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ESTATE PLANNING LAWYER’S WIFE INHERITS THE WHOLE ESTATE ! very recent estate lawsuit with allegations of malpractice and undue influence

Uncategorized Dec 27, 2013

Do you think your attorney’s wife should inherit your whole estate?

What if you are a family member or an heir?   What if you learned that your aunt left all her money, her CDs, her checking account, her mutual funds, and her IRAs, to ………… the wife of her estate planning attorney?   Here is a very recent case out of the Midwest, just decided within the last few weeks.

In 2000, woman from the midwest named Betty approached an estate planning Attorney named Kenneth about Kenneth preparing some estate planning documents for Betty. The Attorney prepared a deed giving real estate from Betty to Betty’s Cousin. Betty had never married nor had children. Perhaps the Cousin was just about Betty’s only relative. Betty also requested a new will from the Attorney, who prepared a will naming Betty’s two friends as equal beneficiaries of the will, or her estate. The will also named one of the two friends as personal representative of Betty’s estate and also as attorney-in-fact under a durable power of attorney. Simple and straightforward enough, right? Hardly unusual or complex.

In Florida, there are lots of people with estates in excess of $1 million. Over a lifetime, many people end up having some bank accounts, brokerage accounts, a car, Florida Homestead– it doesn’t take much to hit the million dollar mark, or to have a sizable estate. In this recent case, Betty owned some bank accounts and brokerage accounts which were “will substitutes”, meaning that they passed outside of probate, automatically and by operation of law: the bank accounts and brokerage accounts had a designated beneficiary, or a survivorship feature, which passed those financial accounts to a named beneficiary should Betty die.

But in 2006, the Attorney received a letter from Betty, who wanted to change her will. Betty wanted to make, in some sense, a radical change to her will, which estate planning clients often do. Betty wanted to change her will, and remove her friend who she previously named as personal representative of her estate. Betty wanted to name the Attorney’s Wife as the new personal representative of her estate, and, also, Betty wanted to name the Attorney’s Wife as attorney-in-fact under her durable power of attorney.

Major red flags!

An estate planning attorney being asked to draft documents and name his wife to administer an estate? And to serve as POA?…..under documents which the estate planning attorney is drafting? At first, this might sound like a conflict of interest, or an act of self-dealing, right? After all, generally, an attorney should not typically benefit from his or her clients, except for reasonable compensation for services rendered. With that said, some clients in Florida do ask their probate attorney, or their Florida lawyer who writes wills and trusts, to serve as personal representative of their Florida estate, or as trustee of their Florida revocable trust. In fact, there is nothing under Florida law which prohibits a Florida estate planning attorney, or a Florida probate lawyer, who writes a will or trust, from serving as personal representative of the client’s estate, or as trustee of the client’s Florida revocable trust, when that client requests this of their Florida probate lawyer. Much ado about nothing, right? Perhaps. But keep in mind that Betty had that cousin, who was the beneficiary of the deed and real estate. Let’s not forget about him.

In 2006, Betty also requested that her Attorney change the beneficiaries of her estate, under her will. Betty wanted to remove her two friends as equal beneficiaries of Betty’s entire estate under her 2000 will. Betty wanted to name two new equal beneficiaries of her entire estate under her will: one beneficiary was her Cousin. The other beneficiary?…………Her Attorney’s wife !

That’s right. In 2006, Betty wanted to change her 2000 will to name her Cousin and her Attorney’s wife as new equal beneficiaries of Betty’s entire estate. Surprised? Well, there’s a back story.

You see, the Attorney’s Wife was close friends with Betty’s mom. And, evidently, Betty was very fond of the Attorney’s Wife. The Attorney’s Wife referred to Betty as her second mother, and Betty thought of the Attorney’s Wife as a daughter.

So what do you think the estate planning Attorney did? Betty’s Attorney changed Betty’s 2000 will as Betty requested. The 2006 will was Betty’s last will and testament.

Flash forward. Betty dies.

