Estate planning work can be satisfying and fulfilling. Helping clients sort out their financial affairs and disperse their estate according to their intent has rewards. At the same time, however, just as society has changed over the past decades, so too has estate planning. Lawyers should be aware of certain risks when taking on estate planning matters.
Family members or other beneficiaries might not be happy with the directives in a will or trust. Even though these disenfranchised beneficiaries were not the lawyer’s clients, they might still sue the attorney for malpractice.
Brian Anderson, claims attorney for Wisconsin Lawyers Mutual Insurance Co. (WILMIC), says, “Third-party claims are becoming more frequent in estate planning.” In fact, none of the estate planning claims Anderson has handled in the past few years have been asserted by the lawyer’s client. “This makes estate planning far more prone to malpractice claims than ever before. During the past five years, estate, trust and probate work is number one on our list of practice areas for claims frequency, beating out plaintiff personal injury work, which traditionally has been at the top of the list.”
“The so-called traditional family has changed. Divorced parents are often remarried, with new spouses, new sets of step-children, and other newly connected family members. At WILMIC, we have seen a five percent increase in the number of malpractice claims related to estate planning since 2007, and the amount of money the company has paid out in claims in this area has nearly doubled during that same time.”
Probate and estate planning attorney Bill Williams, with the Madison law firm Bell, Moore & Richter S.C., says more estate planning lawyers are becoming targets. One reason might be Auric v. Continental Casualty Co., 111 Wis. 2d 507 (1983), in which the Wisconsin Supreme Court carved out an exception to the general rule of attorney non-liability to third parties and allowed a will beneficiary to sue a lawyer for his negligence in drafting or supervising the execution of a will.
“I don’t know if more estate planners are litigating, but based on what I’ve seen and heard, more of them are becoming defendants. Plaintiffs are continually trying to push the limits of Auric and the scope of an estate planner’s liability to his or her client’s heirs.”
Anderson says that because of the potentially new family dynamics involved, from step-children to second and third spouses, lawyers should be especially cautious.
“More people may be anticipating a ‘piece of the pie,’ and even when the lawyer is careful, the chances of someone being unhappy with Dad’s or Mom’s wishes increase. The lawyer is often the target of their discontent after distributions have been made. Sometimes it’s adult children or step-children thinking they helped Mom or Dad over the years, and now it’s time for their reward. Whenever an unrelated beneficiary is named in a will, the lawyer who drafted the document should expect increased scrutiny.”
Williams adds, “Another factor is the sheer amount of money passing to the next generations, and what appears to be an expectation of inheritance. Claims I am familiar with suggest people consider it an estate planner’s obligation to always maximize the amount passing to a testator’s children. This is both legally inaccurate and disturbing.”
Should a good estate planning lawyer identify when he or she is dealing with a broken family, with some members who will never be happy and blame the lawyer in the end, regardless of the outcome?
“This can be difficult to know until after the fact, although some situations telegraph problems,” Williams says. “It’s your duty to put a plan in place that carries out your client’s wishes, regardless of whether his or her putative heirs will like it. It’s incumbent on us, however, as lawyers, to point out the effect such a plan can have on the family.”
Williams suggests a couple of things:
- “Discuss with the client whether tension can be diffused by the client letting his or her family know what’s coming. Conversely, consider whether using techniques that minimize heirs’ ability to upset the plan is necessary.”
- “Try to get the client to direct the distribution of assets that can cause disputes as clearly as possible. These aren’t always the big dollar items. I have literally seen a family splinter over who got mom’s bedroom set. If mom had directed who (or that no one) got this furniture, her family might have been mad at her, but it’s less likely her children would have fought over it to the point that they no longer speak to each other.”
Anderson recommends that lawyers explore not only the normal estate planning issues, but also go into more depth regarding family dynamics. He says this involves considerably more time being expended with the clients and much more individualized estate plans. “Family dynamics can certainly cause disputes. In many circumstances, the lawyer has been involved with multiple family members on different legal matters over the years. That provides another complicating factor and numerous conflict issues.”
