Tag: Elder Law Insurance Issues
By all indications, the abuse of Powers of Attorney to misappropriate assets is on the rise.
When a grantor gives powers to an attorney to manage the grantor’s property, it allows the attorney to assist the grantor in managing property, and in fact to take over management of property altogether if the grantor does not monitor the situation. Often the very goal of the grantor is to allow someone else to completely take over management of one’s property due to age, potential incapacity or other reasons, so the grantor has no intention to monitor.
This is often a reasonable choice, and the law holds attorneys to a high standard to protect grantors. However, the potential for abuse is immense. Abuse can be willful or simply negligent, but in either case the damage can be devastating and irreversible. In many cases attorneys who stray from their duties are never made to account, although they have that obligation. Often they live with the grantor and have little or no oversight. The legal fees in securing justice are generally high, and the chances of recovering on a judgment can be low. In the result, legal proceedings might be impractical, however blatant abuse may be in a given case.
The best defence against this problem is awareness, so these varied results from a quick internet search are somewhat encouraging: a Florida law firm website; an excellent Vancouver Sun article; a synopsis of a TV news story; the New York Attorney General’s website; a news report of a Philadelphia trial; and a news release from Prince Edward Island’s provincial government commenting on the problem for World Elder Abuse Day.
This is the tip of a very large iceberg: by all indications lawyers, financial institutions, governments and of course the public will be wrestling with a growing problem for years to come.
Thanks for reading.
A massive $110 million lawsuit has been brought by the Attorney General’s office in California against a “living trust mill that tricked senior citizens into using their retirement savings to buy annuities that often made less financial sense for the elderly victims but earned the con artists substantial commissions and other income.”
Estate Planning Law Firms.com quotes the Attorney General as saying the following:
“The perpetrators of this fraud deceived seniors into using their hard-earned retirement nest eggs to buy unneeded annuities that actually undermined their financial security. Living trust mills such as this one violate not only the law, but the trust of their elderly victims.”
What surprised me was the apparent scope of the alleged organization being sued by the Attorney General: between 250 and 300 sales agents and another 80 telemarketers were involved, allegedly soliciting elderly consumers through mailings, seminars, telemarketing, presentations at senior centers and other means, marketing their services as a way to avoid probate and estate taxes, then eventually convincing seniors to buy annuities that were, according to the Attorney General, not in their best interest.
Without commenting on this particular case, there does seem to have been a disturbing and growing trend in recent years of attempts to deprive the elderly of the considerable wealth concentrated in their hands.
One more reason, if any were needed, to take great care in choosing investment and estate planning advisors.
Thanks for reading.
Section 72(1) of Ontario’s Succession Law Reform Act allows a court to deem various assets that may normally fall outside of a deceased’s estate, to be part of the estate for the purposes of satisfying a dependant support claim. This usually includes “any amount payable under a policy of insurance effected on the life of the deceased and owned by him or her”. However, as demonstrated in Madore-Ogilvie (Litigation Guardian of) v. Ogilvie Estate  E.G. No. 4654 (Div. Ct.), this provision will not normally capture insurance policies owned jointly by the deceased and a third party.
In Ogilvie Estate, the deceased was the father of six children (three of them minors) by five different women. Dependant support claims were made on behalf of two of the minor children. It was agreed that the deceased had failed to provide adequately for his minor children.
The issue before the court was whether a joint life insurance policy, issued to both the deceased and his spouse, could be included as part of the deceased’s estate under section 72(1) of the SLRA. The deceased and his spouse were both the owners and beneficiaries of the policy, which provided that the survivor of the two would receive the face amount of the policy on the death of the other. It was undisputed that the spouse had made the majority of the payments under the policy.
The applications judge held that the policy could be included as part of the estate. On appeal, a majority of the Divisional Court reversed this decision. The majority held that a jointly owned policy cannot be included as part of an estate merely because the deceased is one of the owners of the policy. The Court recognized that s. 72 of the SLRA was designed to counter the intentional depletion of an estate at the expense of dependants. However, there are transactions that “would be considered the normal personal commerce of an individual” and not necessarily undertaken to disenfranchise a dependant. In the case at hand, the majority ultimately decided that the contractual rights of the spouse to the joint policy trumped the needs of the deceased’s dependants.
Have a great day!
January 15, 2007 articles from the National Post and the Globe and Mail describe breakthroughs in Alzheimer’s research.
This encouraging news raises the possibility that we may be closer to a cure for this terrible disease, or at least treatments to slow the onset. Families struggling daily against the ravages of dementia can now see some light at the end of a very long tunnel.
Capacity law could be greatly affected as well. Current assessments to determine capacity, such as the capacity to manage property or the capacity to execute a Will, mix elements of science (such as cat scans) with the experience and judgment of the capacity assessor. Different assessors come to different conclusions in close cases.
