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PROBATE FRAUD Powered By Docstoc
					                                        PROBATE FRAUD

           An article by Tony Fulton, Manager, Carey Olsen Wills and Probate team

Representatives of Charities in England have recently expressed alarm about the increasing incidences
of fraud involving deceased Estates and elderly clients.

So much so that a Symposium was held in London last month to discuss, “Elderly Financial Abuse
and Probate Fraud”. It was organised by the Institute of Legacy Management and the Society of Trust
and Estate Practitioners.

One of the delegates, representing the Roval National Institute for the Blind, said, “I would be
surprised if the total stolen from Estates was less than £100 million a year and it is probably nearer
£150 million. The trouble is if you are ripped off you may never find out about it”.

He went on to explain that ripping off the elderly is simply too easy. Bogus Wills, Accounts, Trusts
and Powers of Attorney seem to come out of the woodwork when people die. Families need real
rights, so that when a loved one dies or becomes incapable they are not robbed. The Government can
and must protect the public from the kind of cheats who forge Wills to steal from family Estates.

A prime example was the case which lead to the downfall of the infamous Dr. Shipman. The last
person he murdered was Mrs. Kathleen Grundy. He made the mistake of forging her Will on his
manual typewriter in his surgery in Hyde, expecting to acquire all or her assets, including her house.

The Will which Dr. Shipman forged stated, “All my Estate, money and house to my doctor. My
family are not in need and I want to reward him for all the care he has given to me and the people of
Hyde. He is sensible enough to handle any problems this may give him. My doctor is Dr. H.
Shipman, 21 Market Street, Hyde, Cheshire.”

When the forgery was discovered, he was arrested and this led to his conviction for the many murders
which he committed.

Other shocking examples of fraud include the case of a Solicitor who produced two different sets of
Estate Accounts – the difference between the two sets amounted to more than £60,000 – which he
pocketed for himself. In another case study, Cancer Research had been left the residue of an Estate
with the daughter acting as Executrix. The valuable antique furniture was removed and replaced by
furniture from MFI. The Executrix confessed and was forced to pay back the sale value of the
furniture, some £40,000.

A son was disinherited by his mother, who made a new Will cutting him out of her Estate entirely.
When she died he used the old Will naming him as Executor and beneficiary to obtain a Grant of
Probate, so as to collect her bank accounts which he was not entitled to receive.
Fraudsters have also become highly inventive in devising schemes to deprive Charities of their
inheritances. In one case reported by a delegate at the Symposium, an Executor had invented a bogus
Codicil to a Will. The actual Will gave small legacies to nieces and the bulk of the large Estate to
charity. The bogus Codicil reversed this order, giving small legacies to the Charities and the residue
to the nieces. Using this device, both the nieces and the Charity were given documents showing that
they only received small legacies and the Executor was expecting to keep the rest of the assets for
himself. The fraud was only discovered because a niece complained to the Charity about the sale of
an old car for less than it was worth. She said that they as residuary beneficiaries should have done
something about it, but this then led to them both comparing the documents which they had received.
When they realised what was happening they reported the fraud to the Police.

Crispin Ellison, the Executive Director of the Institute of Legacy Management, said that, “The
problem for us at present is that almost half of all Solicitors we deal with are not happy to provide a
Schedule of Assets and Liabilities to residuary beneficiaries. When it comes to personally extracted
Grants, it can be very difficult to get any form of Estate Account from the Executor.”

Reported cases of fraud have also extended to elderly clients who have given Powers of Attorney to
people they trusted with the management of their affairs.

One of the speakers at the Symposium was Denzil Lush, the Master of the Court of Protection and
author of “Elderly Clients: a Precedent Manual”.

He said that most Attorneys are honest, decent people. However, some take liberties and a few are
out-and-out crooks. Financial abuse probably occurs in about ten or fifteen per cent of cases
involving registered Enduring Powers of Attorney and more often with unregistered Powers. In
England the Enduring Powers of Attorney Act came into force in 1985. Since then some 120,000
Powers have been registered and the number of Powers being registered each year has now risen to
about 14,500.

