This recently published story, Elderly Man’s Malpractice Suit Over Estate Advice Dismissed, underscores the “damned if you do, damned if you don’t” risk inherent to the estate planning field and why even the slightest whiff of a client’s diminished mental capacity has to be treated very, very seriously.
On the one hand, you can get sued for allegedly luring your very wealthy, but also very elderly, client into too much estate planning, i.e., transactions that may save millions in estate taxes, but are too complex for the client to understand and thus not something the client would have agreed to if his or her lawyer had adequately explained all the various permutations of the proposed planning strategy. That’s essentially what happened in the case discussed in the linked-to article, as excerpted below:
A Manhattan appellate court has dismissed a legal malpractice suit on behalf of an elderly man who claimed his lawyers misled him into signing away control of his estate, but a dissenting judge said the majority’s decision “risks undermining the confidence of the public in the profession.”
Jack E. Maurer, who died last year at age 86, sued the firm formerly known as Goodkind Labaton Rudoff & Sucharow in 2003 for allegedly failing to explain to him the import of estate planning documents he signed. He also claimed the firm was conflicted because it represented his wife Rona, who he named as a co-defendant in the suit.
According to Mr. Maurer’s lawyer, Lawrence H. Silverman, the documents at issue gave Ms. Maurer control over a trust containing her husband’s major assets, a $12 million Central Park West apartment and a $3 million house in Quogue, N.Y., and placed restrictions on Mr. Maurer’s access to other retirement funds.
But a four-judge majority of the Appellate Division, 1st Department, ruled Tuesday that, despite Mr. Maurer’s “apparent failure to make any effort at all to read the documents,” he was bound by the “clear and unambiguous” documents he signed.
On the other hand, you can also get sued by upset heirs if they think you didn’t do enough to save taxes — even if mom and dad explicitly told lawyer “to keep it simple.” That’s essentially what I think happened in a case involving one of Florida’s most well respected law firms, which I previously wrote about in Gannett Newspaper Fortune: Probate Administration Malpractice Update #2.
Estate planning can be very complex, involving esoteric tax concepts, lengthy trust instruments, complex financial and insurance arrangements, etc. Estate planning can also involve very elderly clients. Combine these two elements and you end up with the type of “perfect storm” ethics conundrum that is loads of fun in law school, but extremely challenging to navigate in real life. Florida Bar Ethics Rule 4-1.14 (Client Under a Disability) offers little real concrete guidance, and as far as I can tell their isn’t much on-point case law out there either. See The Florida Bar v. Betts, 530 So.2d 928, 13 Fla. L. Weekly 579 (Fla. Sep 22, 1988); Vignes v. Weiskopf, 42 So.2d 84 (Fla. Jul 19, 1949).
I think the best anyone can do is to be on the look out for warning signs of incapacity and incorporate appropriate safety measures into your client communications and procedures. For those of you who like to address these issues in your engagement agreements as well, ACTEC provides this sample clause:
If concerns develop regarding your capacity, [OPTIONAL: and our representation of you has not been terminated either by you or pursuant to your engagement letter with us,] we will continue to represent you and to protect your interests to the extent consistent with our standards of practice and our ethical responsibilities. To the extent we can continue to act on your behalf, we will only take actions that we reasonably believe to be in your best interests and consistent with your previously expressed wishes. Unless you direct us otherwise in writing, by signing this engagement letter, you will be authorizing us in such representation: (1) to communicate with your family, your physicians, and your other advisors and to disclose to them such pertinent, but limited, confidential information as we may determine to be reasonably appropriate under the circumstances; and (2) to represent any person you have chosen to be your legal representative in the event your mental capacity diminishes and a legal representative is needed. However, if legal action is taken to obtain a guardian or conservator for you, we will continue to represent your interests until such time as the guardian or conservator is appointed. If the person appointed is a person you have designated to be your guardian or conservator, by signing this engagement letter you will be authorizing us to represent the guardian or conservator. Please note that we may not be able to represent the person you have chosen for a variety of reasons, including conflicts of interest. Moreover, the person you have chosen to be your guardian or conservator is free to choose counsel of his or her choice. Accordingly, your authorization to act does not bind us to act for the person you choose, nor does it bind that person to use our services.