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Archive for February, 2011

The New York Court of Appeals in Schneider v. Finmann, 15 NY3d 306 (June 17, 2010) has at best relaxed and at worst uprooted the long standing precedent that an estate planning attorney could not be sued for legal malpractice after the death of the client by the personal representative, beneficiaries or any other person.  This precedent has long been based on the principle that there was no privity between a decedent’s Estate and the estate planning attorney, such privity only existed between the decedent and the attorney.  Based on this precedent, a personal representative has not had standing to bring a malpractice suit against an allegedly negligent estate planning attorney.  The Court’s ruling opens the door to possible negligence actions against estate planning attorneys and highlights the need for attorneys to exercise great care if practicing in this area.

In Schneider, the personal representative for the estate asserted a claim against the estate planning attorney for negligently advising the decedent regarding the transfer of a life insurance policy, or in the alternative, not advising him at all.  The decedent had transferred a life insurance policy several times during life and had failed to name a beneficiary upon the last transfer before his death, thus the death benefit came into the estate and was included in his taxable estate.  The personal representative filed suit for the alleged negligent legal advice.  The lower court dismissed and the Appellate Division affirmed the trial court’s decision.

The Court of Appeals however, being careful not to comment on the merits of the claim itself, held that “privity, or a relationship sufficiently approaching privity, exists between the personal representative of an estate and the es  tate planning attorney.”  In doing so, the Court has created a level of privity that has never existed before in New York State.  The Court was careful to point out however that no such privity exists between beneficiaries of an estate or third parties and the estate planning attorney. 

The Court of Appeals relied heavily on a Texas Supreme Court opinion, Belt v. Oppenheimer, 192 S.W.3d 780 (Texas 2006), wherein the Texas Court reasoned that given that the negligent legal advice would have occurred during the decedent’s lifetime, the fact that the damages did not occur until after death should not bar suit.  The Court ruled that in effect, the decedent’s Estate stands in the shoes of the decedent after death and the suit that could have been brought during the decedent’s lifetime survives his death. 

While it is too soon to know the practical affect that Schneider will have in New York, it is clear that the estate planning practitioner needs to exercise great care when working with a client.  It also remains to be seen what affect this decision and the decisions that come down following its precedent will have on malpractice insurance policies and rates as it pertains to estate planning.  This decision is also sure to cause the casual estate planning practitioner pause as the days of “dabbling” in estate planning or writing a will here and there are fading away.  The casual estate planner will take a hard look at their practice in light of this new privity which creates one more avenue for bringing a malpractice claim.

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