Opinion ID: 1904276
Heading Depth: 1
Heading Rank: 5

Heading: kuglan estate

Text: Respondent and Madeline Kuglan were named as co-executors and co-trustees of the estate of Charles Kuglan, who died September 9, 1966. Mr. Kuglan's will provided in part that the bulk of his estate was to be held in trust to provide a life estate and income to his wife, Madeline Kuglan. Following the death of her husband, Mrs. Kuglan moved to Florida and left all matters to be handled by Respondent. The decedent, in an informal agreement dated June 8, 1966, and witnessed only by Respondent, directed that Respondent alone would be responsible for any decisions regarding trust transactions. The principal asset of the estate was decedent's ownership of stock in a closely held corporation. In April 1967, the corporate stock was sold for $130,143.48 under an agreement decedent entered into in 1965 when he withdrew from business activities because of illness. Of the total amount, $33,143.48 was paid to the estate in May and June 1967. An interest-bearing promissory note was given by the corporation for the balance. This note was paid on October 12, 1979. Respondent thereafter withdrew $100,000 from the account and applied the proceeds as a loan to himself and to Elwin Realty Co., Inc., a family corporation formed in 1974. This corporation's charter was later declared void by the State on September 18, 1978 for nonpayment of franchise taxes. Mrs. Kuglan retained another attorney in October 1980 to obtain from Respondent information concerning estate assets, such as where the funds were invested and what income benefits were due her. She told this attorney that Respondent did not disclose to her the details concerning the corporate corpus assets. She said Respondent just informed her that the money was invested and she was receiving the income. Respondent never filed a New York inheritance tax return, a federal estate tax return or a fiduciary income tax return nor did Mrs. Kuglan sign any such document. On February 20, 1981, Mrs. Kuglan filed an ethics complaint. She complained of Respondent's failure to account. She acknowledged that she was not experienced in business or financial matters, but was advised by another attorney that certain documents should have been filed. She further claimed that Respondent told her by letter that the estate only received $100,000 from her husband's business interests, but that her present attorney had obtained checks revealing Respondent received $133,143.38. Mrs. Kuglan, by letter dated December 9, 1981, to the then Division of Ethics and Professional Services (DEPS) agreed with the accounting of estate funds that Respondent sent her and desired to withdraw her complaint. When her attorney testified before the Ethics Committee, he said he spoke with Mrs. Kuglan after she informed him she was now satisfied with Respondent's handling of the estate. The attorney maintained that Mrs. Kuglan's statements had been based on either direct communications she has had with Respondent or her own desire to avoid disputes and getting involved. While Mrs. Kuglan had initially consented to travel from Florida to testify at the District Ethics Committee hearing, she later changed her mind. On July 10, 1981, Respondent was interviewed by DEPS. He claimed that Mrs. Kuglan was aware of and consented to the withdrawal of $100,000 in estate funds, loaned to Elwin Realty and himself. He also believed that he filed a federal estate tax return but did not have a copy of it. The federal Internal Revenue Service later informed DEPS there were no records of filings of federal estate tax returns or fiduciary tax returns. While Respondent later forwarded to DEPS the estate financial records, these records were inadequate to permit a meaningful review. The estate account as of December 31, 1980, had a balance of $761.11. Respondent failed to comply with requests from DEPS for more detailed information and records. From a review of the records Respondent did submit and other information provided by him, a DEPS auditor concluded that Respondent failed to file the required tax returns and did not preserve and account for the trust corpus, contrary to DR 1-102(A) and DR 6-101(A). On June 25, 1982, DEPS filed a complaint against Respondent charging violations of his fiduciary obligations; self-dealing, misappropriation and misuse of trust funds; gross negligence which damaged his client; and engaging in conflict of interest in his fiduciary capacity. Respondent filed an answer. After hearing testimony from Mrs. Kuglan's attorney, the Ethics Committee concluded that Respondent's conduct was unethical and unprofessional. Respondent did not attend that ethics hearing.