Know Your Client
Make sure you clearly identify who your client is. Document everything in writing, and ask yourself if there are any potential competency issues.Anderson says, “When in doubt, ask yourself these questions: Who is my client? If someone is being disinherited, is everything documented in writing? Are there any competency issues that could arise if someone is not happy with my client’s decisions? Are you satisfied that your client truly acted under his or her own free will with regard to all of their estate planning decisions?”
Williams adds that identifying the client is something lawyers don’t always do with precision, and they sometimes pay for that lack of diligence. “Estate planning may be the area where precisely defining the client is most critical, and where the attorney has the greatest opportunity to manage his or her risk. One area fraught with potential risk is one of the most common in estate planning: representing both spouses. It’s a conflict and joint-representation situation, and not always appropriate, even when it makes economic sense.”
Whose Interests Are You Representing?
An additional question lawyers should ask is whether they are representing the client’s best interests or trying to maximize an inheritance for the client’s beneficiaries. Williams says, “This is a matter of client identification and being fully informed as to what the client wants. It is interesting how many people are not interested in doing every last thing to eliminate estate taxes, and how many are a lot less interested in divestment once you explain what’s involved and its possible effect on them. Another trend is the well-to-do person expressing concern that his or her heirs will inherit too much or too soon and its effect on their motivation and work ethic.”
“It certainly won’t hurt if an attorney is able to point to a letter written to his or her client showing that the client’s desired estate plan does not maximize the amount that will ultimately pass to the client’s children. While this is routine if there are estate tax issues, it strikes me as a good idea even if there are non-tax reasons why the plan does not result in maximizing the next generation’s haul.”
Scope of Retainer
Make sure you clearly identify the scope of your retainer. What was your client’s intent? What are you retained to do and not do?
A lawyer might draft a trust but fail to make sure the trust is funded properly. Sometimes, a lawyer substitutes his or her knowledge of the deceased’s intent for what is written in the documents. The lawyer thinks it is okay because he or she was “on the same page” with the client. But the document will speak for itself and controls the estate plan. A lawyer’s knowledge of what he or she believes the client wanted and what is actually in the document might not be the same.
Anderson cautions, “The adult kids may disagree on the terms of a trust and the lawyer becomes the target. This often happens when one child is favored with money or assets, or when a parent builds in a spendthrift provision to prevent that child from frittering away the estate. Lawyers are sometimes seen as assisting Mom or Dad in making these choices. That’s when a claim of undue influence may arise.”
Stay Consistent With Entire Plan
Are the estate planning recommendations you are making consistent with the entire estate plan? Sometimes, it’s easy for a lawyer and a client to get off track. Williams says, “It requires an investment of time to get fully informed about the client’s assets. Perhaps the biggest change I have seen in estate planning in 30 years is the growth of non-probate assets such as retirement plans and IRAs. These are now the tail that wags the dog in most estate plans. While we fixate on the terms of the will or revocable living trust, the bulk of the family’s wealth is in plans that will pass through beneficiary designations and likely directly to named beneficiaries. Many don’t realize how much they have in these plans or their growth potential, and a disturbing number are not sure of the beneficiary designations for these assets.”
Society continues to change, and so do families. As a result, estate planning work must evolve along with these societal changes. When doing this work, estate planning lawyers should be prepared to deal with fractured families, including sometimes unhappy, disenfranchised beneficiaries.
A person does not have to have been your client to bring a malpractice claim against you. Third-party claims are becoming more frequent in estate planning. Make sure you clearly identify who your client is. Put everything in writing and ask yourself if there are any potential competency issues involved with your client.
Spell out the scope of your retainer. Know the client’s intent. And don’t succumb to pressure from beneficiaries who want their money quickly. Haste makes waste!
Finally, and not less important: double check the estate planning documents. What happens if the will contradicts terms of a trust? What if the will or the trust is amended piecemeal without the lawyer reviewing the entire plan? This sometimes results in contradictory terms or at least some inconsistencies.
Anderson cautions, “Be sure you proofread. Make sure the documents all properly reflect the testator’s intent. If there is some question as to whether they do, or if inconsistencies turn up, you as the lawyer could be targeted.”
For more information on identifying the client in trust and estate matters, see “Identifying the Client: Trust and Estate Matters” at page 28.