Posts Tagged ‘Texas’

A Chilling Story of Fraud Targeting an Elderly Victim

JUNE 17, 2013 VOLUME 20 NUMBER 23
Last week a colleague told us a story that we think needs to be shared. Patricia Sitchler, a nationally-known San Antonio lawyer with the prominent Texas firm Schoenbaum, Curphy & Scanlan, P.C., described her client’s eye-opening experience with a fraudulent attempt to access her bank account. We asked Patty if we could share her client’s story. Patty wrote:

This is how I spent last Thursday. I thought it might be helpful information.

I spent most of last Thursday helping an elderly client who was scammed. Fortunately, “Doris” discovered the scam and we were able to avert disaster. Take a minute to see just how easy we have made it for the crooks.

The driver helped Doris put her packages in the car. Doris was still living independently, buying her own groceries and curtains and copy paper, writing her own checks, balancing her own checkbook. After putting the goods away in her apartment, it wouldn’t take long to balance the checkbook. She only wrote about 10 checks a month-the utility company, the phone bill, her rent and the few checks she wrote shopping at various stores close by. She was so lucky. She and her beloved deceased husband had planned well and she was comfortable knowing that although she wasn’t wealthy, she probably had enough to live out her life.

But in only a few minutes, Doris would find out just how vulnerable technology has made her. Balancing her checkbook she noticed that there were 13 cancelled checks, more than she realized she wrote. Looking more closely, Doris saw a new name: Josiah Klinger had signed three of her checks (fictitious name, of course). The bank must have made a mistake and applied his checks to her account. Then she looked even closer with the magnifying glass–the account number at the bottom of each check signed by Klinger was identical to her bank account even though his name and address were on the check. What was going on? As realization hit, Doris knew somehow her name had been eliminated from the check and John Klinger’s name was printed on her checks with her bank number, debiting her precious funds.

How could this be? Enter the world of technology. The bank fraud investigator assured Doris that because she reported the theft of over $1,500 so quickly, the bank could stop the fraudulent withdrawals and would replace the funds in her account. But, he pointed out, such fraud was as simple as buying $20 software for your computer and printing your own checks in your own name but inserting someone else’s account information in a magnetic strip at the bottom of the check. “But I have all of my checks,” Doris stressed. “No one has stolen my checks.” “They don’t have to,” the investigator told her. “All a crook needs is the bank identifier and account information at the bottom of your check-information that can be copied anytime you hand over your check to a stranger in payment for goods or services.”

Check out a compilation of ads from a business supply store and the internet: “Good check writing software should include several check design templates with options to customize the templates by changing font styles and colors and adding logos and graphics. Financial institutions require checks to include a magnetic ink character recognition (MICR) line, so software that includes a MICR font will save you money on check stock with pre-printed MICR lines. In addition, the MICR line must be printed with magnetic toner or your checks will be rejected. For example, MySoftware Checksoft Personal Pack costs just $19.99. Just a few of the features of this check printing software includes 900 personal checks, allows the user to print sequential check numbers, include the bank’s address and logo, and print the bank code line.”

So the next time you write a check and hand it over to a stranger, is your account safe? Do you balance your checkbook the same day you get your bank statement in the mail like Doris? Do you get photocopies of your checks with your bank statement? You may have just 30 days from the date of the bank statement to report theft in order to possibly recoup the funds.

Taken from FAQs on the Texas Banking website:

“What are my rights and responsibilities when a check has been forged on my account?”

Answer: Ultimately, the forging party is liable for items forged by them. However, banks do have a responsibility under Section 4.401 of the Business and Commerce Code to pay only authorized items from a customer’s account, and a forged check is not an authorized item. Most banks employ automated check processing techniques which do not verify the signature on each check to the signature on the deposit account. Under Section 4.406, the customer has a duty to discover and report unauthorized signatures or alterations with reasonable promptness. Typically, the depository contract will limit the discovery period to 30 days. Once reported, the bank generally must credit the item back to the account unless it can prove that the customer failed to comply with his or her discovery and reporting duties as imposed by the law. However, once a customer has notified a bank of a forgery incident, and has had at least 30 days to examine previous statements, he or she may not recover a loss on items previously forged by the same party and paid by the bank before it was notified. A customer can also be precluded from asserting against the bank if the customer was negligent in protecting his or her checks (Section 3.406).”

