Egregious fiduciary malfeasance. These are the words that best describe the issues purveyed in "American Probate: Protecting the Public, Improving the Process" by Paula A. Monopoli. This book breaks it down for us and shines a glaringly bright light on some dirty laundry in the legal profession.
About the book …
Title: "American Probate: Protecting the Public, Improving the Process"
Author: Paula A. Monopoli
Description: This book offers a tripartite blue print for reform: increasing deterrence, detection and compensation in the American probate system.
Publisher: Northeastern University Press
Released: May 2003
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Probate courts are "the venue for many cases involving Americans who are unable to protect their own interests - children, elderly, incompetents - it plays an essential role in protecting those people. The National College of Probate Judges describes this function as follows: 'Probate Courts are responsible for equitably handling many kinds of problems in our society. Though they deal primarily with the estates of deceased persons, probate courts also play an important role in protecting the rights of people with special needs - the mentally ill, alcoholics, orphaned children, the aged, and developmentally disabled.'"
Sadly enough, the very people who especially need to be protected by the system are the very ones who often fall victim to it.
"American Probate" begins with the Las Vegas death of John Fairbanks, a New Hampshire judge and probate attorney who stole millions of dollars from the trusts and estates of dozens of clients to cover investment losses. For decades, he was a trusted member of the legal community and continued to be appointed as trustee, executor and guardian while giant red flags were blowing in the wind and those in charge looked the other way.
Fairbanks routinely failed to file inventories and accountings on time, did not stay in touch with his clients and did not pay estate taxes. However, the probate judges that Fairbanks appeared before were his colleagues because he was also a part-time judge. While the Fairbanks story is a bit long and involved, it illustrates the failures in the probate system in New Hampshire at that particular time.
Monopoli gives several more cases of probate attorneys located in different states who exploited their fiduciary positions.
Monopoli suggests ways to detect and prevent abuses in the probate system, including random audits of trust accounts in order to surprise lawyers who may be taking client funds; public education about the probate system to make more well-informed testators and beneficiaries; increased court funding; requirement that fiduciaries post bond; mandatory malpractice insurance; and state client protection funds.
Some of the suggestions are already in place in certain states. Other suggestions, such as increased court funding, seem very unlikely to happen.
In addition, Monopoli examines the changes that took place in various states in response to these very public scandals caused by noted probate attorneys. As a result of the Fairbanks debacle, New Hampshire passed legislation requiring the probate courts to send out default notices if a fiduciary failed to file accounts on time. A sophisticated software program was implemented that automatically produces these default notices and requires a manual override in order to prevent a notice from being issued.
The book contains some historical information on the American probate system and a glossary of terms. The differences in various states are compared and contrasted, which become the basis for a discussion on the need for more uniformity and the birth of the movement for the Uniform Probate Code.
In addition, Monopoli discusses probate avoidance and how, with the use of living trusts, a trustee distributes the estate without any court supervision. "The question remains why American law allows probate and non-probate transfers, which look extraordinarily similar, to be subject to different rules and different systems." Monopoli calls on states to continue to build on the reform efforts embodied in the Uniform Probate Code and the Uniform Trust Code.
Here in Massachusetts, the legislature has two bills pending (S.B. 958, H.B. 787) in the Joint Committee on the Judiciary, which would create a Massachusetts Uniform Probate Code.
While "American Probate" certainly will not leave you with warm cozy feelings about being a lawyer, it will - or at least should - raise many questions for us all. Although we may not all be probate attorneys, most of us are part of a family. Because of the mortality of our loved ones and eventually ourselves, at some point, the American probate system will touch us all.
Although "American Probate" shows so much wrongdoing that has been committed in the probate system, it also provides the opportunity for planting many types of seeds of change. As we move further into the new century, hopefully these seeds will take root and blossom into a new and better American probate system.
Lisa C. Johnson is a tax counsel at Taxware, a division of govONE Solutions.