At the time of Betty’s death, Betty own eight financial accounts with either cash or investments. She owns three CDs, or certificates of deposit, a checking account, two IRAs (individual retirement accounts), and two mutual fund accounts.

The Attorney’s Wife was the sole beneficiary of one of the “pay on death” (“POD) certificates of deposit. Guess who inherited Betty’s seven other financial accounts? Or should I say, guess who was named on the other CDs, checking account, the IRAs, and the mutual funds? Who do you think is named as a joint tenant on those other financial accounts? Answer: the attorney’s wife.

So, let’s just get this straight: the Attorney has a client named Betty. Betty hired the Attorney. The Attorney owed Betty fiduciary duties. The Attorney writes Betty’s will. The Attorney then prepares a new will in 2006. The Attorney’s wife inherits practically 100% of Betty’s assets. Outside of probate. Automatically. By operation of law.

What you think the Cousin did? The cousin sued the Attorney, and the Attorney’s Wife. Estate litigation. Probate litigation. Bank account litigation. You got it.

Undue influence. The cousin of the deceased person accused the estate planning Attorney, and the Attorneys’ Wife, of undue influence. The cousin accused the Attorney and the Attorney’s Wife of procuring, or obtaining, the CDs, bank account, mutual funds, and IRAs by undue influence.

In Florida, some family members who are cut out, or some people who are disinherited, fight over bank accounts, pay on death accounts, joint accounts, and named beneficiaries on CDs and IRAs, when they learn that a Florida resident, or a Florida citizen, changed their bank account or beneficiary, and left  their money to someone else. They hire a Florida trust litigator, or a Florida probate litigator to file in inheritance lawsuit. When someone is cut out, or disinherited, by bad acts, that beneficiary might also sue for tortious interference with an inheritance, to recover their Florida inheritance, or damages.

Oh yes, the cousin also sued Betty’s estate Attorney for breach of fiduciary duty, and malpractice.

In Florida, when a beneficiary of an estate, or a family member, sues a dead family member’s Florida estate attorney, or probate attorney, there is often a legal “standing” issue. Which family members, which beneficiaries, have the legal ability to sue the estate planning attorney in Florida for malpractice?

The laws in Florida for suing a Florida probate lawyer for malpractice are very unique, and at times tricky. Not everybody, who, at first blush, may appear to be harmed by an Florida estate attorney’s actions, may necessarily have the legal ability, or standing, to sue that Florida probate lawyer. If a Florida probate lawyer, a lawyer who prepared a deceased Florida resident’s will or trust, committed malpractice, the deceased Florida resident’s estate– the Florida personal representative– may be the most appropriate “legal actor” to sue the Florida probate lawyer for malpractice. In other words, a family member or estate beneficiary may or may not be the proper “legal actor” to sue a Florida probate lawyer for malpractice, if the Florida probate lawyer’s malpractice did not do what the deceased Florida resident intended. Put another way, an important issue in any Florida malpractice case against an estate planning lawyer, revolves around who is the correct person to sue the Florida probate lawyer for malpractice.

Does this leave a bad taste in anyone’s mouth? Should an estate planning attorney be permitted to have a client where the client wants to leave just about her entire estate to the attorney’s wife?  The facts of this case raise questions, and even some eyebrows.

In Florida, however, there is a new statute, Florida Statutes §732.806, regarding gifts to lawyers, and gifts to lawyers’ families, regarding the preparation of a Florida will–and bank accounts.  This new Florida statute is also referred to as Fla. Stat. § 732.806 or just § 732.806 . This new Florida statute about gifts to lawyers is not limited to just a last will in Florida, but also bank accounts, CDs, or naming a beneficiary, or changing a beneficiary, on such things as financial accounts, joint accounts, and IRAs. Note that this new Florida statute on gifts to lawyers refers to a “written instrument.” This is a victory for family members, heirs, and Florida estate beneficiaries!

