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!
Continue Reading...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:
STUART
-- 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:
- An inadequate or fictitious consideration or a false recital as to consideration.
- The fact that property is transferred by a debtor in anticipation of or during a pending suit.
- Transactions which are not in the usual course or method of doing business.
- The giving of an absolute conveyance which is intended only as security.
- The failure to record the conveyance or an unusual delay in recording the payment.
- Secrecy and haste are ordinarily regarded as badges of fraud but are not in themselves conclusive of fraud.
- Insolvency or substantial indebtedness of the grantor.
- The transfer of all the debtor's property, especially when she is insolvent or greatly financially impoverished.
- An excessive effort to clothe a transition with the appearance of fairness.
- 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.
- The unexplained retention of possession of property transferred by the grantor after conveyance.
- The buyer's employment of the seller to manage the business as before, selling the goods which were the subject of the transfer.
- 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.
- The reservations of a trust for the benefit of the grantor and the property conveyed.
- 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.
Continue Reading...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!
