BVI Accounts Under Scrutiny in 2014

bvi bank accountsA new law will reveal more details about United States taxpayers who maintain accounts in the British Virgin Islands. Starting in 2014, the BVI will need to provide account information about US taxpayers in order to comply with the new legislation.

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Health Care Reform Scams

healthcare reform scamSenior citizens are vulnerable to financial predators and scams, but now families with elderly relatives need to be aware of scams associated with the new health care reform. As The Affordable Care Act, also known as Obamacare, rolls out around the country later this year, all individuals young and old should be weary of the scams below:
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Memory Loss, Retirement and Aging

Memory loss comes in many forms. From mild cognitive impairment and dementia, to the severe effects of advancing Alzheimer’s, the number of senior citizens affected by memory impairments is only going up. 1 in 5 Americans over the age of 70 are afflicted by some type of memory loss. Families often recognize the importance of advanced estate planning when thinking of retirement for aging Americans with a growing rate of memory impairment. However, seniors may avoid discussions about retirement planning because they are concerned about losing their independence – both financial and otherwise. By meeting with an estate planning attorney in advance, individuals can take the steps needed to help preserve the independence that most fear will be lost as they age.

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Illinois Ruling Strikes a Blow at Asset Protection Trusts

In Rush University v. Sessions, et al, the Illinois Supreme Court ruled that a transfer to a Cook Islands trust was per se fraudulent.   Despite the holding, since the grantor was deceased and therefore could not be held in contempt of court, the trust would probably have worked to protect the assets had the assets not been located in the U.S.  In this case, however, the trust owned millions of dollars of Illinois real estate, over which the court has jurisdiction, of course.

As explained in this Forbes article by attorney Jay Adkisson, this ruling could spell bad news for the effectiveness of domestic asset protection trusts more so than offshore trusts.  Adkisson's view:

"(1) With some exceptions, Foreign Asset Protection Trusts can be effective if the Settlor/Beneficiary and all assets are beyond the reach of the U.S. courts. So long as those two conditions prevail, contrary U.S. law probably will not be of practical benefit to the creditor. But Foreign Asset Protection Trusts might not be effective as to trust assets found in the U.S. (as here), or if the Settlor/Beneficiary remains within the contempt power of the Court.

(2) With some exceptions, Domestic Asset Protection Trusts can be effective if all of the trust assets are held in a DAPT state. But Domestic Asset Protection Trusts might not be effective as to assets held in a non-DAPT state.

(3) While not considered in this Opinion, Bankruptcy Code section 548(e) casts a dark shadow over all “self-settled trusts and similar devices” to the extent that the Bankruptcy Petition is filed within 10 years of the date of transfer.

To summarize as to Domestic Asset Protection Trusts: They “work” so long as your assets are kept in a DAPT state and you can stay out of bankruptcy for 10 years. There is an open question as to whether the courts of a non-DAPT state can compel the return of asset from the DAPT state to the non-DAPT state so that those assets are available to creditors, i.e., the application of “Anderson relief” to DAPTs."

For North Carolina residents, this means that assets held in North Carolina, especially real estate, are unlikely to be afforded much protection by either foreign or domestic asset protection trusts.  Even assets located elsewhere may at risk.  My advice for those seeking protection - plan carefully, with multiple strategies, and do so now!


Elder Fraud on the Rise - North Carolinians No Exception

It’s an unfortunate reality that, as people get older, they find themselves at a heightened risk of becoming victims of elder abuse.  Recent studies have shown that elder abuse is an increasingly prevalent phenomenon.  While elder abuse can occur in many forms, including physical and emotional abuse and neglect, elder fraud poses a particularly strong danger for many aging citizens.  The 2010 “Elder Investor Fraud Survey” conducted by the Investor Protection Trust showed that one out of every five citizens over the age of 65 has fallen victim to financial fraud.  A 2011 study conducted by MetLife showed that Americans over the age of 60 had been conned out of approximately $2.9 billion in 2010.  Most victims fall between the ages of 80 and 89, with the majority being women.

