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McClellan Legal LLC Estate Planning & Tax Assessment Blog

Wednesday, March 19, 2014

Beware of Your Fiduciary

Beware of Fred the Fiduciary

I received a call from a man (let’s call him Fred the Fiduciary, or better yet, Fred the Fraud) this morning and he asked to meet with me immediately concerning his Aunt (let’s call her Vicky the Victim).  It’s not uncommon for a person to arrange a meeting for an elderly family member, so I agreed to meet two hours later.  Instinctively, my radar was on high alert when Fred arrived at my office without Vicky. 

Fred began our meeting by informing me that Vicky already has her basic estate planning documents in place, including a will, power of attorney for finances, and health care documents.  My first question was, “Who drafted her documents and why are you not going back to her previous attorney with these new concerns.”  Fred indicated that he is an intelligent man and that he “was able to prepare her documents without an attorney." Anyone see a problem with this yet?  Fred, the non-attorney, is providing Vicky legal advice by drafting and executing her estate planning documents. 

My second question was, “Who are the fiduciaries and beneficiaries of her estate?" Fred proudly noted that he is his Aunt’s power of attorney, executor, and SOLE beneficiary. Giving Fred the benefit of the doubt, we will assume that Vicky has no other family members that would naturally inherit.  But, what are the chances that Vicky doesn't have any living children, grandchildren, great-grandchildren, siblings, or other nieces and nephews? Very slim. 

The reason that Fred was in my office is because Fred wanted to “protect” Vicky’s assets from herself.  Vicky is about 80 years old and she still drives herself to work each day.  It doesn't sound like she needs much protection. Fred wanted to learn more about putting all of Vicky’s assets into an Irrevocable Asset Protection Trust.  Apparently Fred had spent some time on the web researching his plans for Vicky’s assets and realized that his estate planning competency does not include drafting complex asset protection trusts, so he came to me for advice. 

In order for an Irrevocable Asset Protection Trust to provide any real protection from creditors, Vicky would have to give up full control of her assets and not be able to receive any of her own principle.  Hence, Vicky would be completely isolated from her assets even though she still had the capacity to drive herself to her full-time job.  Of course, Fred offered to “serve” as trustee of his aunt’s Irrevocable Trust.  At this point, I told Fred that the meeting could not continue without Vicky sitting at the table. In fact, if he brings Vicky to my office, I told him that I would request that he wait in the reception area.  He indicated that since he had Power of Attorney, it was not necessary for Vicky to be present.  I politely ended the meeting.

I have seen various levels of abuse by family members in order to control assets that do not belong to them. A fiduciary’s role is one of trust and requires the fiduciary to put the principal’s interests ahead of their own.  You should never appoint a fiduciary to serve on your behalf unless you have absolute confidence that he or she is looking out for your best interests.  In this case, Fred did not care about anyone’s interest other than his own.  I suggest that we all keep both eyes open for people like Fred and be aware of who we trust to serve as our fiduciaries.  




McClellan Legal LLC is located in Kennett Square and serves clients throughout the areas of Avondale, Chadds Ford, Coatesville, Downingtown, Landenberg, Oxford, Phoenixville, Pottstown, West Chester, & West Grove. We also serve the following towns in Lancaster County: Lancaster, Lititz, Strasburg,Millersville, Ephrata, Leola, Manheim, New Holland, Willow Street, Quarryville, Elizabethtown and Mountville.



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