Our Attorneys Will Help You End Elder Financial Abuse in Maryland
As parents and other family members age, they may become more vulnerable to elder financial abuse and exploration due to their health problems, declining cognitive ability, or other age-related factors. Indeed, elder financial abuse and exploitation is a major and growing national problem – some estimates put annual losses at $36.5 billion. Some elder financial abuse is perpetrated by strangers. The AARP Fraud Resource Center, for example, lists over 50 different scams, ranging from fake sweepstake scams to Medicare frauds scams.
Sadly, much elder financial abuse and exploitation is perpetrated by caregivers and family members. The exploitation can take different forms: convincing the vulnerable senior to make outright transfers or “loans” based on a made-up hard luck story; taking the vulnerable person to a bank and getting them to create joint or pay-on-death accounts, and; engineering on-line beneficiary changes on investment or retirement accounts. Often the transfers are made by an agent misusing and abusing a power of attorney, effectively stealing the money.
Sometimes these transactions are discovered during the older person’s life and sometimes they come to light after his or her death. Depending on the circumstances, the legal process to challenge the transfer involved will differ.
Often the person engaged in the financial exploitation trades off their trusted relationship with the vulnerable, older individual. Other times, the vulnerable adult acquiesces to transactions out of fear that care will stop, and that they will be left alone. Sometimes self-serving transactions will be made by an agent abusing a power of attorney or made by the successor trustee of a revocable trust breaching a fiduciary duty and taking money from the vulnerable parent or other family member.
Not all lifetime gifts to family members or caregivers, of course, are elder financial abuse but, instead, may be transfers motivated by gratitude and done without pressure or duress. Analogous to Will contests, however, transfers that were caused by undue influence, fraud, or abuses of trust can, and should, be set aside and the property returned.
Although this is a national problem and civil litigation addressing it is similar across jurisdictions, lawsuits to reverse these transactions and return the assets involve state-specific procedural and substantive law. This article is written by trial lawyers at our firm who are Maryland estates and trusts litigators and who routinely handle these types of cases – both seeking to overturn transfers and, when appropriate, defending transactions. This discussion is from a Maryland litigation perspective and necessarily involves Maryland statutory and common law.
The Role of Confidential Relationship
Generally, the hallmark of cases where a caretaker or family member has manipulated a vulnerable adult is the existence of a confidential relationship. Under Maryland law, some confidential relationships are per se: between a lawyer and client; between a trustee and beneficiary; and between an agent acting under a power of attorney and the principal. Otherwise a confidential must be proved as a matter of fact — was there a relationship of reliance by a subservient person to a dominant person for care, or for protection, or for guidance in financial and business affairs.
For lifetime transfers, such as an outright gift, the existence of a confidential relationship shifts the burden to the dominant recipient of the transfer to prove by clear and convincing evidence that it was the free and uninfluenced act of the transferor. In Will contests, on the other hand, the existence of a confidential relationship does not shift the burden of proof but is merely a factor, among others, tending to prove that a Will favoring the dominant party was a product of undue influence.
One possible remedy is to bring a guardianship proceeding to have someone “step in the shoes” of the vulnerable adult to make decisions. In elder financial abuse settings, however, this remedy may not be as useful as it appears. Under Maryland law, a guardianship is a comparatively drastic, invasive remedy. A guardianship of the person strips the alleged disabled person of many fundamental rights – deciding where to live, handling finances, and other basic, every-day rights. Accordingly, protecting the alleged disabled person’s liberty interest is the primary focus of a guardianship proceeding, not protecting that person from ill-conceived decision-making.
By its nature, a guardianship creates an adversarial dynamic between the person filing the petition for guardianship and the alleged disabled person. Thus, seeking a guardianship is something to consider but by no means an automatic decision.
A complicating factor, for example, stems from a dynamic often present with undue influence cases. Such cases may involve a “trusted advisor” who has gained the vulnerable adult’s confidence. The person exerting the undue influence may have poisoned the relationship of the parent or other family member with those trying to intervene. In the vulnerable adult’s mind, bringing a guardianship proceeding could be “proof” those seeking to help are really seeking to injure him or her. As with any intra-family litigation, complex emotional relationships need to be considered along with strictly legal factors.
Nevertheless, a guardianship is often advisable. A guardianship will help prevent future financial abuse. It gives constructive notice of the disabled person’s inability to enter binding contracts. The guardian also assumes the control of an agent under a power of attorney. It does not, in and of itself, remedy losses from financial abuse that has already taken place. It does not set aside changes to assert titling or restore assets to the guardianship estate. The guardian does have the right, however, to bring legal and equitable causes of action on behalf of the disabled person to seek those remedies.
