Tuesday, October 22, 2013

Family alignment in financial elder abuse cases in Oregon

I have written before that the people who file financial elder abuse cases under Oregon's elder abuse statutes are seldom abused elders. The only cases I ever see in my office are cases filed by fiduciaries: conservators if the elder is alive or executors if the elder has died. In the real world, the cases are filed by one family member against another. Most of the cases involve siblings: Cain and Abel battling over Adam's money.

Financial elder abuse cases filed by conservators and executors tend be attempts by one sibling against another to undo gifts made by the elder. For example, Adam gives Abel the house, and when it comes to reading the will it turns out that the house was the only thing of value that Adam owned. Cain is out of luck. He goes to his Oregon elder law lawyer and sues Abel for financial elder abuse on the grounds that Abel used undue influence to get Adam to sign the deed.

If old Adam has dementia instead of being dead, Cain either gets himself appointed conservator or gets his Oregon elder law lawyer to hire a professional fiduciary who will do the deed for him. Cain then files the elder abuse case while Adam is still alive. The goal is still the same--to bring the house that Adam gave away back into the estate so Cain can inherit it according to the terms of the will.

I have a case in which it is a daughter against mother over grandma's property, but the bulk of the cases I see are brothers and sisters fighting with each other. Seeing siblings fighting like this can be discouraging, but I have to remind myself that humans have a rich history of such fights. We have Cain and Abel of course, and in the old days when the becoming king of a nation was at stake, siblings murdered each other to protect an inheritance. Compared to that, going to court is actually quite civilized.

You may think that you are safe from brotherly litigation because you get along well with your siblings or because your parents have no money to fight over. Beware--these disputes suck in everyone close to the battlers. I know of a case locally where the court entered a judgment against the wife of one of two battling brothers because her husband spent his ill gotten goods paying the mortgage on the home where he and his wife lived. Being anywhere close to these disputes is dangerous.

I think the Oregon legislature had the best of motives when it passed the Oregon financial elder abuse statutes. It wanted to protect elders and punish those who would take advantage of them. I doubt they had in mind a full-employment law for probate litigators, but it seems to me that is what has happened. For people, who want to challenge the estate plan of a parent, it adds an additional legal weapon that can be put to use before the elder is even dead. For people who have received large gifts from elders, it makes for sleepless nights. And for lawyers like me who make a good living off of family discord, it means a regular income.

Powers of Attorney and changes in beneficiary designations on life insurance and retirement plans.

Recently I have had a lot of cases in which someone has used a power of attorney to change the beneficiary designations on an elder's life insurance or retirement plan. After the change, the elder dies, the life insurance company or the administrator of the retirement plan pays off according to the beneficiary designation, and then shortly thereafter we are in court.

Let's review. When a person dies, property passes in one of three ways. Property owned jointly with a right of survivorship passes to the joint owner. Life insurance, retirement accounts and pay-on-death accounts go to to the person named on the beneficiary form. The remainder of the property passes according to the terms of the will.

One of the ways to make the will less important or even worthless is to make sure all the major assets pass by joint ownership or beneficiary designations. In the case of real estate, a person might do this by talking the elder into "putting him on" the deed to the house. In the case of life insurance or retirement accounts the person mght convince the elder to change his beneficiary. Sometimes, however, the elder cannot change beneficiary designations. If a person who wants the change to happen has a power of attorney that allows the agent to change the designation, the agent can change the designation himself. If the agent changes the designation to himself, or someone closely related to him, then when the elder dies, we will be going to court.

Going to court is good for me, but not so good for the family.

I have had so many cases about a change of beneficiary made by an agent under a power of attorney that I have changed my standard power of attorney to eliminate the power of the agent to change  beneficiary designations. A power of attorney is intended to allow the agent to handle financial matters for the benefit of the elder.  Beneficiary designations control what happens after the elder has died. I do not understand how changing who gets money after an elder dies is helping a living elder. An agent under a power of attorney cannot change a will: why should the agent be able to change beneficiary designations.

Other lawyers do not share my concerns.  A lot of powers of attorney explicitly or arguably allow the agent to change beneficiary designations, and the agents under those powers seem willing to do it. What happens when they do? The elder dies and the person who used to be the beneficiary sues the person who got the money.

These tend to be complicated cases. Will contests and trust contests all look about the same. Lawyers challenging a change in beneficiary designation need to find a legal theory to get the case to court, and the theories vary from the sublime to the ridiculous. A discussion of those theories is far beyond what I can do in a blog, but I can assure you that when creative legal theories are necessary, the legal bills are high.

As for advice: don't use a power of attorney to change the beneficiary designations for someone else. This goes double if you think it is a good idea to make yourself the beneficiary. And it goes triple if your reasoning is that you have to name yourself because that is what the elder really wants but the elder is too incapacitated to do the deed him or herself. If you ignore warnings one, two and three, and the life insurance company or retirement account administrator pays off, be sure to stash at least half of the proceeds to pay your lawyer in the litigation that is sure to follow.