By Joshua R. Furman. 
Joshua R. Furman is a sole practitioner focused on attorney-client disputes and a Certified Specialist in Legal Malpractice Law.  Mr. Furman serves on the LACBA Professional Responsibility and Ethics Committee, as well as the Future of Lawyering Taskforce and section committees.

Articles are provided regularly by LACBA’s longstanding Professional Responsibility and Ethics Committee.

Wealth management is in a period of unprecedented growth in California and throughout the country.  As part of any prudent wealth management strategy, individuals and families turn to estate planning attorneys to provide advice on intergenerational transfers of wealth and legacy planning.  But many common practices and errors by California trusts and estates attorneys can lead to significant malpractice liability.  This update outlines some common issues that arise in estate planning and probate malpractice cases.

Failure to Anticipate Liability to Beneficiaries

The client that shows up in the estate planning attorney’s office is typically the one that wants to create the will or trust to provide for their heirs.  That client is the attorney’s only client and the attorney owes that client an undivided duty of loyalty.  (Chang v. Lederman (2009) 172 Cal.App.4th 67, 80.)  However, an estate planning attorney may owe a duty of care to the heirs that would support an heir’s claim for legal malpractice.

The California Supreme Court created the Biankanja/Lucas factors to determine whether an attorney can be liable to beneficiaries of the attorney’s client.  The first six factors are (1) the extent to which the transaction was intended to affect the plaintiff beneficiary; (2) the foreseeability of harm to the plaintiff; (3) the degree of certainty that the plaintiff suffered injury; (4) the closeness of the connection between the defendant attorney’s conduct and the injury suffered; (5) the moral blame attached to the defendant’s conduct; and (6) the policy of preventing future harm.  (Biakanja v. Irving (1958) 49 Cal.2d 647, 650.)  The seventh factor is considered specifically in legal malpractice cases: “whether the recognition of liability to beneficiaries of wills negligently drawn by attorneys would impose an undue burden on the profession.”  (Lucas v. Hamm (1961) 56 Cal.2d 583, 589.)  While these factors are identified as non-exclusive in the cases, subsequent case law has only analyzed these seven factors.

Some examples where courts have found the requisite intention of the decedent and allowed a claim against the attorney by beneficiaries include:

Where the attorney testifies at deposition, in connection with a petition to modify, that the contested language is a “scrivener’s error” in the estate planning documents.  (Paul v. Patton (2015) 235 Cal.App.4th 1088.)

Where the attorney drafts the will providing for the beneficiary as intended, but fails to advise the testator or beneficiary about or how to avoid statutory presumptions of disqualification (or presumably, presumptions of undue influence under the current statutory scheme).  (Osornio v. Weingarten (2004) 124 Cal.App.4th 304.)

Where the attorney advised the testator that designating property as “separate” or “community” in his will was adequate to establish the character of the property, without observing additional formalities.  (Garcia v. Borelli (1982) 129 Cal.App.3d 24 [in this case the drafting attorney also represented the decedent’s wife during administration of the estate].)

Where the attorney does not advise the settlors of an inter vivos trust about the tax consequences for the beneficiaries of including a general power of appointment in the trust.  (Bucquet v. Livingston (1976) 57 Cal.App.3d 914.)

Where the attorney fails to advise the testator on the consequences of a post-testamentary marriage.  (Heyer v. Flaig (1969) 70 Cal.2d 223.)

Failure to Advise on Conflicts and Confidentiality Issues When Representing Trustees

Estate planning attorneys that represent trustees in administration proceedings are increasingly faced with ethical complications that arise from breach of trust petitions.  Attorneys representing administering trustees must be careful—and advise their clients—concerning (1) the conflict of interest between representing a trustee in their capacity as trustee and representing a trustee subject to an unresolved breach of trust claim or other individual claim; and (2) the potential that a successor trustee will have access to privileged attorney-client communications.

Trustees (and attorneys) often presume that the attorney they hire is their personal attorney, but an attorney hired by the trustee in their capacity as trustee is an attorney for the office of the trustee, not the trustee individually.  That means that the attorney cannot represent the trustee accused of breach of trust or other individual claims without erecting an information wall between the two representations and billing separately for that representation—and ideally would refer the client to another firm for non-trustee representation.  The trust cannot be the source of funds for the attorney’s fees in that representation.  (Whittlesey v. Aiello (2002) 104 Cal.App.4th 1221, 1231 [holding that where a party is both a beneficiary and Trustee in a dispute involving a trust contest, “counsel must seek compensation from the parties who stand to gain from the litigation, not the trust”].)

The separation of information between the two matters—both as to privileged communications and privileged billing matter—is doubly important because a successor trustee becomes the holder of the attorney-client privilege upon assuming the office of trustee and has the right to both privileged communications with the attorney and to all billing records.  (Moeller v. Superior Court (1997) 16 Cal.4th 1124, 1131 [“[W]hen a successor trustee takes office it assumes all of the powers of trustee, including the power to assert the privilege with respect to confidential communications between a predecessor trustee and an attorney on matters of trust administration.”].)  This can result in liability for the predecessor trustee who was perhaps improperly advised about paying fees out of the trust, and, in turn, liability for the attorney who so advised. 

The prudent course is to be conservative in the risk that the attorney’s files and billing will be subject to disclosure to successor trustees and, at a minimum, advise the client trustee about the risks of disclosure, the wisdom of retaining separate counsel, and to not pay fees out of the assets of the trust.  (Moeller, 16 Cal.4th at pp. 1134–1135 [“If a predecessor trustee seeks legal advice in his personal capacity … the predecessor may be able to avoid disclosing advice to a successor trustee by hiring a separate lawyer and paying for the advice out of its personal funds.”].)

Reliance on Forms

Estate planning attorneys, like all lawyers, make use of form documents and templates to efficiently accomplish many tasks.  However this can lead to unintended errors when providing for a specific estate plan such as transmutation of separate property into community property.  In a recent case, husband and wife had a premarital agreement maintaining separate property.  Wife had significantly more assets and owned the marital home from before the marriage.  After several years, they jointly retained an estate planning attorney to update a marital trust.  Trial testimony revealed that wife’s primary goal in updating the trust was to ensure minimal tax burden should she die before husband.  Among the documents prepared to update the trust was a form Memorandum of Agreement Regarding Property Status listing all separate property of either spouse as “NONE.”  The estate planning attorney’s file did not reflect any intent on the part of the wife to transmute the character of her separate property.  In the subsequent contentious divorce, husband’s attorney argued that the trust documents were a transmutation and wife settled the divorce including a substantial portion of her formerly separate assets.  The jury found the estate planning attorney was liable for malpractice in the amount of the total wife paid to husband in the divorce.  (Yale v. Bowne (2017) 9 Cal.App.5th 649 [affirming judgment on verdict in unpublished portion of decision].)

Attorneys’ fiduciary obligations to their clients can be unforgiving, but this promotes careful observance of duties and detailed attention to work product, which in turn protects clients and preserves public confidence in the law.  The vigilant trusts and estates attorney can both avoid liability claims and provide exceptional services to clients and their legacies.