Beneficiary rights! Rights for the family to inherit! Beneficiary designations in Florida, regarding a trust inheritance, or pay on death bank accounts, or right of survivorship accounts, or IRA beneficiaries. Many probate litigators, trust litigators, and trial lawyers in Florida who handle bank account litigation, and who are involved in lawsuits about CDs, checking accounts, and IRAs, believe that the concepts found in this Florida statute will be applied to similar facts.

Here’s the link to the new Florida Statute about gifts to lawyers. http://www.leg.state.fl.us/Statutes/index.cfm?App_mode=Display_Statute&Search_String=&URL=0700-0799/0732/Sections/0732.806.html

You can view the Florida probate code, and this new Florida statute about gifts to lawyers, at the above link, as well as other Florida laws relating to Florida estates and trusts. These statutes, regarding Florida estates, and Florida trusts, govern all Florida estates and Florida trusts regardless of the county. These laws apply throughout Florida, and throughout Palm Beach, Florida, Fort Lauderdale, Florida, and Miami, Florida.

For a copy of the court opinion about this recent case, please email Michelle@pankauskilawfirm.com. A complete copy of the new Florida statute, from the Florida probate code about gifts to lawyers is reprinted below.

732.806 Gifts to lawyers and other disqualified persons.-

(1)  Any part of a written instrument which makes a gift to a lawyer or a person related to the lawyer is void if the lawyer prepared or supervised the execution of the written instrument, or solicited the gift, unless the lawyer or other recipient of the gift is related to the person making the gift.

(2) This section is not applicable to a provision in a written instrument appointing a lawyer, or a person related to the lawyer, as a fiduciary.

(3) A provision in a written instrument purporting to waive the application of this section is unenforceable.

(4)  If property distributed in kind, or a security interest in that property, is acquired by a purchaser or lender for value from a person who has received a gift in violation of this section, the purchaser or lender takes title free of any claims arising under this section and incurs no personal liability by reason of this section, whether or not the gift is void under this section.

(5) In all actions brought under this section, the court must award taxable costs as in chancery actions, including attorney fees. When awarding taxable costs and attorney fees under this section, the court may direct payment from a party’s interest in the estate or trust, or enter a judgment that may be satisfied from other property of the party, or both. Attorney fees and costs may not be awarded against a party who, in good faith, initiates an action under this section to declare a gift void.

(6) If a part of a written instrument is invalid by reason of this section, the invalid part is severable and may not affect any other part of the written instrument which can be given effect, including a term that makes an alternate or substitute gift. In the case of a power of appointment, this section does not affect the power to appoint in favor of persons other than the lawyer or a person related to the lawyer.

(7) For purposes of this section:

(a)  A lawyer is deemed to have prepared, or supervised the execution of, a written instrument if the preparation, or supervision of the execution, of the written instrument was performed by an employee or lawyer employed by the same firm as the lawyer.

(b) A person is “related” to an individual if, at the time the lawyer prepared or supervised the execution of the written instrument or solicited the gift, the person is:

1. A spouse of the individual;

2. A lineal ascendant or descendant of the individual;

3. A sibling of the individual;

4. A relative of the individual or of the individual’s spouse with whom the lawyer maintains a close, familial relationship;

5. A spouse of a person described in subparagraph 2., subparagraph 3., or subparagraph 4.; or

6. A person who cohabitates with the individual.

(c)  The term “written instrument” includes, but is not limited to, a will, a trust, a deed, a document exercising a power of appointment, or a beneficiary designation under a life insurance contract or any other contractual arrangement that creates an ownership interest or permits the naming of a beneficiary.

(d) The term “gift” includes an inter vivos gift, a testamentary transfer of real or personal property or any interest therein, and the power to make such a transfer regardless of whether the gift is outright or in trust; regardless of when the transfer is to take effect; and regardless of whether the power is held in a fiduciary or nonfiduciary capacity.

(8) The rights and remedies granted in this section are in addition to any other rights or remedies a person may have at law or in equity.