This story is an example of what can happen in a worst case scenario probate. Probate is a court process by which an estate (funds and real property) is distributed when a person dies. Probate only occurs if an estate plan has not been set up. Under California law, this means a person's assets exceed $150,000 and their assets are not in a trust. Even if someone has a will, a probate still takes place. Such was the case with Miriam Strong, long time Connecticut resident, who died in 2010 at the age of 85 with an estate estimated between 3 and 4 million dollars. This May, nearly 5 years later, prominent real estate attorney Peter Michael Clark, was arrested and charged with embezzling $1.8 million of that money.
Clark was Ms. Strong's lawyer, and assisted her in drawing up her will, in which he appointed himself as co-executor of her estate. Why Mr. Clark did not have Ms. Strong put her assets in a trust to protect them is unclear. This misstep alone would guarantee Mr. Clark received at least $60,000 in legal fees when she died, because the estate would have to go through probate. This could have been avoided with an Estate Plan.
In California, if someone dies without an estate plan, and there is no obvious choice for an executor (such as an heir), an attorney can be appointed as the executor of an estate. The executor, often with the help of an experienced probate lawyer, is responsible for distributing the assets of the estate and accounting to the court. In this case, the executor and the attorney were one and the same - and the unthinkable happened - the money "disappeared". The $1.8 million dollars was earmarked to go to the town of Oxford, CT for student scholarships and a new library, and Ms. Strong's church, which was desperately in need of repairs to its boiler room. The shocking part is that it took nearly five years for this embezzlement to surface. According to the affidavit, the Probate court scheduled a hearing to determine what had happened to the money after beneficiaries reported not receiving the funds. The FBI began an investigation, and Mr. Clark was arrested several months later.
Despite the jokes made about attorneys, most attorneys I know in Contra Costa and Alameda County hold themselves to a very high ethical standard. And by law, an executor of an estate or trustee of a trust has a "fiduciary duty" to the beneficiaries of an estate. This means that they will act in the highest interest of the beneficiaries, and uphold themselves to the highest ethical duty of loyalty to those beneficiaries. According to an FBI report, Peter Michael Clark had filed "false and misleading documents" to the probate court, indicating that the money had gone to beneficiaries when instead it went to himself. It seems that greed overcame Mr. Clark and he became blind and deaf to his responsibilities. In a similar case involving embezzlement by tax collector Karen Guillet, when questioned by the judge if substance abuse led to her severe misjudgment, she replied "no," it was simply greed.
One interesting point to note is that typically, an executor or trustee is bonded until the will or trust is administered in full. A bond, in short, is an insurance policy. While the bond can be waived by the beneficiaries or the court, this is not what I recommend as a Probate and Trust attorney. A bond, in short, is an insurance policy. If Mr. Clark had been bonded, the bond company would "insure" him for the full value of the estate, and should anything happen with the money, they would pay the beneficiaries what they were entitled. This means the town of Oxford and Ms. Strong's church would get their money, and no longer have to worry. The bond company, in turn, would sue Mr. Clark to recover the funds. It is unclear if this is what occurred in this particular probate case. It does appear Mr. Clark was sentenced to 4 years in prison, however, which seems low given his crime.
This is a particularly stark example of what can go wrong if one fails to do an estate plan. An estate plan does not guarantee that no foul play will occur, but it certainly lessens the chances. For more information about drawing up your estate plan, or assistance with your trust or estate, I offer a free 30 minute consultation at my estate planning and elder law office in Walnut Creek.