As science can better identify and isolate genetic causes of dementia, we can expect more accurate tests. We might even see partial or comprehensive cures for dementia diseases. If so, patients who have lost capacity might recover it. Someone unable to sign a binding Will in 2006 could theoretically regain that ability in 2008.
This opens a Pandora’s box of fascinating questions. For example, if John Doe loses capacity in 2005 and regains it in 2010, who’s to say if he would name the same beneficiaries in 2011 as in 2004? Conceivably his personality may be significantly different after recovering capacity than it was before he lost it.
A beneficiary’s joy at recovering a loved one could be tempered by losing an inheritance.
Thanks for reading.
In Re Nesbitt Estates, an unreported 2005 decision of the Ontario Superior Court of Justice that is presently under appeal, the actions of an attorney under power of attorney were scrutinized by the Court in an unusual fact situation.
In this case, the attorney managed the property of his elderly aunt and uncle at their request and made a series of transfers of the aunt’s bank accounts into joint bank accounts held with her husband. The evidence suggested that the aunt was capable at all relevant times although there was admittedly sketchy evidence as to whether the aunt knew and approved of each and every transaction that placed her assets into joint ownership with her husband of sixty years. What was clear was that her testamentary intention throughout the period of the transfers was to benefit her husband with her entire estate. The wrinkle was that the aunt inexplicably changed her will shortly before her death to benefit, not her husband but, rather, a family friend.
During Hull of Estate and Succession Planning Episode 32, we continued to discuss the Elder Law Conference with an emphasis on what the Canadian Centre for Elder Law Studies is currently working on, highlighing their past work and discussing its mission of enriching and informing the elderly in the law.
During Hull on Estate and Succession Planning Episode 31, we discussed the various aspects of the Canadian Conference on the Elderly presented by the Canadian Centre for Elder Law including how the Courts are dealing with elder law and elder law situations.
In our final blog on this topic (for now), we wanted to look at Canada’s perspective in regard to viatical settlements. At page 10 of the report produced by the Canadian Centre for Elder Law Studies, the study reviews the current law in Canada.The authors note that, in Canada, laws regulating the business of insurance and insurance contracts are primarily found in provincial and territorial statutes. An example of the legislation prohibiting trafficking in life insurance policies is set out in Section 26 of the British Columbia Insurance Act, where the legislators state that any person other than an insurer or its authorized agent … who traffics or trades in life insurance policies for the purpose of procuring the sale, surrender, transfer, assignment, pledge or hypothecation of them to himself or herself or any person, commits an offence against this Act.
The authors of the study comprehensively set out arguments for and against legalizing viatical settlements (see pages 22 to 30 of the report).
As we review the study paper prepared by the Canadian Centre for Elder Law Studies on viatical settlements, we see that the authors note that a typical viatical settlement contains six steps.
Firstly, the holder of a life insurance policy initiates the transaction by filling out and submitting an application and providing any required supporting documentation to an interested company. The policyholder, him or herself, is typically referred to as the "viator" and the company is typically referred to as a "viatical settlement provider" or "VSP" (see page 3 of the report). To even be considered for a viatical settlement, a viator must have diminished life expectancy.
Secondly, the viator must submit medical and insurance records to the VSP for evaluation.
Thirdly, the VSP reviews the information and essentially determines whether or not the viator is eligible for a viatical settlement. This third step is, of course, a combination of insurance underwriting and medical analysis. In the U.S. experience, both whole life and term life insurance policies are acceptable, as are group life insurance policies. The expectation is that the policy is in good standing and that it not restrict assignment. Furthermore, it is expected that the policy has been in full force for at least two years.
Continuing with our review of the Canadian Centre for Elder Law Studies’ paper on viatical settlements, we note that the paper is broken down into 7 parts, starting with a brief introduction and an examination of typical viatical settlements. There is also a review of American academic articles and the study looked at the historical developments of viatical settlements in the U.S.
The study goes on to examine the current law in Canada and looks at leading policy arguments for and against removing the legal barriers to viatical settlements in Canada. The study also examines in detail the leading Canadian model for law reform drafted in 2001 by Ontario’s Financial Services Commission. The last two parts of the study include a review of several issues for reform and a conclusion to the study paper.
The origins of the project arose out of the Program Committee of the British Columbia Law Institute, whereby they identified examining the possibility of legalizing and regulating viatical settlements as an innovative area for legal reform.
After having reviewed the study paper on viatical settlements, it is clear that, while this is an innovative area of legal reform, certainly in the United States, the concept of viatical settlements is a growing trend and one that will no doubt be considered over the next few years as the increase in population puts pressure on the market forces.
Given that viatical settlements are rare in Canada, the study paper looked at the elements of a typical viatical settlement from the United States as providing the reference point. Again, while there are different approaches in the United States, the study notes (at page 3) that one commentator who recently reviewed the American market concluded that the typical viatical settlement contains six steps.
We will look at the six steps in our next blog.
All the best, Suzana and Ian. ——–