Belt v. Oppenheimer, Blend, Harrison & Tate, Inc. ,
Other Estate Planning Matters
Executors sued Attorneys who prepared Testator’s will
asserting that Attorneys provided negligent advice and drafting services.
Executors believed that Testator’s estate incurred over $1.5 million in
unnecessary federal estate taxes because of the malpractice. Both the trial and
appellate courts agreed that Executors had no standing to pursue the claim
because of lack of privity.
Below are some of the key points made by the court:
· Barcelo remains good law. The court did not overturn Barcelo. The court explained that an attorney owes no duty to a non-client, such as a will beneficiary or an intended will beneficiary, even if the individual is damaged by the attorney’s malpractice. The court reiterated the policy considerations supporting Barcelo:
[T]he threat of suits by disappointed heirs after a client’s death could create conflicts during the estate-planning process and divide the attorney’s loyalty between the client and potential beneficiaries, generally compromising the quality of the attorney’s representation. * * * [S]uits brought by bickering beneficiaries would necessarily require extrinsic evidence to prove how a decedent intended to distribute the estate, creating a “host of difficulties.” * * * [B]arring a cause of action for estate-planning malpractice by beneficiaries would help ensure that estate planners “zealously represent[ed]” their clients.
· Policies are different regarding suits by personal representatives. The policy considerations discussed above do not apply to suits by personal representatives. The court explained that unlike cases “when disappointed heirs seek to dispute the size of their bequest or their omission from an estate plan,” these policy considerations do not apply “when an estate’s personal representative seeks to recover damages incurred by the estate itself.” The court also pointed out that “while the interests of the decedent and a potential beneficiary may conflict, a decedent’s interests should mirror those of his estate.” The court wrapped up its opinion by concluding that “[l]imiting estate-planning malpractice suits to those brought by either the client or the client’s personal representative strikes the appropriate balance between providing accountability for attorney negligence and protecting the sanctity of the attorney-client relationship.”
· Possible “recasting” is possible. The court recognized the problem which may arise because beneficiaries often are appointed as the estate’s personal representative. The court’s holding creates “an opportunity for some disappointed beneficiaries to recast a malpractice claim for their own ‘lost’ inheritance, which would be barred by Barcelo, as a claim brought on behalf of the estate.” The court minimized this possibility by stating that “[t]he temptation to bring such claims will likely be tempered, however, by the fact that a personal representative who mismanages the performance of his or her duties may be removed from the position.” The court also pointed out that any recovery goes to the estate, not the beneficiary, unless recovery flows through to the beneficiary under the terms of the will.
· The decedent’s personal representative has capacity and standing. The court explained that it is well-accepted law that a decedent’s personal representative has the capacity to bring a survival action on behalf of the decedent’s estate. The court then had to address an issue of first impression in Texas, that is, does a legal malpractice claim in the estate-planning context survive a deceased client. The court explained that the common law allowed causes of action for acts affecting property rights to survive and that estate-planning negligence that results in “the improper depletion of a client’s estate involves injury to the decedent’s property.” Thus, the court held that “legal malpractice claims alleging pure economic loss survive in favor of a deceased client’s estate.” Consequently, Executors had standing to bring the malpractice claim.
Malpractice claim accrues during the decedent’s lifetime.
The court explained that the alleged malpractice occurred during the testator’s
lifetime even though the alleged damage (increased estate tax liability) did not
occur until after the decedent’s death. Thus, the court disapproved a contrary
holding in the lower court case of
· Discovery rule applies running of statute of limitations. In a footnote, the court addressed the issue of when the statute of limitations begins to run. The court stated that
while an injury occurred during the decedent’s lifetime for purposes of determining survival, the statute of limitations for such a malpractice action does not begin to run until the claimant “discovers or should have discovered through the exercise of reasonable care and diligence the facts establishing the elements of [the] cause of action.” * * * In this case, the “claimant” may be either the decedent or the personal representative of the decedent’s estate.
Moral: Estate planners are now subject to potential malpractice actions brought by the personal representative of their client’s estate.