Trouble, Helmsley’s Maltese. At the same time as the will “amendment,” the $12 million set aside for the care of Trouble was reduced to $2 million. Upon Trouble’s death, any unused money was designated to be transferred into the Helmsley charitable trust. Why once again, did a legal precedent have to be established in which a decedent’s expressed wishes were disregarded? In due time, the same outcome would have been achieved yet with a course that included honoring Helmsley’s wishes.
In February 2009, Judge Troy K. Webber of Surrogate’s Court in Manhattan ruled that the Helmsley trustees may distribute the money as they see fit. In a ruling he wrote “The court finds that the trustees may apply trust funds for such charitable purposes and in such amounts as they may, in their sole discretion, determine.” Perhaps the trustees and the court were disinclined to worry about honoring Helmsley’s wishes as her beneficiaries - the dogs - presumably can’t hire attorneys to fight such a ruling. Perhaps unexpected was “man’s best friend” actually having friends and, in this case, they have surfaced as three of the country’s most prominent animal welfare organizations.
The Humane Society of the United States (HSUS), the American Society for the Prevention of Cruelty to Animals (ASPCA) and Maddie’s Fund are asking a Manhattan court to force Helmsley trustees to honor Helmsley’s expressed intentions. According to the groups, “less than $100,000 of the initial $136 million Helmsley grants have gone to dog welfare.”
Trusts can be a helpful estate planning tool, but in the wrong hands - and those hands are out there - administration of these instruments can be executed so as to completely circumvent intentions of the trust founder. The legal industry will advocate the use of a “qualified estate planner” to help prepare a plan for the final distribution of your assets.
Few in the industry, however, will talk candidly about the problems created when that planning takes an unpredictable turn at the hands of that “qualified” professional. And as the Helmsley case well demonstrates, today’s courts also seem willing to redistribute assets opposed to upholding the wishes of a decedent.
Leona Helmsley used her resources to create a trust that, upon her death, was to distribute her wealth as per specific instructions. Brooke Astor and J. Howard Marshall II engaged in similar estate planning activities yet their estates (and beneficiaries) have also been harmed due to Involuntary Redistribution of Assets (IRA) actions. If the estates of high profile people with significant holdings can be so boldly challenged in a manner contrary to their clear intentions, what chance do people of more modest means and their heirs have in standing up to the same type financial assault occurring in courthouses across this country?
Final Thoughts
You spend a lifetime accumulating assets. For many of us, we’ve worked hard and achieved prosperity. We now look forward to passing on to our children or designated loved ones the fruits of our labor which they can in turn use productively in their lives and share similarly with their heirs. Predators driven by self-interest are present in all walks of life, but as we get older and/or incapacitated, the risk for exploitation becomes greater. As wealth is relative, no one is immune from being targeted for Involuntary Redistribution of Assets (IRA).
IRA is a process in which unscrupulous individuals use the age and/or incapacitation of a person to gain control of their personal assets and “redistribute” them in a manner contrary to what the person intended. The redistribution can happen during the person’s lifetime through a guardianship or power of attorney or posthumously via a will or trust. Family members, friends or even “trusted” associates like a lawyer or caregiver are potential IRA practitioners. With legal and financial maneuvering, IRA can sometimes be accomplished within technical limits of the law.
Unfortunately, these cases often occur within frameworks that relegate them to being treated as civil rather than criminal matters. With a minimal threat of legal consequences, estate theft becomes a more appealing endeavor. Law enforcement is tepid to become involved often discounting such cases as “family disputes.” Politicians and governmental officials often find cover by feigning ignorance of estate abuse, probate corruption or specific IRA perpetrators with such actions costing targeted Americans their freedom, property or both. The collateral damage to their families can also be a life changing experience.
Historically, court battles are the traditional “remedy” for IRA actions. And how convenient as the legal industry, complete with lawyers, judges and lobbyists, also helped create this problem - maybe not by accident. Win or lose, the massive financial expense, as well as emotional toll, often yields the only true “winners” in these cases to be the participating lawyers.
Transparency is an avenue to addressing the egregious process that allows the looting of assets via probate venues or probate instruments. Meaningful reform, however, will not be an easy task. The legal industry is powerful with few insiders willing to stand up against their own. Secrecy is a great friend to the IRA practitioner and their protectors.
However, as more of these cases occur and affect people at levels throughout the economic spectrum, “shining light on the dark side of estate management” will become the important first step toward shutting down IRA practitioners, exposing their allies and returning integrity to the arena of estate management and the probate process.
