The Risk Manager, Winter 2006

The Ohio Bar Liability Company in its newsletter Malpractice Alert (June 2004) alerted lawyers doing estate planning to beware of three situations that often lead to claims:

• Clients that instruct that the tax consequences of estate planning are secondary. In such cases the lawyer should document the client’s guidance in a letter that includes advice given and confirmation of the client’s position on taxes. If an alternative approach to the one decided upon by the client would accomplish the client’s goals and avoid taxes, it should be included in the letter. The client should be asked to acknowledge receipt of the letter by signing a copy.
• Title or ownership of property conflicts with an attempt to bequest it in a will. Testators often do not appreciate that property they wish to pass by will are titled in such a way as to pass by law instead of by will. This can result in a different disposition of the property than the testator’s intent and lead to malpractice claims by disappointed beneficiaries. Testators should be informed in writing about the distinction between property passing by will and by law. They should be advised to assure that property to pass by will is not titled in a way to frustrate their intent.
• Estate planning for married couples when there are children of prior marriages involved. In these circumstances there is a high risk that the lawyer may later be accused of favoring one spouse over the other or that incomplete advice was given about the possible outcomes for beneficiaries of a deceased spouse. It is often prudent to represent only one of the spouses in these circumstances. A Kentucky case illustrates this risk. In Bohlinger v. O’Hara (Ky. Ct. App. No. 2003-CA-001670-MR, 10/29/04) a lawyer prepared a prenuptial agreement and, after the marriage, wills for the husband and wife, both of whom had children by previous marriages. The effect of these arrangements was for each spouse to waive any claim upon the other’s estate at death and to leave their respective estates to their children from the previous marriage. Later the lawyer prepared a general power of attorney granted by the husband to the wife because of his failing health. Subsequently, the wife with the assistance of her son sold $200,000 of Procter & Gamble stock owned by the husband. Some of the proceeds were used to pay taxes and upkeep for the couple, but $160,000 was placed in an account in the name of the wife and son. After the husband’s death, his children questioned the stock sale leading to the allegation that the lawyer malpracticed by failing to adequately explain to the husband that the wife could use the power of attorney to sell assets, make gifts, and thereby circumvent his intention for his assets to go to his children. The lawyer was saved from contesting this claim by the malpractice statute of limitations.