Victims of elder fraud often find themselves at the mercy of friends or family members who take advantage of a close relationship, often by misusing a Power of Attorney or abusing credit card privileges, spending beyond permitted limits.  However, as this recent article from shows, there is another form of elder fraud on the rise, and its effects have already been felt in the Triangle.  Raleigh residents Charles and Miriam Parker, both 81 years of age, fell victim to a telemarketing fraud scheme in which the couple wound up losing tens of thousands of dollars.  Taking advantage of their trust and financial needs, their abuser charmed his way into the Parkers’ lives with the promise that, upon sending money to pay for taxes, they would receive the proceeds of a multimillion dollar lottery.  Over the next few years, the Parkers were persuaded to send and relay thousands of dollars and found themselves heavily in debt.  For the Parkers’ children, perhaps the most frightening aspect of the Parkers’ situation was their denial of being victimized.  Even after their children stepped in with law enforcement in an intervention meeting, the Parkers adhered to their belief that their “investment” soon would pay off.

The Parkers’ story sheds light on a danger that many elder citizens could face during their later years in life.  While the Parkers were lucky enough to have children close-by who eventually were able to put a stop to their parents’ troubles, many elder Americans are isolated, living far away from children and other family members who could keep an eye out for their loved ones.  As more instances of elder fraud continue to occur, it’s important to keep both elderly citizens and their loved ones educated about the warning signs to watch out for to avoid similar misfortune.

NC POA Case Shows it's Better to Plan in Advance

A recent North Carolina Court of Appeals decision affirmed the Superior Court verdict that an agent under a power of attorney did not breach his fiduciary duty to his aunt, Doris King or unjustly enrich himself at her expense.  Albert v. Cowart, et al.

Even though the defendants prevailed in this case, proper advance planning by Mr. and Mrs. King would most likely have avoided the lawsuit.  The use of powers of attorneys and perhaps trusts executed well in advance of incapacity, with a lawyer's counsel, does not completely avoid the possibility of litigation, but certainly reduces it considerably.

It appears that the lawyer that prepared a power of attorney for Mrs. King did so without first consulting with her.  This goes against North Carolina State Bar rules, which require that an attorney must first communicate with a person before preparing legal documents for that person to sign.  This helps ensure that the person signing the documents has capacity to sign the documents and is doing so willingly.

2011 NC Senior Fraud Booklet

The 2011 Consumer Scams and Fraud booklet issued by the North Carolina Attorney General is now available.  It is geared to increase awareness of and prevent fraud against seniors.

AK Bankruptcy Court Avoids Transfer to AK DAPT

In the May 26, 2011 Alaska Bankruptcy Court decision of In re Mortensen, the court avoided a transfer of real property of the debtor to an Alaska Domestic Asset Protection Trust (DAPT).  The judge held that under Section 548(3) of the Bankruptcy Code, any transfer to a DAPT for less than full and adequate consideration is, by definition, with the intent to "hinder, delay, or defraud" creditors despite state law providing otherwise, and that such DAPT asset are part of the bankruptcy estate if made within the 10 year look back period in Section 548(e)(1).  548(e)(1)(D) states that the intent to defraud relates to future potential creditors as well as any present creditors: "the debtor made such transfer with actual intent to hinder, delay, or defraud any entity to which the debtor was or became, on or after the date that such transfer was made, indebted." [emphasis added]

Although this case was decided in Bankruptcy Court in Alaska, there is no reason to doubt that the decision would be any different in North Carolina or any other state as it hinged on federal, not state, law.

Bottom line is do whatever you can to avoid filing bankruptcy within 10 years of funding a DAPT.  Also make clear that any other applicable reasons for the DAPT, such as estate tax planning, are well-documented.  Finally, don't try to do the legal work yourself!

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How to Avoid Investment Fraud

As an estate planning attorney and Certified Financial Planner, much of what I do is help people protect and grow their assets.  Unfortunately, there are those who seek to do the opposite - con artists who try to take others' hard earned money by committing investment fraud.  The elderly are particularly vulnerable to such scams.