The largest fraud unearthed so far involved a sum of £1.9m, most of which had been deposited by the
Attorney in a Swiss Bank account en route for the United States and ultimately Australia. The donor
of the Power of Attorney was a spinster in her nineties, without any known relatives. The Attorney of
the unregistered Power was the proprietor of the residential care home in which she resided.

A former Social Worker, who addressed the Symposium, referred to standard types of financial
abusers to be wary of as “wormers-in”. These might include rogue traders who target old or
vulnerable people to undertake work which is not necessary, or is overcharged for, “companions” who
target rich people, and opportunists, who may be neighbours or friends suddenly seeing an
opportunity to make a quick profit. Then there are friends and family who think that they will inherit
eventually and believe that taking the money now does not really matter.

There are certainly difficulties in deciding how to deal with dishonest Attorneys. There is the
question of whether they should be punished and how this should be done. The Attorney is often a
close relative and they may be prosecuted for theft or pursued by civil proceedings. This could lead to
the recovery of assets, but the Attorney may well stand to inherit them anyway. An Inspector from
the Fraud Squad addressed the Symposium and pointed out that the Police may not feel able to
investigate complaints which they regard as domestic problems, especially if unexpected gifts do not
necessarily amount to theft.

Problems over English Powers of Attorney have even led to reference to the Jersey Court over the
administration of Trusts. This was not because of any fraudulent intent but merely, in one case,
because of the unwitting infringement of the rules on making gifts.
In the recent Jersey case of Brown Shipley Trust Company (Jersey) Limited v. Holland (JRC
2004/005), a Judgment delivered on 13 January 2004 held that a transfer of assets to a Trust was void
under Section 3 (5) of the Enduring Powers of Attorney Act 1985, whereby Attorneys are only
allowed to make minor gifts. The assets held by the Jersey Trust were therefore not held by them on
the terms of the Trust at all. They therefore held them as bare trustee, much the same as a Bank
would hold a bank account. They were therefore assets of the Estate of the donor of the Power of
Attorney, who had since died. A Jersey Executor therefore needed to be appointed and since the
deceased was deemed to have died domiciled in England and Wales, Inheritance Tax became payable
on assets which had been placed offshore to avoid tax. The Judgment of the Court said, “Because the
transfers to the Trust were void, we should also treat the transfers of the assets from the United
Kingdom to Jersey as also never having taken place”.

As far as Jersey is concerned, it is difficult to estimate the extent to which probate fraud or abuses of
Powers of Attorney represent a significant problem. There have been no recent Court cases or reports
in the media of such problems.

At present, there is no specific process for the regulation of Attorneys or Trustees. Bankrupts and
criminals can thereby fulfil these functions if they so wish. Curators of mentally incapable persons on
the other hand are regulated by the Royal Court under the provisions of the Mental Health (Jersey)
Law 1969. Professional Executors who are trust corporations are regulated under the Probate (Jersey)
Law 1998 and professional Trustees are regulated under the Financial Services (Jersey) Law 1998.

One idea to limit the extent of probate fraud would be to follow Scottish procedures. In Scotland a
Grant of Confirmation is obtained as opposed to a Grant of Probate. Unlike in England or in Jersey,
the Grant of Confirmation includes a Schedule of all of the assets and liabilities of the Estate. It is
therefore easier for beneficiaries of Estates to verify the correct application of any inheritance to
which they are entitled to. However, delegates at the Symposium did not think that such a procedure
was likely to be adopted, at least as far as England was concerned.

In the absence of further regulation, the best way of avoiding potential fraud problems is probably to
be very careful over the choice of Attorneys, Executors and Trustees. Professional people, firms and
companies should usually be preferred and chosen according to their high reputation, expertise and
relevant experience. Most professional practitioners will already be regulated by either the Law
Society of Jersey, the Society of Estates and Trust Practitioners, or another professional body.

Most professional Executors operate their Estate administration, Wills and Probate work via Trust
Corporations such as Carey Olsen Executors (Jersey) Limited, which is authorised to act as Executor
under the Probate (Jersey) Law 1998 and is also regulated by the Jersey Financial Services
Commission for the conduct of trust company business. Details of the company’s services are
available in the Private Client, Wills & Probate section of Carey Olsen’s website at

Tony Fulton
March 2004

Carey Olsen
47 Esplanade
St Helier

Tel: 01534 888900 Fax: 01534 887744