It could have been disastrous for Doris. Although only 6 checks showed up on her bank statement the check numbers that showed up on her statement indicated that at least 23 checks were written but only 6 had cleared when the bank statement was issued and she caught the fraud Technology can be so convenience but beware.

Postscript: Under Texas law the Bank must refund the money to Doris so long as she properly reports it to the bank. Based on my contact with Plano, Texas, attorney Keith E. Davis, however, the biggest vulnerability I see for people is use of a DEBIT card. Debit cards do not carry the protections of a credit card (limit on liability for theft if properly reported) or bank account. Once the scammer figures out how to access your debit card, your bank account can be in real jeopardy and you can only hope that your bank will be nice and help you try to recover.

Patty Sitchler
Patricia F. Sitchler, CELA
Schoenbaum, Curphy & Scanlan, P.C.
112 E. Pecan St., Suite 3000
San Antonio, Texas 78205

Thank you, Patty. Word to the wise.

Appellate Court Upholds Orders in New Jersey/Texas Guardianship

JULY 25, 2011 VOLUME 18 NUMBER 27
We have told you about Lillian Glasser before. She is a wealthy New Jersey woman with two children who disagree about where she resides, who should manage her health care and finances, and what should be done about financial actions taken in the months before court proceedings were begun. Much of the dispute centers over whether Texas or New Jersey courts should hear her case. That issue seems to have been put to rest, with New Jersey the victor.

To recap: Ms. Glasser, then worth about $25 million, lived in New Jersey. She occasionally visited her son in Florida (where she also had a rented home) and her daughter in Texas. In 2002, Ms. Glasser was persuaded to execute a new estate plan. She signed a will putting her daughter in charge of her estate, and a new power of attorney in favor of her daughter.

In 2004 and 2005, Ms. Glasser’s daughter fired her mother’s caretaker in Florida, moved Ms. Glasser to Texas, and initiated a Texas guardianship proceeding. In the meantime, she used her power of attorney to create a family limited partnership which she controlled, and transferred the bulk of her mother’s assets into the partnership’s name.

The Texas guardianship proceeding spawned a variety of legal actions. Ms. Glasser’s son, a nephew who was close to her and a family friend all objected in Texas. The litigation costs in Texas exceeded a million dollars, with much of the cost being paid from Ms. Glasser’s assets. The result: the Texas courts authorized her return to New Jersey, where there was more legal action pending.

After Ms. Glasser’s nephew filed a separate New Jersey guardianship proceeding, that state’s Adult Protective Services agency weighed in with a complaint alleging that Ms. Glasser had been subjected to exploitation. Those two actions were consolidated. Meanwhile, the Texas courts decided to wait until New Jersey had completed its review of Ms. Glasser’s situation.

In 2007 the New Jersey court held a 34-day trial on Ms. Glasser’s condition, the transfers of her assets, and the actions of the various players. The result: a judgment finding that Ms. Glasser’s daughter exercised undue influence and behaved in her own interest rather than her mother’s best interest, ordering return of all of the assets transferred into the family limited partnership, and appointing a bank as guardian of Ms. Glasser’s estate and an independent party as guardian of her person. That ruling was the subject of our 2007 update on the Glasser litigation. Ms. Glasser’s daughter appealed that ruling, as did two of the other litigants; much of the appellate argument focused on who should pay the extensive legal costs of the proceedings. The New Jersey Superior Court Appellate Division (that state’s intermediate appellate court) has now — four years after the original court findings — ruled on those appeals.

Spoiler alert: the appellate court affirmed the extensive trial court decision without modifying a single finding or order.

The appellate judges approved the trial judge’s finding that Ms. Glasser’s daughter had exercised undue influence over her mother. They agreed that she should be ordered to put all of her mother’s assets back into Ms. Glasser’s name, to be managed by the bank named as guardian of her estate (what we in Arizona would call her conservator). They confirmed the daughter’s history of inappropriate and evasive actions with regard to Ms. Glasser’s placement and care, and agreed that she was not suitable to manage her mother’s personal OR financial matters.

