Practical Lessons for Probate Attorneys
Wendy J. Keenan, Wilson Elser, New York
Disputes over wills, trusts and the disposition of estates are common and the frequency of litigation against attorneys who practice in the field is on the rise. It is, of course, best to avoid such disputes altogether, as they are usually hotly contested, resulting in significant costs, including the retention of experts. The following scenarios convey some lessons that can be learned from attorneys who found themselves to be the subject of a dispute. They are based on real situations and come with some useful and informative takeaways.
For more than 25 years, Attorney D represented several members of the Claimants’ family in various legal matters, including trust and estate matters. In or around late 2006, Attorney D represented the Claimants in connection with their pursuit of claims against their sister, as trustee and/or purported trustee of two family trusts. Attorney D provided a draft complaint and invited pre-litigation discussions with respect to such representation. Those discussions were unsuccessful and the Claimants ultimately filed a complaint that was later amended to include a litany of allegations, including claims that Attorney D: took action that suppressed the will of their father who had passed away in 1999; engaged in self-dealing with respect to Irrevocable Trust No. 1 prepared for the Claimants’ parents in 1984; failed to protect the assets of Irrevocable Trust No. 2, also prepared for the Claimants’ parents in 1984; engaged in self-dealing with respect to the assets held in their mother’s trust; and committed malpractice in advising the Claimants to settle their claims with their sister and obtaining a release for himself (i.e., Attorney D) and a general partnership in which Attorney D owned an interest. The Claimants sought in excess of $13 million from Attorney D.
Attorney D’s liability was questionable in some respects and unfavorable in others. The claims relating to the alleged suppression of the will and those allegations relating to the assets of the mother’s trust were completely without merit. The more problematic claims against Attorney D related to the allegations involving Trust No. 1, Trust No. 2, and the alleged malpractice relating to the settlement between the Claimants and their sister. As to Trust No. 1, it was alleged that Attorney D as one of Trust No. 1’s trustees, signed a quitclaim deed transferring title to 10 parcels of a property held by the trust to the Claimants’ sister. Attorney D did not recall signing the deed, but advised that if he did, the sister had held herself out to be one of the trustees and, therefore, she was entitled to take such action. In addition to not recalling whether he signed the deed, Attorney D took the position that he would not have reviewed the trust documents, in which case he likely breached a standard of care by failing to review the trust or to obtain any independent confirmation that the sister was the trustee for Trust No. 1 before transferring the assets to her.
The sister used a 1031 exchange for the parcels and subsequently acquired two medical buildings in San Diego and San Francisco, California. Attorney D paid for a 15 percent interest in the San Francisco building, but held a 30 percent interest in the profits. The Claimants alleged that the additional 15 percent interest held by Attorney D properly belonged to Trust No. 1. It was also alleged that Attorney D, while acting as their attorney, asked the Claimants to sign an agreement preserving and protecting his extra-profit interest. As Attorney D was the Claimants’ attorney at the time, this agreement violated applicable state law.
The issues with Trust No. 2 and the settlement with the sister were intertwined. The Claimants alleged that although Attorney D knew that Trust No. 2’s assets should have been distributed to the beneficiaries, being the Claimants and the sister, Attorney D helped the sister sell trust assets rather than distribute them. In connection with the sale of one of the assets for $15 million, Attorney D charged $5,000 to prepare a simple contract and failed to confirm that the sister was, in fact, a trustee for Trust No. 2. He also received $5,000 from the sister to prepare the sales contract. The Claimants would have been able to demonstrate that Attorney D breached a standard of care by failing to confirm that the sister was entitled to sell the 10 parcels of a property held by the trust. Additionally, after the sale, the proceeds were embezzled by a 1031 exchange accommodator. The Claimants alleged that Attorney D advised them to settle their claims with the sister relating to the sale of the asset and her other actions relating to the trusts for $1.5 million. This settlement also included a release of Attorney D.
An attorney-client relationship existed between Attorney D and the Claimants relating to this settlement, as under applicable state law an attorney-client relationship arises based on the conduct of the parties, regardless of whether any formal arrangement exists. Here, Attorney D provided legal advice to the Claimants regarding the proposed settlement and specifically recommended settlement over pursuing the sister through litigation. Attorney D made changes to the settlement agreement on the Claimants’ behalf, who also paid Attorney D for his services in connection with the settlement. Notwithstanding Attorney D’s adamant denial that none of his actions were improper, given the totality of the evidence in the context of applicable state law, Attorney D likely would have been deemed the Claimants’ attorney for purposes of the settlement with the sister, and therefore a substantial settlement was ultimately reached.