The Investment Securities section of the website of the North Carolina Secretary of State contains a great deal of educational and other information for investors, including how to file a complaint.  One piece provided the Securities Division is Five Things You Need to Know to Avoid Investment Fraud:

1.     Know Yourself and Your Investing Goals

You should know your investing objectives and your level of investing knowledge. Ask yourself: What can I afford to lose? What is my risk tolerance? Do I need external guidance to help me invest?

2.     Know Who You Are Dealing With

You should know if the person offering you the investment opportunity is registered to sell  investments, what their background is, how they are paid, what kinds of products they offer, who their other clients are and what level of service you can expect.

3.     Know What You Are Investing In

For example, is the purchase a security? Ask questions, take notes, and get a second opinion from a registered adviser. Never sign a document before reading it carefully, and don't be drawn in by appearances or smooth talk. Remember most fraudulent investments are very well thought out and appear professional in their presentation.

4.     Know Who To Call For Help

The North Carolina Securities Division (1-800-688-4507) can provide verification of the registration of the securities seller, investment adviser and the security itself. Other information, such as complaint history, is also available.

5.     Know the Red Flags Which Could Signal Fraud

  • Promises of high returns with little or no risk, or guarantees: All investments carry risk. Usually, the higher the expected returns, the higher the level of risk. Pressure to "invest immediately or miss the opportunity": Don't be pulled in! This tactic is used to pressure you into handing over your money without doing your homework or asking for independent advice.
  • Offshore investment – tax free: Taxes can sometimes be deferred, but they can't be avoided. This tactic is used to get investors to send the money offshore where it is difficult, if not impossible, to get back.
  • Great investment opportunity – "your friends can't be wrong": Yes, they can. Many investment fraud victims were introduced to the fraud by unsuspecting family, friends or co-workers.
  • Psychological tactics: Sellers who play on your fear (i.e. insufficient income to keep your home or buy your medicine), greed (to live the good life or leave money to your kids?"), or insecurities (not wanting to appear foolish or incompetent) are common tools used by con artists. 
  • Inside information: First you have no way of knowing that the information is true. But second, trading on inside information is illegal.

You can also talk with your CPA or attorney, who should be able to provide guidance.


IRS Offers 2nd Voluntary Disclosure Initiative for Offshore Assets

Today the IRS announced a new special voluntary disclosure initiative designed to bring offshore money back into the U.S. tax system and help people with undisclosed income from hidden offshore accounts get current with their taxes. The initiative is available through Aug. 31, 2011.

While it is legal to hold assets offshore, the assets must be disclosed to the IRS, and U.S. citizens must pay tax on all earnings worldwide.

See IR-2011-14 for details of the Initiative.


Keeping Your Personal Financial Information Safe Online

From guest author Aaron Huber:

Whether you're keep your money in a conventional financial institution or in an internet based bank without a physical location, it’s a good idea to ensure that you’re doing business with a reputable organization and that your money deposited is federally insured.

Listed here are guidelines created specifically for individuals who conduct banking transactions on the internet – which is pretty much everyone these days as traditional banks now charge extra to perform transactions in person or even over the telephone.

1.         Never access your on-line account using open public computers. There might be viruses on those computer systems or even most severe spyware that can keep track of your financial transaction and can steal your identification.

2.         Look at your online bank account on a regular basis to make certain that there aren't any unusual purchases on your statements. If you see any kind of problems, report the incident to your financial institution right away.

3.         Pick a robust username and password or PIN which is tough to guess. A powerful password consists of random sequence of characters with both uppercase and lowercase letters, numbers, and symbols. It is usually not advisable to use any personal information in your password like birthday, address, or anniversaries because these are the first thing that hackers will try to get in your accounts.

4.         Never disclose your personal security details like account number, PIN, or security code to other people even if they claim to work for the bank. The bank may ask for personal information like birth date, middle name, or maiden name just to verify your identity but never the PIN or security code.

5.         Be careful with email messages that appear to come from your bank. Because of so many phishing scams – most banks no longer send their customers email directly. Instead they will send you a message informing you that the bank has a message for you which can be accessed via an internal messaging system on the bank’s website. Although this extra step is a hassle – it protects you from imposters claiming to be the bank.


