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Keywords

defendantdamagesattorneyliabilityappealmalpracticeestate planninglegal malpractice
defendantdamagesattorneyliabilityappealmotionmalpracticeestate planninglegal malpracticemotion to dismiss

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Estate of Schneider v. Finmann, 15 N.Y.3d 306, 933 N.E.2d 718, 907 N.Y.S.2d 119, 2010 N.Y. Slip Op. 05281

Facts

Defendants represented decedent Saul Schneider from at least April 2000 until his death in October 2006. During this time, Schneider purchased a $1 million life insurance policy and transferred ownership of it multiple times, ultimately resulting in the policy's proceeds being included in his gross taxable estate. The estate alleged that the defendants negligently advised Schneider regarding these transfers, leading to an increased estate tax liability, and commenced the malpractice action in 2007.

The complaint alleges the following facts. Defendants represented decedent Saul Schneider from at least April 2000 to his death in October 2006. In April 2000, decedent purchased a $1 million life insurance policy Over several years, he transferred ownership of that property from himself to an entity of which he was principal owner, then to another entity of which he was principal owner and then, in 2005, back to himself.

Issue

Whether an attorney may be held liable for damages resulting from negligent representation in estate tax planning that causes enhanced estate tax liability.

At issue in this appeal is whether an attorney may be held liable for damages resulting from negligent representation in estate tax planning that causes enhanced estate tax liability.

Rule

A personal representative of an estate may maintain a legal malpractice claim for pecuniary losses to the estate resulting from negligent estate planning, as privity exists between the personal representative and the estate planning attorney.

We now hold that privity, or a relationship sufficiently approaching privity, exists between the personal representative of an estate and the estate planning attorney.

Analysis

The court determined that the personal representative of an estate has a relationship sufficiently approaching privity with the estate planning attorney, allowing them to bring a malpractice claim. The court agreed with the Texas Supreme Court's view that the estate 'stands in the shoes' of the decedent, thus enabling the personal representative to pursue claims for negligent estate planning that harms the estate.

The personal representative of an estate should not be prevented from raising a negligent estate planning claim against the attorney who caused harm to the estate.

Conclusion

The Court of Appeals reversed the Appellate Division's decision, reinstating the estate's claim against the attorney for legal malpractice.

Accordingly, the order of the Appellate Division should be reversed, with costs, and defendants' motion to dismiss the complaint denied.

Who won?

The personal representative of the decedent's estate prevailed because the court recognized their right to bring a legal malpractice claim against the attorney for negligent estate planning that resulted in increased tax liability.

The Court of Appeals, Jones, J., held that personal representative of decedent's estate had sufficient privity with decedent's attorney to bring legal malpractice action for damages resulting from negligent representation in estate tax planning.

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