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Published Wednesday, February 22, 2017

What Attorneys Need to Know Before Entering the Wills, Trusts and Estates Practice

Legal malpractice claims arising from estate planning representations surged in the wake of the 2008 financial crisis and have continued to escalate at an elevated pace. As wealth transitions from one generation to the next and the demand for estate planning grows, attorneys should be cognizant of the inherent risks and necessary precautions associated with the wills, trusts and estates practice area. Consider the following CNA claim findings included in the recent edition of CNA Professional Counsel, written by CNA Risk Control Representative Matt Fitterer:

  • Claim frequency for wills, trusts and estates remains markedly higher than prior to the recession and constitutes the primary area for claim frequency.
  • Claim counts arising from wills, trusts and estates increased from an average of 120 claims per year in 2007 to an average of 210 claims per year in 2014.
  • The average yearly cost of all wills, trusts and estates claims is $23 million.

While varying factors contribute to the claim data in this area of practice – including, among others, the erosion of the privity requirement, leading to an increase in malpractice claims – CNA data reflects the top three causes of these claims as:

  • Improperly drawn/recorded documents
  • Improper handling or disbursement of funds
  • Failure to know/properly apply law

To address these three vulnerabilities, I offer risk management tips below for attorneys seeking to engage in the wills, trusts and estates practice area.

The wills, trusts, estates, probate and planning practice area frequently involves complex issues requiring specialized legal experience and training. Serving as a trustee, executor or administrator can present risk exposure where the lawyer may be placed in the center of bitter family disputes. Lawyers who lack specialized experience in wills, estates and trusts should, therefore, avoid dabbling in this area of practice alone. If a lawyer determines that she/he is sufficiently qualified to become involved in such matters, due diligence must be exercised. Attorneys can reduce their risk by understanding their limitations, carefully navigating conflicts and implementing sound documentation practices:

  • Avoid representing friends or family members in trust and estate matters.
  • Limit the scope of engagement in a written engagement letter for areas in which the lawyer does not have adequate experience, such as taxation or appellate work.
  • Utilize letters and waivers. For example, conflicts of interest can arise where a lawyer has represented multiple generations of family members whose interests may diverge in the course of an engagement. The routine use of engagement letters and conflict of interest waivers may thus provide an effective method for lawyers to identify and define the parties to whom the attorney-client relationship will apply in these scenarios.
  • Video and audio record a decedent’s intentions, as it may be effective in defending against third-party claims that the client lacked testamentary capacity or that his or her intent has been frustrated.

CNA claim data indicates that wills, trusts and estates claims have not fully stabilized since the 2008 financial crisis. As a result, lawyers should continue to take the necessary steps to safeguard themselves and their practices. To see detailed data and access additional tips and resources, download Fitterer’s article in CNA Professional Counsel: Wills, Trusts and Estates – Professional Liability Fact Sheet.

One or more of the CNA companies provide the products and/or services described. The information is intended to present a general overview for illustrative purposes only. Read CNA’s General Disclaimer.
One or more of the CNA companies provide the products and/or services described. The information is intended to present a general overview for illustrative purposes only. Read CNA’s General Disclaimer.