The court-appointed trustee seeking to recover money for bilked investors began taking aim at Andrew Madoff’s money even before his Sept. 3 death from mantle cell lymphoma. Two federal officials also said Madoff would have likely faced tax evasion charges if he had not died.

Have you ever heard of a clawback?

When investors are defrauded in financial schemes, courts will often appoint trustees. These trustees have the responsibility of going after people who profited from the schemes and returning money to the defrauded investors. In a Ponzi scheme, this often means that those investors who paid in first and who received payouts from the funds that later investors paid into the scheme have to return the money they received. This is what has happened in the case of Bernie Madoff’s Ponzi scheme. It’s called a clawback.

With Andrew Madoff’s death, however, there is a new twist. The trustee has long tried to recover money from Andrew with little success. Now that he has passed away, his estate will have to defend itself against the trustee’s attempts. The issue is not one that goes away upon death. Interestingly, The New York Daily News, in a recent article titled Bernie Madoff’s last surviving son was under scrutiny until he died – and questions still surround $16 million estate, reports that federal investigators were considering charging Andrew with tax evasion. This move would have pressured him to repay the money, even though investigators could not prove Andrew was involved in the scheme.

The Madoff situation is obviously unusual. One thing to keep in mind as it develops, however, is that any legal issues you might have at the time you pass away may continue. When that is the case, then your estate still has to deal with them. If you are someone who might be sued because of business dealings, you will want to consider this when choosing an executor or trustee.

Better yet, consult an experienced estate planning attorney to help guide you through these potentially dangerous waters.

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