My sister had been divorced for 17 years when she married her second husband. She had no children of her own, while he had three adult children by his prior marriage. My sister was a well-educated, highly respected professional social worker with a wide circle of friends and professional associates. She was my older and only sibling and we maintained a close relationship throughout our adult lives. I escorted her down the aisle at her first marriage because our father had passed away a year earlier and also did so at her second marriage. Even though we lived in different states and many miles apart during most of our adult years, we visited each other at least yearly and phoned each other regularly. We were together at many family gatherings, including the weddings of my three children, her nephews and niece. During the years she was single, she joined me, my wife, and children every Christmas. She became very close to my family and shared a special bond with her niece in their affection for animals.
Before she met her second husband, my sister had not expected to remarry and, so, saved and invested with a view to maintaining her financial independence. She married her second husband in 1995 when both were 53. On several occasions prior to and after their marriage, she and her husband stated that they intended to maintain the assets each brought into their marriage as sole and separate. These intentions were confirmed by estate planning documents executed by the couple in the early years of their marriage and later obtained by subpoena. Each had brought significant assets to the marriage and my sister’s separate Living Trust document, executed in 2002, clearly indicated that I was to be 100% beneficiary of her Living Trust while her husband’s separate trust listed his children as his beneficiaries. I was also named sole beneficiary of her IRA. In 2005, my sister had in excess of $800,000 in four accounts, which included two Living Trust Accounts and an IRA account.
It was in early 2005, at the age of sixty-three, that my sister began to exhibit signs of memory loss and confusion. She no longer initiated telephone calls to me and could no longer complete simple tasks that she had done repeatedly over preceding years. In our conversations, she voiced increasing frustration in paying the bills. A year later, in 2006, she could not read and comprehend a reservation form and tell me of travel plans for herself and her husband.
In 2007, a noted neuropsychologist found my sister to be significantly cognitively impaired, exhibiting “a markedly abnormal neuropsychological profile.” In June, 2008, a PET metabolic evaluation noted “metabolic activity consistent with an Alzheimer’s Disease pattern-moderate to severe.” Between 2007 and 2010, numerous reports from my sister’s physicians (Family Physician, Neurologist, E.R. Physician, and Cardiologist) document her severely impaired mental functioning.
Until 2005, my sister had managed the monthly finances and bill paying for the couple. I have learned through subpoenaed documents that her adult stepdaughter, who had a degree in accounting, began to ‘help’ with these tasks, beginning in February of that year, when my sister’s accounts began to be depleted at the rate of $10,000 or so per month.
In 2009 and in 2010, my sister’s Living Trust and DPOA documents were completely revised, virtually eliminating me as a beneficiary of her Living Trust and substituting the stepdaughter in my place as Successor Trustee and as Durable Power of Attorney. This was years beyond the point where my sister had the capacity to understand the significance of these actions. It is also to be noted that the stepdaughter’s name does not appear on any of my sister’s legal documents prior to the onset of the latter’s memory loss and confusion.
I first became aware of the abuse in December of 2015, two months after my sister’s death, after receiving only evasive answers from the stepdaughter regarding my sister’s affairs. In January of 2016, after contacting a lawyer, the stepdaughter provided an accounting in the form of a simple statement that the balance in my sister’s only remaining account, which was a Living Trust account, was $4,000. Between 2005 and her death in October of 2015, my sister’s four investment accounts were exhausted of essentially all of their funds, that is, more than $800,000.
It is only because my sister had provided me with a 14-page document in 2002 and again in 2004 (prior to overseas travels as well as the onset of her cognitive decline) with, among other things, a summary of her accounts and possessions for which I was to be beneficiary, that I had any basis to question the stepdaughter’s account.