Then the appellate judges turned to the extensive fees incurred in the various legal proceedings in two states. They confirmed the trial judge’s decisions that:

  • Ms. Glasser’s daughter should pay her own legal fees in both New Jersey and Texas. That meant that she would have to repay the money she had taken from her mother’s assets to fund the Texas proceedings, for which she had paid her attorneys at least $1 million.
  • Ms. Glasser’s estate should pay the legal fees of the lawyer she selected to represent her (the court having found that she had the capacity necessary to hire an attorney of her own choosing). It should also pay the legal fees of her nephew, who filed the guardianship action in New Jersey, without forcing her daughter to reimburse those fees.
  • Ms. Glasser’s son argued that his mother’s estate should pay most or all of his legal fees; the trial judge decided that it would not order her to pay all of his legal fees in Texas, and that (since he hadn’t filed a guardianship petition in New Jersey) he was not entitled to reimbursement for his New Jersey expenditures. The appellate judges agreed, noting that his sister had no standing to object to the amounts allowed in any case.

In the Matter of Lillian Glasser, July 21, 2011.

So how much did Ms. Glasser’s legal predicament cost her, and what was the total cost paid by all of the litigants in protracted proceedings in two states? It may be impossible to calculate exactly, but it is obviously several millions of dollars — after all, her daughter’s legal fees in Texas alone exceeded one million dollars.

Assuming (and the evidence is good) that the outcome is correct, was there a way to prevent the absurd expenditure of millions of dollars, the delay of half a decade, and the angst and anguish associated with this case? A few things might have helped:

  • A carefully created and well-documented estate plan, drafted at a time when Ms. Glasser was clearly competent, might have headed off some of these problems. It might not, however. Ms. Glasser did have an estate plan in place in 2002, at a time when she was competent to make her plans. Her daughter’s undue influence and over-reaching upset that plan over the next few years.
  • If both Texas and New Jersey had adopted the Uniform Adult Guardianship and Protective Proceedings Jurisdiction Act prior to 2005 then considerable cost might have been avoided. That Act would have made clear that New Jersey had jurisdiction and Texas should not act — the very conclusion that the respective judges reached, though only after more than a million dollars in legal fees. Unfortunately, the Jurisdiction Act did not exist in 2005. Since it was first proposed in 2007, about two-thirds of the states have adopted it (including Arizona). So far neither Texas nor New Jersey has. In fairness, adoption of the Jurisdiction Act might have sped the proceedings up by only a few months, and saved only a fraction of the many millions of legal costs.
  • Mediation of the family disputes might have been effective — but it might not have. The appellate judges made reference to Ms. Glasser’s son adopting a “‘take no prisoners’ approach to anyone who disagreed with his views.” Her daughter’s intransigence is pretty clear from her actions and her legal posture. Perhaps they could not have ironed out their differences.

 

Court Distinguishes Between Undue Influence, Incapacity

DECEMBER 28 , 2009  VOLUME 16, NUMBER 66

Contrary to public perceptions, will contests are actually rare. In fact, few wills are written in such a way that anyone would benefit from a contest — most wills leave property to the same people who would inherit if there was no will. When there is a will contest, however, the two most common grounds are allegations of (1) lack of testamentary capacity, or (2) undue influence exerted by someone. A recent Texas case highlights the differences between those two allegations.

Evelyn Marie Reno died at age 81. She had been married twice, and left three children from her first marriage and one daughter from the second. The youngest child, Jan LeGrand, did not get along well with her half-siblings. Relationships between Ms. Reno and the three children from her first marriage were also strained — at least partially because two of them had initiated a guardianship proceeding (which was later dismissed) against their mother.

Ms. Reno spent the last year of her life in a nursing home. Ms. LeGrand visited her regularly, paid all her bills, and kept her location a secret from her half-siblings. At some point in the year before she died, Ms. Reno asked her daughter to help her prepare a new will disinheriting her other three children and leaving her entire estate to Ms. LeGrand.

The will was prepared (by Ms. LeGrand), and signed in Ms. Reno’s nursing home room. The witnesses were a hospice worker and chaplain, and the notary public was a nursing home employee. Ms. LeGrand was asked to leave the room while the three non-family members discussed the will and watched her sign it.

After Ms. Reno’s death the will was filed with the probate court by Ms. LeGrand. The three half-siblings proposed an earlier will, which left most of the estate to the four children equally.

The Probate Court ruled that Ms. Reno lacked testamentary capacity at the time the last will was signed, and that she was subjected to undue influence by her daughter. The earlier will (and a codicil) were instead admitted to probate.