In this scenario, because Attorney D was the family attorney for more than 25 years, he should have sought a waiver from all family members after recommending that they consult their own counsel and before agreeing to represent the Claimants in pursuing their sister. In the event the family members were amenable to waiving any conflicts or purported conflicts, Attorney D should have prepared a written agreement confirming the scope of his representation of the Claimants. Finally, Attorney D should never have negotiated a separate release for himself in connection with any of these transactions without advising his clients to consult with separate counsel.
Attorney A was sued individually and as Trustee for his aunt’s trust by his cousin in connection with the distribution of his aunt’s estate, worth in excess of $5 million. Attorney A’s cousin alleged that Attorney A manipulated his aunt into changing her estate plan on her deathbed to provide Attorney A and his children with a larger distribution of the estate than that which was provided to the cousin, as desired by his mother. Another attorney prepared the original trust, pursuant to which Attorney A was to receive a limited sum and his cousin was to receive the balance of the estate.
At a later date, while the aunt was under hospice care, Attorney A claimed that the caretaker for his aunt called him to change the will to add the caretaker and her son as beneficiaries. Attorney A prepared a handwritten codicil, which devised a modest sum to the aunt’s caretaker and her son. The codicil was witnessed by Attorney A only and was not notarized. Attorney A thereafter prepared another handwritten codicil, which he witnessed, as did the caretaker and her son, and which provided a limited inheritance to the cousin, the caretaker and the caretaker’s son, and bequeathed the remainder of the aunt’s estate to Attorney A, as sole residuary beneficiary. Attorney A contacted the aunt’s attorney and advised him of the changes to be made to the Trust and provided him with the handwritten codicils. The aunt’s attorney made the revisions and brought a copy to the hospice for execution by the aunt, who passed away only hours later. The cousin sought rescission of trust due to the alleged improper execution of the amendment, lack of capacity and undue influence. The cousin also alleged that the revised amended trust was void as being a gift to a lawyer or family. The cousin argued that Attorney A solicited and orchestrated the preparation and execution of the Trust in order to benefit himself and his children at her expense.
Attorney A refuted the assertions that his conduct was actionable and denied being in an attorney-client relationship with his aunt. He believed that his cousin’s claims were without merit. Attorney A’s position, however, was not at all sustainable. By preparing the handwritten codicils, it was undisputable that he had created an improper attorney-client relationship with his aunt. In addition, the first codicil was not notarized or witnessed, in contravention of the rules of execution of such documents. While the second codicil may have been notarized, the witnesses were improper as they were all beneficiaries of the trust. Attorney A should have advised his aunt as to the clear and un-waivable conflict of interest and instructed her to retain an alternate attorney to prepare the codicils to the will and to the Trust. Attorney A had been practicing for more than 20 years, and thus it was simply not believable that he did not understand the implications of his behavior, and the insurer settled this matter with the cousin on his behalf.
Attorney B was retained by the Claimant to draft a Revocable Trust, a Power of Attorney and an Advanced Health Care Directive. The Claimant then asked Attorney B to create an Irrevocable Trust and to serve as the Trustee. In connection therewith, Attorney B obtained a Certificate of Independent Review from another attorney who met with the Claimant to attempt to confirm that she fully understood her intended testamentary actions and to confirm that there was no evidence of any undue influence or fraud. After the Certificate of Independent Review was signed, the election of irrevocability was signed and a new, smaller trust was established with Attorney B as Trustee.
The Claimant’s stepdaughter thereafter raised concerns that she was cut out of the Irrevocable Trust. Since Attorney B prepared the documents, she recognized a potential conflict of interest. Attorney B immediately suggested to the Claimant that she retain alternate counsel, and specifically directed her to the counsel who had been representing the Claimant in conservatorship and trust challenge actions filed by the Claimant’s disinherited stepdaughter. Following Attorney B’s withdrawal from representing the Claimant, she received a request to enter into a tolling agreement by the Claimant’s new counsel in order to preserve the statute of limitations if a suit were commenced against the new counsel in connection with any services provided by Attorney B. After contacting her insurer and notwithstanding her adamant contention that all of her services and advice were proper and within the standard of care, Attorney B agreed to enter into a tolling agreement in order to avoid the unnecessary commencement of costly litigation.