In August of 2016, as a result of my civil lawsuit (see below), the stepdaughter finally provided a very incomplete accounting of expenses. This accounting amounted to a selective list of checks exceeding $1,000.00 and the electronic equivalent of a jumbled pile of bank and brokerage statements (thousands of pages). She failed to account for many thousands of dollars in checks she wrote to herself and deposited into her own account, numerous credit card charges, numerous electronic withdrawals for cash made from the couple’s checking account, and a number of charges, obviously her own expenses, paid using the couple’s debit card. Her accounting ignored completely the line of credit loan taken out in September of 2011 on a luxury home that was my brother-in-law’s sole and separate property. There is no evidence that this money was ever used to pay living expenses for my sister and her husband. Yet, between 2011 and 2015, more than $50,000 of my sister’s money was used to make monthly payments on this loan line of credit. I received only a partial accounting of the proceeds from the sale of the couple’s primary home in Phoenix which the stepdaughter, acting as trustee for both my sister and her husband, sold in 2015 for $460,000. Some $100,000 is missing in the accounting of the sale of the home. In addition, between 2008 and 2015, more than $175,000 was improperly withdrawn from my sister’s IRA by her stepdaughter in order to maintain the sole and separate property of my sister’s husband, even though other financial resources were available, in an attempt to conserve assets destined for the stepdaughter and her siblings as beneficiaries of their father’s estate.
In summary, my sister’s stepdaughter fraudulently obtained and then abused her powers as Trustee and Durable Power of Attorney by misappropriating my sister’s funds for her own benefit, both directly in funds she took for herself (I believe that this was well in excess of $100,000) and indirectly, in conserving her father’s assets of which she, along with her two siblings, is a direct beneficiary. The foregoing allegations of my sister’s incapacity, vulnerability and fiduciary abuse are supported by medical records, monthly bank and brokerage statements and other documents obtained through independent investigation and by legal action in the form of a civil lawsuit. The stepdaughter’s conduct was egregious, calculated, sustained, and criminal.
I believed from the beginning that the abuse was a criminal in nature; however, multiple sources encouraged us to address our claims through the civil courts. I initiated civil action in February 2016. I reluctantly settled our civil lawsuit in April of this year (2017) for $13,000. My legal fees ran close to $40,000, paid from my retirement savings. I felt compelled to settle because I was facing rapidly escalating costs and not getting anywhere. My attorneys advised me that if I continued to trial it would cost us between $75,000-$100,000, or more. Then, if I did obtain a judgment against the stepdaughter, I would have the onerous task of collecting that money … involving more lawyers and more fees.
In July of 2016, I also filed a criminal complaint with both the Phoenix Police Department and the State Attorney General’s office. A month later I received a letter from the Attorney General’s Office, Special Investigations Section, stating that they had reviewed my complaint and would not be opening a criminal investigation at that time. Since that date, I have obtained and submitted a number of additional documents in support of our allegations. The Special Investigations Unit has declined to follow up on our assertions.
My sister was victimized three times over. She was a victim of Alzheimer’s Disease, struggling with this disease for ten years. She was a victim of an unscrupulous stepdaughter, and she is a victim of a legal system which recognizes financial abuse of a vulnerable adult as a crime but does little to follow up on reported cases, particular when the abuser is a member of the family and the abused is deceased.
Arizona has laws on the books making fiduciary abuse of a vulnerable adult a crime. AZ STATUTE 13-1815 (Unlawful Use of Power of Attorney): “An agent who holds POA and who uses the principal’s assets or property with the intent to unlawfully deprive that person of the asset or property is guilty of theft. AZ STATUTE 13-1802: a person commits theft if, without lawful authority, the person knowingly takes control, title, use or management of a vulnerable adult's property while acting in a position of trust and confidence and with the intent to deprive the vulnerable adult of the property.” Furthermore, according to a Basic Estate Planning Document put out by the Maricopa County Bar Association, “a power of attorney executed by an incapacitated adult is invalid and, in a criminal proceeding, the agent has the burden of proving by clear and convincing evidence that the principal had the capacity to understand the nature and effect of executing and granting the Power of Attorney.”