The Texas Court of Appeals analyzed the findings of the Probate Court, and modified the basis for its findings — while not changing the result. The evidence, according to the appellate court, showed that Ms. Reno DID have testamentary capacity. Though she was often confused, the two witnesses and the notary agreed that the will was signed on a good day. Evidence of confusion and occasional disorientation on days before and after the will signing was not enough to overcome the testimony that she knew what she was signing, who her children were and what she intended to do at the time she signed the will.

The appeals judges agreed with the Probate Court, however, on the subject of undue influence. A key part of the evidence considered by the Court of Appeals: the fact that the will was actually prepared by Ms. LeGrand. As the Court wrote: “the fact that LeGrand personally prepared teh will without the intervention of an atotrney or other third party is significant.”

Also important to the court’s analysis: Ms. LeGrand had sole access to Ms. Reno for more than a year (during which time their mother’s whereabouts were not shared with the other three children). During that time, noted the Court of Appeals, Ms. Reno was completely dependent on Ms. LeGrand for bill-paying, care management and personal contact.

A more subtle distinction is drawn by the appellate judges with regard to Ms. Reno’s declining mental status. Though her condition at the moment of signing the will did not support the allegations of lack of testamentary capacity, her growing confusion and periodic mental weakness made her susceptible to undue influence.

Finally, the Court of Appeals notes that the will prepared by Ms. LeGrand for her mother was a complete shift from her prior wills. In each of those she made specific bequests to her four children and thirteen grandchildren, plus hospitals, her church and her pastor. The last will, however, left everything to one daughter — and this significant change in her dispositive plan was yet another indication of undue influence.

Though family members often confuse the concepts of testamentary capacity and undue influence, the legal analysis of the two different approaches to will contests is well-developed. It is also important to note that not every attempt to talk someone into making a new will is automatically subject to challenge. As the Reno court opined, in somewhat dry legalistic language: “One may request, importune, or entreat another to create a favorable dispositive instrument, but unless th eimportunities or entreaties are shown to be so excessive as to subver the will of the maker, they will not taint the validity of the instrument.”

The difference between “lack of testamentary capacity” and “undue influence” is legalistic, to be sure, but it is more than just academic. Interestingly, the Texas Court of Appeals noted that there is a difference in the burden of proof borne by the parties in the two different kinds of cases. In a case alleging lack of testamentary capacity the proponent of the will has the burden of proving that the testator understood what she was doing. In an allegation of undue influence, the challenger carries the burden of proof.

That means that each side in Ms. Reno’s case met their burden of proof. That is, Ms. LeGrand showed that her mother understood what she was doing, but the other three children demonstrated that Ms. LeGrand unduly influenced their mother. Estate of Reno, December 18, 2009.

High-Stakes Guardianship Case Illustrates Multistate Conflicts

APRIL 9, 2007  VOLUME 14, NUMBER 41

Mark Glasser and Suzanne Glasser Matthews, brother and sister, have spent the last two years battling for physical and financial control over their mother, Lillian Glasser. The 86-year-old Mrs. Glasser, who at one point had an estimated net worth of $25 million, has been the subject of proceedings first in Texas and more recently in New Jersey, where a trial judge heard thirty-four days of testimony and argument last fall.

Nearly six months after the extended proceedings, New Jersey Judge Alexander Waugh has issued his ruling, appointing a guardian of the person and estate for Mrs. Glasser. Rather than appointing any of the family members who might have been candidates, Judge Waugh appointed New Jersey attorney Joseph Catanese as guardian of the person. Mr. Catanese had served as court-appointed counsel for Mrs. Glasser during the trial, and the judge indicated that her condition could worsen if yet another new party was injected into her life.

Judge Waugh also appointed a guardian of the estate (the equivalent of a conservator in Arizona and some other states), turning to the financial management firm Mrs. Glasser and her late husband had used before his death. Mrs. Matthews, her daughter, was ordered to return control of approximately $20 million she had transferred to a family limited partnership just before initiating guardianship proceedings in Texas (see the San Antonio Express-News report), and the judge made clear that at least some portion of the costs incurred by Mrs. Matthews to set up that entity would have to be reimbursed as well.

All of that is very interesting, and Judge Waugh’s written opinion reads like a fictional saga (for more detail and an excellent running commentary on the case, consider Texas Tech College of Law Prof. Gerry W. Beyer’s blog coverage of the case). What the Lillian Glasser case points out even more clearly, however, is a growing problem in guardianship matters—the conflicts that can arise between jurisdictions with the increased mobility of families, support systems, caregivers and assets.