Abuse of a Power of Attorney
A Power of attorney is an important tool for disability planning. Obviously, only trustworthy individuals or corporate fiduciaries should serve as agents. There are techniques that the estate planning lawyers of our firm recommend to protect against, or at least minimizing, misuse by an agent – for example naming two agents who must act together thus building in checks and balances.
Under Maryland statute, an agent acting under a power of attorney must act with care, competence, and diligence for the benefit of the principal and only within the scope of the authority granted. Unless the power of attorney states otherwise, the agent has a duty of loyalty, meaning he/she essentially has the same fiduciary duty as a trustee. Also, the agent should attempt to preserve the principal’s estate plan.
The Maryland General and Limited Power of Attorney Act give a large group of people the ability to challenge an agent’s acts in court in order to protect the principal. This group includes the principal’s spouse, parents, descendants, presumptive heirs, and any person named as a beneficiary to receive property at the principal’s death. These interested persons may petition the Circuit Court to enjoin the agent to force specific conduct and to petition review the agent’s conduct.
Abuse by a Trustee of a Maryland Trust
Revocable trusts are popular planning devices used as a hedge against disability. As with a power of attorney, only trustworthy individuals or corporate fiduciaries should serve as the successor trustee to the settlor in the event of the settlor’s disability.
Once the settlor becomes disabled, the successor become the trustee and is obligated to administer the trust for the benefit of the settlor or any other person who is a current income beneficiary (often the settlor’s spouse). The revocable trust, however, does not become irrevocable upon the settlor’s incapacity. This is designed to keep the duty of the trustee solely owed to the settlor and not permit the remainder beneficiaries have standing to interfere with that exclusive obligation.
The only persons with a specific statutory standing to sue a revocable trust after the settlor’s disability but before his death is a guardian, an agent under a power of attorney assuming that authority is granted to the agent in the power of attorney, and any other current income beneficiary. If no guardian has been appointed, a parent or grandparent or more remote ancestor has standing.
The Maryland Rules, on the other hand, also permit other interested persons, including heirs at law, to ask the Circuit Court to assume jurisdiction over the trust in which case the broad equitable powers of that court apply. Additionally, the Maryland Declaratory Judgment Act seems to authorize a broad group to intervene. During the settlor’s life, the extent to which this broader group may trigger court intervention may be controversial. After the settlor’s death, all qualified beneficiaries may bring court cases to question a trustee’s behavior as it may impact their rights.
Causes of Action After the Death of the Vulnerable Adult
The ability of heirs or others to intervene to set aside and reverse transactions are very broad after the death of the vulnerable adult. These cases often present logistical considerations. While the Orphans’ Court has exclusive original jurisdiction in Will contests, it has no jurisdiction on any of the other causes of action to rectify the financial exploitation of vulnerable adults.
Many cases involve Will contests and litigation to cure wrongful account designations (for example joint tenancies and pay-on-death accounts) and to force return of improperly received gifts. Thus, there are cases based on the same set of facts in both the Maryland Orphans’ Court and the Maryland Circuit Court. Occasionally another related case is before the federal District Court. Managing the potential multi-jurisdictional issues, by consolidation or otherwise, in a manner that is both cost effective and keeping with a well thought out trial strategy is a high priority.
We Can Help You With Elder Financial Abuse and Exploitation
The Maryland fiduciary litigation attorneys at Franke Beckett LLC understand the private causes of action involved in elder financial abuse and exploitation in Maryland and we are prepared to handle your case in bringing or defending a such a case. Some firms have a broad focus – ranging from divorce, auto accidents, negligence cases, DWIs and other criminal defense cases. We do not. For over 35 years, the law firm of Franke Beckett LLC has concentrated on the law of fiduciaries and the law of estates and trusts. We have experience in a wide variety of fiduciary litigation. We handle will contests and challenges to trusts, cases involving life-time transfers or changes to beneficiary designations based on a lack of capacity, undue influence, or abuse of a powers of attorney. We try cases involving personal representatives and trustees abusing their fiduciary duty to beneficiaries. As fiduciary litigators, we also handle the suits against directors or general partners abusing their fiduciary duty in family, closely held businesses.
On a regular basis, we try cases before the Orphans’ Courts and the Circuit Courts of various Maryland counties in Central Maryland and on the Eastern Shore. We also take appeals to the Court of Special Appeals and the Maryland Court of Appeals. We have deep experience in, and knowledge of, the Maryland law fiduciaries and the law of estates and trusts. Firm-wide, we concentrate on all aspects of estates and trusts: fiduciary litigation, planning and administration. In order to schedule a consultation with an experienced Maryland fiduciary litigation attorney, or for any other matter within our practice area, call 410-263-4876 to get in touch with our Annapolis office.