About the Author:

Aaron Huber is a staff writer for Global Finance School. Global Finance School is a leader in producing interactive e-learning courses on finance, accounting, and economics.

North Carolina Senior Helpline

Legal Aid of North Carolina has a Senior Legal Helpline for citizens age 60 and older. The toll-free number is 1-877-579-7562.  Intake hours for new callers are 9:00-11:00 a.m. and 1:00-3:00 p.m. Monday through Friday.  Matters covered include Housing Law, Consumer Law, Employment Law, Pubic Benefits, Alternatives to Guardianship and Wills.

Keep Your Information Private

Watch out for telephone calls where the caller requests personal information:

“There are no situations in which it is reasonable to give out Social Security, Medicare/Medicaid, credit card, checking account or other personal information over the phone or in writing unless you have initiated a conversation with a qualified person or business,” according to Angel Dennison, director of the Chatham County Council on Aging.

If you are interested in what someone is offering to sell, ask for the physical address of their office and a call back number. Then, tell the person you will call him/her back to continue the sales process. At least you will have recourse in case the offer is a fraud or your personal information is abused.

But, the best advice is to make personal contact at the place of business or decline to continue the phone conversation.


Stipulation Leads to Directed Verdict in Fraud Case

Here's a summary of Burton v. Williams, a recent North Carolina Court of Appeals case (adapted from today's NAELA eBulletin):

Plaintiff sued defendant as attorney-in-fact for decedent, alleging that an addendum and payment agreement release entered into between decedent and defendant regarding the sale of decedent’s property were void and unenforceable.  The grounds were that (1) At the time the documents were signed, decedent lacked the mental capacity to assent to the addendum and release; (2) the agreements were obtained through undue influence and duress; (3) they were procured through fraud; and (4) they were not supported by consideration.  After presenting his evidence, plaintiff moved for a directed verdict, and the court granted on grounds that the release was void and unenforceable for lack of consideration.  Defendant claimed this violated his right to trial by jury. However, because plaintiff established his claim through documentary evidence, which both parties stipulated was authentic and correct, the Court of Appeals ruled that the trial court properly directed the verdict in favor of plaintiff despite plaintiff having the burden of proof at trial. No consideration for the payment agreement was specified, and the document which was the basis of the agreement, as a matter of law, was not a valid contact. 

Burton v. Williams, 2010 N.C. App. LEXIS 93 (January 19, 2010)

Bank of America Liable for Failure to Honor Power of Attorney

In a recent Florida case, Bank of America was held liable for refusing to honor a power of attorney:

Copyright 2009 Stuart News Company All Rights Reserved The Stuart News/Port

St. Lucie News (Stuart, Florida) November 15, 2009 Sunday Martin County

Edition SECTION: LOCAL; Pg. B5 LENGTH: 496 words HEADLINE: Stuart man

takeson Bank of America BYLINE: Melissa E. Holsman staff writer BODY:


-- When Clarence H. Smith Jr. sued Bank of America in 2007 over its

refusal to honor the power of attorney his now-deceased father had enacted years

before, he called it as a case of David against Goliath. And like

David, Smith on Friday walked out of court a winner, armed with a jury award

worth $64,142. "I'm glad we won, but I think it's a victory for more than

just us," said Smith, 67, of Stuart. "It's a victory for anyone who gets a

rough deal from a big bank -- that a little person can prevail against a huge

international bank." After a week-long trial, it took a one-man,

five-women jury 15 minutes to determine Bank of America had not acted

reasonable in September 2007 when it denied Smith Jr.'s request to

transfer $65,000 his father, Clarence H. Smith Sr, then held in a joint account

with a female friend he knew from living at Ocean Palms Retirement Center.

Smith said his ordeal with the bank began when he became suspicious

money may be missing from his father's bank accounts. He presented to

former Stuart branch manager Victoria Carscadden the durable power of attorney

he'd had on behalf of his father with a request to transfer money from the

elder Smith's jointly held accounts into a new account only the father and son

could access. But instead of honoring the request, Carscadden

testified that she consulted bank policies and called the woman on the account

with Clarence Smith Sr., and she accused the son of trying to steal his

father's money. Carscadden said she refused Smith's request because bank

rules governing jointly held accounts require that all signatures on an

account must agree to any transfers or changes. The woman sharing Clarence

Smith Sr.'s account, she said, had refused to allow any money to be moved.