Pursuant to relevant state law, Attorney B had an independent attorney meet with the Claimant to confirm that she was of sound mind, that there was no evidence of fraud or undue influence on the part of Attorney B, and that the Claimant understood her actions. While Attorney B was required to take such action under the laws of her state, it is good practice to obtain such an assessment even if no requirement exists under the laws of the state in which you practice. Having a Certificate of Independent Review to combat any claim that may ultimately be made against Attorney B should make it more difficult for a viable claim to be asserted. To further insulate herself from liability, Attorney B also could have considered obtaining an independent assessment from the Claimant’s doctor confirming her mental capacity and ability to understand the consequences of her testamentary actions.
In addition, while no demands had been made on Attorney B, other than to enter into a tolling agreement, she immediately placed her insurer on notice of this matter and did not take any action without the insurer’s consent. While agreeing to enter into a tolling agreement may seem innocuous, if such a request is made and agreed to during the pendency of one policy and a claim is ultimately made during the subsequent policy, an insurer will undoubtedly take the position that its insured was aware of a situation or circumstance that could give rise to a claim prior to the policy inception and deny coverage or seek to rescind the policy on this basis. By taking this prudent action, Attorney B had effectively prevented any such assertion by her insurer.
Attorney C was retained to represent the executrix in the administration of her father’s estate. The father had five children, each entitled to a 1/5 share of the estate. One of the children declared Chapter 7 Bankruptcy and the Claimant was appointed Chapter 7 Trustee. As Trustee, the Claimant alleges that he reached out to Attorney C to advise him that any distributions from the estate should be paid to the Trustee as property of the bankrupt estate rather than the debtor directly. The debtor received three partial distributions from the estate, the third of which was sent to the Trustee as a result of his prior notification of the bankruptcy proceeding. The Trustee alleges that, thereafter, he occasionally checked with Attorney C to determine the status of any estate distributions. A few years later, a final accounting was provided to family members, and the debtor executed a release in order to receive her final distribution. The debtor did not inform Attorney C that her bankruptcy was still ongoing. The Trustee thereafter commenced a turnover action against Attorney C, the executrix, and the debtor, alleging that Attorney C and his client were aware of the bankruptcy but nonetheless improperly allowed payments to be made directly to the debtor, instead of to the Trustee.
Attorney C initially maintained that he did not receive notice of the bankruptcy filing. However, after further extensive investigation and discussion with the members of his law firm, he discovered that the notice was, in fact, provided to his assistant, who unfortunately failed to provide it to Attorney C. Further compounding this error, the assistant later misfiled the document. Upon this discovery, Attorney C immediately notified his counsel and his insurer of this change in position.
While this situation could have been avoided had the notice of bankruptcy been given to Attorney C or if it had been properly filed, mistakes happen and sometimes a claim is the unfortunate result. In this case, rather than continue to maintain an untenable position, Attorney C owned up to the mistake and promptly advised his counsel and insurer as to the unfortunate realization that he had actually been placed on notice of the bankruptcy. A prompt settlement with the Trustee was then reached by the insurer, thereby avoiding further unnecessary litigation fees and costs.
The foregoing scenarios are examples of conduct that could result in you becoming the subject of a claim or a party to litigation. By implementing these recommendations, you may be able to avoid such situations. Unfortunately, no matter how well you represent your clients, a claim and/or litigation may be inevitable, especially due to the emotional nature of this area of practice. Should you find yourself in such a situation, you would do well to immediately report the matter to your insurer to avoid compounding a difficult situation.
Wendy Keenan focuses her practice on complex professional liability coverage matters as claims and monitoring counsel for international and domestic insurance carrier clients. Her practice includes the representation of insurers in all aspects of coverage disputes. Wendy approaches client assignments from the dual perspective of a lawyer and a businessperson to determine the most legally savvy and cost-effective means to resolve a particular claim.
In her coverage practice, Wendy has handled claims under policies for attorneys, architects and engineers, real estate agents, mortgage brokers, and insurance agents and brokers, as well as nonprofit organizations, unions, translators and interpreters, telephone marketing services, and other miscellaneous professions.
Wendy also has a strong background handling all aspects of ERISA defense litigation and most recently has been retained to defend a number of premises liability cases.
She may be reached at: firstname.lastname@example.org