Planning for Life

Are Lawyers Off the Hook for Estate Planning Mistakes?

Posted by Harry S. Margolis on July 12, 2011

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By Harry S. Margolis

In the case of Sherman, et al. v Shub, et al., the judge dismissed the consumer protection claim against lawyers and tax advisors who drafted two allegedly defective life insurance trusts  because the damages were too speculative to determine.While it's a longstanding legal doctrine that the difficulty of establishing the amount to damages does not preclude recovery,

Judge Peter M. Lauriat in his decision  argues that the issue here is not the extent of damages but whether damages will exist at all, since whether the plaintiffs will have to pay any estate tax due to the alleged errors will depend on the size of their estates, the estate tax threshhold set by Congress, the plaintiffs' gifts to charity, and their marital status, among other factors.  In addition, some of these factors are within the plaintiffs' control and they may be able to fix the trusts through reformation, rather than getting money damages from the professionals on whom they relied.

While this seems to indicate that attorneys are off the hook for estate tax planning errors, at least until the client dies and it can be determined whether damages resulted, this ruling only applies to cases brought under Chapter 93A, the Consumer Protection Act.  Chapter 93A permits the award of treble damages and attorneys fees against the defendants.

In earlier proceedings, the plaintiffs' claims under standard negligence law were dismissed as being untimely filed. So, it's not clear whether the holding in this case would apply to a claim for attorney malpractice not brought under the Consumer Protection Act. Estate planning attorneys and insurance advisors should not rest completely easy if they screw up based on this decision.

Topics: trusts, Estate Planning

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