At trial, Smith's Stuart attorney William R. Ponsoldt Jr. showed that

despite Carscadden visiting Clarence Smith Sr. to see he was competent and that

he wanted his son to manage his affairs, she still refused to recognize

Clarence Smith Jr.'s power of attorney. Shortly afterward, Ponsoldt told

jurors, the woman sharing Clarence Smith Sr.'s account moved all the

money into an account only she could access. Clarence Smith Sr. died about

three weeks later, Ponsoldt said. He argued that the bank's refusal to =

honor Smith's power of attorney went against state law. During his closing

argument, Bank of America attorney J. Randolph Liebler of Miami, said

based on bank policies, "it would be absolutely inappropriate to have honored

the power of attorney where there was some allegation of abuse -- rightly or

wrongly." After court, Bank of America spokeswoman Shirley Norton

said they were disappointed in the jury's verdict. "We believe that

neither the facts nor the law support the verdict," she said, "and we plan to

appeal." Smith meanwhile, said he'll use the money to pay bills from

his father's estate. "I feel fortunate we were able to take on Bank of

America," he said. "Think of all the people who can't."

Thanks to Brevard attorney Nicola Melby for bringing this to my attention.  North Carolina also has laws to help with enforcement of a valid power of attorney.  N.C.GS. Section 32A-40 et sq.

The Time for Asset Protection Planning is Now

Many people come to see me for asset protection advice only after some type of actual or probable liability has arisen.  At that time, it is normally too late to do any meaningful asset protection, as most contemplated transfers of property could be undone as a fraudulent conveyance.

In order to determine whether there has been a fraudulent conveyance, which would render the planning useless, the courts look at "badges of fraud, such as the following:

  1. An inadequate or fictitious consideration or a false recital as to consideration.
  2. The fact that property is transferred by a debtor in anticipation of or during a pending suit.
  3. Transactions which are not in the usual course or method of doing business.
  4. The giving of an absolute conveyance which is intended only as security.
  5. The failure to record the conveyance or an unusual delay in recording the payment.
  6. Secrecy and haste are ordinarily regarded as badges of fraud but are not in themselves conclusive of fraud.
  7. Insolvency or substantial indebtedness of the grantor.
  8. The transfer of all the debtor's property, especially when she is insolvent or greatly financially impoverished.
  9. An excessive effort to clothe a transition with the appearance of fairness.
  10. The failure of parties charged with fraudulent conveyance to produce available evidence or to testify with sufficient preciseness as to the pertinent details, at least in cases where the circumstances under which the fraud, transfer took place are suspicious.
  11. The unexplained retention of possession of property transferred by the grantor after conveyance.
  12. The buyer's employment of the seller to manage the business as before, selling the goods which were the subject of the transfer.
  13. The failure to examine or to take an inventory of the goods bought or the presence of looseness or incorrectness in determining the value of property.
  14. The reservations of a trust for the benefit of the grantor and the property conveyed.
  15. The existence of a blood or other close relationship between the parties to the transfer.

Also, certain other circumstances may constitute evidence of fraud, such as the transferee's failure to keep a record of the dates and amounts of loans, or advances made by him to the transferor; failure to demand repayment; an erroneous or insufficient description of the property transferred; sending the money received from the transferee out of the country; assignment of the property to the seller rather than to the purchaser; and the fact that the purchaser, soon after transfer, offered to resell the property at a much higher price.

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Seniors - Protect Your Financial Well-Being

North Carolina's elderly are particularly vulnerable to financial fraud and scams.  Check out the the North Carolina Department of Justice's website, which has helpful information for people of all ages to help protect themselves from identity theft, scams, and other crimes.  If you have an elderly family member without access to a computer,  please print the information and discuss it with them.

Even attorneys are being scammed these days, so it pays to be vigilant!