Estate Planning Malpractice in 2020 and How to Avoid It

“Clear record keeping is an estate planning attorney’s strongest defense against legal malpractice claims.”
The scenario above demonstrates how estate lawyers are uniquely exposed to legal malpractice lawsuits.
Working in estate law does have its rewards, but truth be told, most lawyers plan their clients’ estates with pessimistic expectations that someone somewhere will eventually claim they breached a legal duty owed to a testator client that caused harm to another.
For this reason, experienced will and trust attorneys often look for hidden third-party beneficiaries while drafting testamentary documents, and they also diligently record the testator’s intent during pre-draft meetings—remembering that when legal malpractice claims arise, an attorney’s files are the best and often the only defense evidence available to counter legal malpractice claims brought against him/her decades after the fact.
Let’s examine some tips on how to reduce professional negligence risk and learn how Iowa’s non-privy third-party beneficiary doctrines and the state’s expert testimony rules can impact a lawyer’s defense, brought to you by the legal malpractice defense team at Iowa Probate Litigation.

Estate Planning Legal Malpractice in a Nutshell

Iowa courts consider professional negligence claims against estate lawyers to be tort actions. This means that legal malpractice claimants must plead a valid prima facie case of negligence in their briefs and show by a preponderance of the evidence that:
  1. the estate attorney owed the claimant a legal duty;
  2. the will and trust lawyer failed to act or breached the duty owed to the claimant;
  3. the attorney proximately and actually caused the claimant injury; and,
  4. the claimant suffered actual loss or damages.
The Supreme Court of Iowa further held in Ruden v. Jenk (Iowa 1996) that failure to prove any one of the four elements through “substantial evidence” destroys the plaintiff’s claim.

Plaintiffs in Professional Negligence Lawsuits

During discovery and before lawsuits move forward, the courts will rule on whether the claimant bringing legal malpractice action holds standing to sue the named estate planning attorney defendant.
Third-Party Beneficiaries
Iowa statutes affirm lawyers are liable for malpractice only to their clients—the Supreme Court of Iowa however ruled in Brody v. Ruby (Iowa 1978) that the courts can relax such privity requirements “when a third-party claimant is a direct and intended beneficiary of a lawyer’s services.”
Therefore, to hold non-privy standing under Brody, third-party beneficiaries must present the court with “clear and convincing” evidence showing the testator “directly intended” to bequeath estate assets to them. Arguments that only assert the lawyer’s conduct subsequently disinherited the plaintiff or that the claimant was the attorney’s ancillary client are thus invalid.
It’s also harder for claimants to prove standing that emerges from an attorney’s conduct in adversarial litigation, as opposed to his/her non-adversarial performance (i.e. estate planning work).
Estate attorneys can therefore count on the courts consistently holding them liable when influencing a third party’s inheritance while acting on the testator’s behalf.
Third-party beneficiaries likewise find it burdensome to assert legal malpractice claims against attorneys who act as the testator’s personal representative during probate proceedings.
Here, the fiduciary only owes legal duties to the estate and not to the claimant—if the courts allowed standing, a conflict of interest would arise between the executor’s duty to distribute estate assets without prejudice and his/her duty to make sure the claimant’s interest takes precedence.
Implied-in-fact Beneficiaries
It may be possible for an Iowa claimant to argue an attorney owed him/her legal duties based on an implied-in-fact relationship established between the two parties before the alleged harm took place.
A federal court of appeals found when hearing Scanlan v. Eisenberg that a trust beneficiary can sue the trust’s attorneys despite both parties never entering into an express agreement.
According to the Seventh Circuit US Court of Appeals, the lawyer defendants formed an implied-in-fact contract with the plaintiff after giving the beneficiary legal advice and treating the claimant as a client for most of her adult life.
The Iowa courts have yet to address implied-in-fact privy between lawyers and legal malpractice plaintiffs, but Scanlan shows us the dangers of exceeding the scope of representation found in retainer agreements and the importance of treating new legal issues like fresh cases requiring separate files and separate attorney-client contracts.

Iowa’s Statute of Limitations for Bringing Legal Malpractice Lawsuits

Iowa Civil Procedure Code §614.1(4) reads the statute of limitations for bringing legal malpractice action is five years on lawsuits seeking remedies to redress injuries to property stemming from unwritten contracts.
The Iowa Supreme court upheld the Code in Millwright v. Romer (Iowa 1982) and reaffirmed seven years later when hearing Norton v. Adair County (Iowa 1989)… “Our statute of limitations applicable to attorney malpractice is in section 614.1(4), which provides a five-year limitation period.”
Code 614.1 thus provides an affirmative defense for attorneys named in professional negligence lawsuits brought by third-party beneficiaries and plaintiffs holding implied-in-fact standing—the Iowa courts however make an important exception when legal malpractice claims name estate planning attorneys as defendants.
Iowa estate law precedent has steadily held that future interest injuries stemming from negligently drafted will and trust documents arise at the time of the testator’s death.
The limitations clock therefore starts ticking in such cases on the day the claimant discovers the injury, as opposed to the date when the negligence actually occurred (i.e. during will-drafting performance). This means victims of estate planning negligence can theoretically sue an attorney beginning as soon as probate starts and up to five years after probate ends.

Iowa’s Expert Witness Rules

In Barker v. Capotosto (Iowa 2016), the Supreme Court of Iowa ruled a legal malpractice lawsuit cannot move forward unless the claimant retains testimony from a standard-of-care expert to establish the duty owed.
The Court upheld this requirement in Stender v. Blessum (Iowa 2017). However, Justice Zager added in his opinion that expert testimony is “generally lifted” when the alleged malpractice negligence is so “overt and obvious” that any layperson can recognize it. The Court reaffirmed this exception last year in Wild v. Willey (Iowa 2019).
Iowa case law hence affords attorneys another affirmative defense against legal malpractice action arising when claimants fail to produce expert witness depositions or affidavits during discovery (unavailable of course when the harm was clearly negligent).

Conclusion

The law uniquely exposes estate planning lawyers to professional negligence liability due to third-party beneficiary and implied-in-fact doctrines established by The Supreme Court of Iowa.
Iowa’s statute of limitations and expert testimony rules for bringing legal malpractice claims do offer lawyer defendants some relief; but, to minimize professional negligence allegations that may emerge after the fact, estate lawyers must maintain meticulous records throughout the estate planning process and must never exceed the scope of representation terms found in their retainer agreements.

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