On the website of the Arizona Attorney General, it is noted that most cases of elder abuse are not reported to authorities and that as few as one out of twenty-five cases of financial abuse are reported. It is also stated that adult children and other family members are often the abusers. Citizens are urged to report elder abuse and exploitation. This rhetoric rings hollow if the police investigators and prosecuting attorneys are not committed to following up on cases of financial abuse that are reported!
Examination of relevant State statutes indicated to us that the abuse was criminal in nature and extent. Nevertheless, many advised us to pursue civil action because the state and local police would view the matter as a family affair, no physical abuse had apparently occurred and, after all, the victim was deceased. In fact, the police focus appears to be mainly on scams and frauds perpetrated by individuals outside of the family. However, the total of sums involved in fiduciary abuse perpetrated by family members is believed much greater than that by those outside the family and is also thought to be under-reported. After filing the initial report with the Phoenix Police I followed up with detailed summaries and reports, including copies of bank statements, canceled checks and brokerage account statements that had been obtained in the civil action. The Phoenix police made only a preliminary contact with the stepdaughter and her attorney but, as of this writing, have proceeded no further with an investigation.
Our civil lawsuit proved equally unsatisfactory. It is frequently stated that some 85% of civil cases settle before going to trial. How many of those settlements are like ours: settling for a paltry sum to avoid incurring significant additional and onerous expenses? I have learned a dirty little secret. A defense attorney can mount a campaign of delays, objections, motions, unnecessary depositions, etc. intended to thwart the requirement to provide responses to requests for an accounting from the plaintiff. Intentionally or not, these actions generate substantial legal fees. It took us eight months and almost $20,000 before I was able to issue my first subpoenas for records necessary to substantiate our claims. Not many people have the financial resources to pursue a claim of fiduciary elder abuse through the civil courts. It becomes a question, not of obtaining a just resolution, but of who has the money to stay in the game the longest.
At no time in the process did the civil court attempt to bring the sides together in mediation. Indeed, it is clearly in the interests of the legal profession to prolong the process and thereby generate income. The Civil statutes call for an accounting by the trustee at the death of the trustor but a superficial summary was all that was provided and the court was apparently satisfied. This is a travesty. An individual becomes a Trustee and assumes a Durable Power of Attorney voluntarily and the Courts need to demand that such individuals meet the stated requirements in the statutes much more thoroughly than they currently do. This should also include verification that vulnerable adults have the capacity to understand trust documents and powers of attorney, and also include Court supervision of the process.
Finally, had my sister required notification of beneficiaries of any changes in her Living Trust in the Trust document as well as a yearly accounting from Successor Trustees, this might have prevented the abuse.
What action steps are you taking to address and prevent this issue from happening to others?
My wife and I have established contact with the Ageless Alliance and other organizations interested in this issue to call attention to the growing problem of fiduciary abuse of vulnerable adults by family members. The ultimate goal would be two-fold: (1) have police and prosecuting attorneys treat this fiduciary abuse by a family member as a crime; (2) enact laws requiring DPOAs and Successor Trustees to provide beneficiaries with at least an annual report that includes an accounting of income and expenditures on behalf of the trustor or estate and a mechanism whereby this report may be obtained without having to go to the expense of filing a civil lawsuit.
My mom resided in an assisted living facility in San Diego for several years after my dad passed away. One day she noticed her heirloom silver and some jewelry had been stolen from a closet shelf. I had warned her not to keep valuables there, but she came from the a different era where people trusted others.
The theft was reported to the Director, but she didn't call the police to make a report. I assume the staff didn't want to have the police there upsetting other residents. My mom thought a new staff member stole her things while cleaning her room.
My mother in law was exploited and my wife wanted me to call the police because she feels this crime usually goes unreported.
My mom was very upset that her things had been stolen. I wish it had been reported, but other family didn't want to make that call.