Archive for the ‘Recent Decisions’ Category

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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ATTORNEY’S FEES – Burden on Attorney to prove reasonableness of fees other than simply tying fees to executor’s commission

Attorney submitted to Surrogate Court of Monroe County accounting showing attorney’s fees of $18,750.00 for legal services.  The Court reiterated that the question of attorney’s fees in estates is one of reasonableness, and the burden is on the attorney to prove that the fees sought are reasonable.  In this case, the Court found that the attorney had submitted no proof of reasonableness for his fees other than to state that their calculation was equivalent to one executor’s commission.  The attorney had offered no proof of hours worked and in fact kept no time records whatsoever. 

The Court noted that while time spent is “one of the least emphasized factors in setting attorney’s fees” in this area, the keeping of records does serve as one form of proof of work performed and results achieved.  The Court went on to hold that while an “executor’s commission is a rough guideline for the reasonableness of fees, it is not exclusively determinative of reasonableness'”.  The Court then awarded him fees in quantum meruit of $8,000.00 based upon 40 hours at $200.00 an hour.  In re Duffy, 885 N.Y.S.2d 401 (Surr. Monroe Co. 2009).

PRECATORY REQUEST – Letter to Executor not binding contract or sound basis for constructive trust 

Decedent’s will left his entire estate to his surviving spouse and decedent left her a letter expressing his “wish” that upon her death or remarriage, certain commercial properties would be conveyed to their three children.  The letter was signed by both the decedent and surviving spouse.  Surviving spouse later wrote a new will completely disinheriting one of their  children.  Surviving spouse and two of the children brought a proceeding to declare the decedent’s letter unenforceable.  The Appellate Division, Third Department agreed, declared the letter a precatory request and dismissed the disinherited child’s request that a constructive trust be established.   The Third Department held that the language of the letter did not create a clear and unambiguous promise by the surviving spouse and did not meet the requirements of EPTL 13-2.1 for establishing a contract to make a testamentary provision.  Aaron v. Aaron, 64 A.D.3d 1103 (3rd Dept. 2009).

This case highlights the need for careful drafting of estate planning documents and for practicioners to ensure that language in any will or other testamentary device is crafted in accordance with the statutes and applicable caselaw to ensure that the client’s last wishes come to fruition.   It also highlights the need for clients to contact their attorneys before self-crafting any sort of estate planning document.

UNDUE INFLUENCE – Error in Jury Charge Regarding Confidential Relationship

The Appellate Division, Fourth Department reversed a Surrogate Court decision out of Oneida County where the Surrogate instructed the jury that the respondent had a confidential relationship with the decedent as a matter of law.  The Fourth Department stated that  when the issue of undue influence based on a confidential relationship is raised, “the initial burden is on the objectant” to make the threshold showing that a confidential relationship existed.  If that relationship is established, the burden then shifts to the beneficiary of the transaction to show that the transaction was fair and free from undue influence.  In this case, the Fourth Department found that there was conflicting evidence as to the existence of a confidential relationship and therefore it was error to instruct the jury to find that relationship as a matter of law.   Prievo v. Urbaniak, 64 A.D.3d 1240 (4th Dept. 2009).

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