Legacy or Liability? 10 Common Pitfalls for Will, Trust, and Estate Lawyers
It is estimated that the Baby Boomer generation will transfer more than $120 trillion to succeeding generations.[1] This so-called “Great Wealth Transfer” will reverberate in the will, trust, and estate area of practice (“w/t/e AOP”) for years to come. Liability exposure risks for w/t/e lawyers accompany this staggering amount of money.
When an estate contains significant assets, stakes are raised and emotions among beneficiaries, actual or purported, can become volatile. Add in the complexity and evolving nature of the w/t/e AOP and lengthy time horizons, where statutes of limitation can be tolled for decades, an environment exists where malpractice claims arise frequently[2] and can be difficult to defend.
1. Frustrating the Client’s Intent
Lack of privity between a lawyer and the intended beneficiaries of an estate plan is no longer a bar to a professional liability claim in most jurisdictions. Lawyers must carefully listen to and adhere to the client’s wishes, knowing that any error on the lawyer’s part that causes the client’s intent to be frustrated may result in a lawsuit brought by such beneficiaries against the attorney. As one court opined:
[W]hen an attorney undertakes to fulfill the testamentary instructions of his client, he realistically and in fact assumes a relationship not only with the client but also with the client’s intended beneficiaries. The attorney’s actions and omissions will affect the success of the client’s testamentary scheme; and thus, the possibility of thwarting the testator’s wishes immediately becomes foreseeable. Equally foreseeable is the possibility of injury to an intended beneficiary.[3]
2. Missed Deadlines
Lawyers failing to comply with deadlines may result in legal malpractice exposure. For example, a lawyer acting as executor of an estate and performing legal services in that role who neglects to submit an inventory of the estate’s assets within the statutory or court-ordered deadline could cause financial harm to the estate due to delays in distribution or adverse tax consequences. Per the American Bar Association’s Profile of Legal Malpractice Claims, 2020-2023.
(“ABA Profile”), administrative errors, such as failing to react to a calendar or deadline, comprised more than one-third of the errors that led to claims reported in the ABA Profile.[4] Law firms should ensure that they have reliable dual calendaring systems in place and train their lawyers and support staff on how to use such systems.
3. Conflict of Interest
Conflicts arise more readily in the w/t/e AOP than most other areas of practice (“AOPs”) due to the usual involvement of multiple parties with competing interests. In an Illinois case, a law firm represented the wife [4] American Bar Association, Profile of Legal Malpractice Claims: 2020-23, pp. 20-22.
in her role as administrator of her husband’s estate.[5] The wife and the decedent’s son from a prior marriage were the sole beneficiaries of the estate. The son moved to have the wife removed as administrator due to alleged mismanagement of the estate, and the wife agreed to resign as administrator. When the law firm continued to represent the wife in her capacity as an heir, the son and the successor administrator sued the wife’s law firm for legal malpractice, contending that the law firm advanced the wife’s interest in the estate’s assets over that of the estate itself. The appellate court ruled in favor of the son and the successor trustee in reversing and remanding the lower court’s grant of a summary judgment for the law firm, opining that:
[I]t seem [sic] axiomatic to this court that when an attorney is retained by an administrator for the purpose of administering the estate, its client is in actuality the administrator and the estate due to the symbiotic nature of their concurrent existence. The administrator only acts to serve the estate, and the estate cannot act but through the name of the administrator. Thus, we find the attorney-client relationship between an attorney and an estate to be inherent when the attorney is retained to assist in the administration of the estate.[6]
Law firms must employ conflict of interest checking systems and use them for all new clients and new matters.
4. Poor Communication and Verification with Clients
Consider an estate planning attorney who, at the client’s request, drafts a will to transfer his interest in a brokerage account to his three children in equal shares. Unfortunately, the lawyer failed to instruct his client to change the name of the designated beneficiary so that the brokerage account’s funds would pass through to the client’s estate and neglected to follow up with the client to confirm that such a change had occurred. Once the client died, all the funds in the brokerage account went to a former spouse, the designated beneficiary on the brokerage account, instead of his three children. The lawyer could face claim liability for failing to take reasonable steps to ensure that the brokerage account’s designated beneficiary had been updated in alignment with his client’s wishes.
Do not assume that clients will automatically follow through on instructions from their lawyers. Lawyers need to document important instructions to clients as well as attempts to verify that the client complied with
such directives.
5. Dabbling/Inexperience Can Lead to Claims
The w/t/e AOP can be highly complex and involve assets worth millions of dollars, which often exceed the limits of liability in a law firm’s lawyers professional liability policy. Lawyers lacking experience in this area of practice should not accept a matter unless they are willing to devote the necessary time and effort to provide competent representation to the client. Co-counseling or consulting with a mentor experienced in this area of practice may mitigate risk exposures to lawyers new to the w/t/e AOP.
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