Guardianship proceedings were initiated in Texas when Mrs. Matthews sought appointment as guardian of both her mother’s person and her estate. After Mrs. Matthews’ appointment as temporary guardian, another relative initiated the New Jersey case, arguing that Mrs. Glasser was a New Jersey resident and the question of her capacity—and management of her affairs—should be handled there.

In an earlier ruling Judge Waugh determined that his court should have primary jurisdiction over the guardianship. Luckily, the Texas judge assented, staying the proceedings until a hearing could be completed in New Jersey. Although neither state’s laws include explicit provisions permitting such an action, the two judges’ cooperation saved considerable expense and duplicative legal proceedings.

Arizona law also lacks a provision for resolution of interstate guardianship conflicts. In practice, such conflicts are handled on an ad hoc basis, considering the strength of the proposed ward’s ties to each of the jurisdictions, the location of principal witnesses, and other factors. Frequently the result is that the state where proceedings are first filed has priority, even though the stronger contacts are elsewhere.

The National Conference of Commissioners on Uniform State Laws (NCCUSL), which proposes uniform statutes for consideration by the states, has addressed this growing problem. A provision of the Uniform Guardianship and Protective Proceedings Act, proposed in 1997, would specifically permit the judge in one state to notify and consult with the judge in another state, and to decide whether to accept or decline jurisdiction based on the best interests of the proposed ward (see section 107(b) of the UGPPA).

Another growing problem involves movement of wards after appointment of a guardian or conservator. Under current law and practice, it may be necessary to initiate a whole new guardianship proceeding in the new state after a move, at considerable expense and duplicating much legal effort The proposed uniform law would also address that problem, permitting the final guardianship order of one state to simply be lodged with, and become an order of, the ward’s new state.

Arizona Community Property Is Not Always Subject To Probate

OCTOBER 9, 2000 VOLUME 8, NUMBER 15

Arizona is one of nine “community property” states in the country, and that can be the source of some confusion about estate planning, taxes and property ownership rights for married couples. Recent changes in Arizona’s law make the “community property” designation a little more friendly and understandable, and the benefits to this unique property ownership choice are now clearer.

“Community property” concepts were not part of the English common law. Under the system imported to most of the American states, property was owned by one spouse or the other, though the non-owner might acquire some rights in his or her spouse’s property. The French and Spanish, however, understood the marital community to be a separate entity from either spouse individually, and permitted the “community” to own property. Each spouse then holds an equal interest in the community’s property.

Those American states with rich Spanish or French histories tended to adopt some version of the community property concept. Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin are community property states, although the method of implementing the concept varies somewhat. Alaska also permits some trust assets to be held as community property.

In community property states a married couple is presumed to hold assets as community property regardless of the actual title on the asset. Couples may, however, choose to hold their property in joint tenancy or as tenants in common if they wish.

One important advantage to having assets titled as community property comes, oddly enough, from federal tax law. Although capital gains taxes are ordinarily due any time an appreciated asset is sold, the increased value of property held by a decedent at the time of death is not taxed. The property’s income tax “basis” is said to “step up” to its value on the date of the owner’s death, often resulting in substantial income tax savings for heirs.

Jointly owned property only receives a partial “step up” in basis. Property held in joint tenancy will usually only get half the income tax benefit on the death of one joint owner. Community property, however, is treated differently: the entire value of a community property asset gets “stepped up” to the value on the first spouse’s death, resulting in twice the income tax savings.

The main drawback to holding community property in Arizona has long been the requirement of a probate proceeding to pass the property to the surviving spouse. Although the long-term tax savings can be substantial, the probate costs are immediate and, in most people’s minds, too high. Since 1995 Arizona has permitted married couples the best of both worlds: property can be held as “community property with right of survivorship” and secure the favorable income tax treatment while still avoiding the probate process. The value of this type of property ownership is, of course, restricted to married couples.

One caveat: some commentators, relying on fairly arcane interpretations of the federal tax law, argue that the “community property with right of survivorship” designation could conceivably be found to result in no step up in tax basis at all. So far the federal government has not taken such a position, but there remains some slight possibility of a problem. In addition, the effect of titling separate property as community property (with or without the “right of survivorship” language) has more than just tax effects. In other words, you should consult an Arizona attorney before changing title on your existing assets or deciding how to title a new acquisition.

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