Tuesday, December 28, 2004
Recent cases from Michigan and Texas illustrate two very different approaches on the issue of the malpractice liability of attorneys whose negligence in drafting estate plans for their clients results in additional estate tax liability:
- Sorkowitz v. Lakritz, Wissbrun & Associates, P.C., 261 Mich. App. 642, 683 N.W.2d 210 (2004): The beneficiaries of an estate brought a malpractice action against the lawyers who drafted the decedent's estate plan for failing to include Crummey and GST clauses. The lower court dismissed the complaint on procedural grounds, concluding that Michigan law required malpractice plaintiffs to prove, on the "four corners" of the documents themselves and not via extrinsic evidence, that "a decedent's intent has been frustrated by an attorney's negligent drafting of estate planning documents." The court of appeals reversed and rejected the application of the "four corners" doctrine on these facts:
In this day and age, clients go to estate planning experts not only to have valid testamentary documents prepared, but also to have an estate plan that will minimize the taxes payable recommended, and thus have the maximum amount transferred to the donor's intended beneficiaries at the intended times and intervals. We would be ignoring reality to dismiss legal malpractice cases such as this one on the basis of the fiction that one cannot know the decedent's intent unless it is apparent within the four corners of the estate planning documents, and without regard to common sense and expert opinion on estate planning matters. We should not ignore as judges what we know as lawyers and as men and women. It is far more likely that the decedents here intended to minimize the taxes payable upon their deaths than that they were indifferent to the amount of taxes payable, and it is virtually certain that they did not intend to pay more taxes than necessary.
It is asserted ... that the decedents engaged defendants for estate planning, which clearly encompasses tax advice, and defendants either negligently failed to advise of, or negligently failed to include, provisions that would have prevented the tax deficiencies. Such claims will rarely be apparent on the face of the estate planning documents, without resort to extrinsic evidence. There is no reason to exempt estate planning lawyers from liability for malpractice simply because the damages often accrue after their client's death. If safeguards are necessary because of the nature of this specialty, such safeguards can be developed. But applying the Mieras "four corners" limitation to such claims is not required by precedent, goes too far in the direction of protecting the attorney, and is against the best interests of the clients and, ultimately, the profession.
The "four corners" rule is applicable in a dispute between potential beneficiaries concerning the intended distribution of the pot of assets or pie left by the decedent. It is not applicable to a claim such as this one, that seeks recovery for diminution in the pot or pie left by the decedents alleged to have been caused by the negligence of the defendants who provided estate planning. Here the interests of the deceased clients, the estate, and all the beneficiaries are aligned on the same side, and there is no danger that defendant attorneys will be wrongly held accountable to a third-party for properly implementing the desires of their client.
- Belt v. Oppenheimer, Blend, Harrison & Tate, Inc., 141 S.W.3d 706 (Tex. Ct. App. 2004): The executors and children of the decedent brought a malpractice action against the lawyers who drafted the decedent's estate plan, alleging that the estate incurred more than $1.5 million in additional federal estate tax because of the lawyers' negligence. The lower court granted summary judgment to the attorneys on the ground that they did not owe any legal duty to the beneficiaries because of a lack of privity under Barcelo v. Elliott, 923 S.W.2d 575 (Tex. 1996), and the court of appeals affirmed:
We recognize that the [plaintiffs] have . . . raised several policy arguments in support of their position; however, such arguments have been adversely answered by the supreme court in Barcelo. It is a tenet of our judicial system that we, as an intermediate appellate court, are bound by pronouncements of the supreme court, even though we may entertain a contrary opinion. [W]e are confined to follow the dictates of Barcelo in this instance. . .
For further discussion of these cases, see the Winter 2004 ACTEC Journal (Vol. 30, No. 3).