Estates Lawyers...Don't Forget About Family Law

On Wednesday I blogged about will drafting and professional negligence issues that can arise for a lawyer.  I commented that “dabbling” in an area of the law can be a bad thing – however, knowing about another area of the law is a very good thing.  In its most recent Webzine, LawPRO (the professional insurer for lawyers in Ontario) discusses how estates and trusts lawyers can benefit from knowing a thing or two about family law.

When drafting wills, something that is often overlooked is the role family law has on an individual’s ability to dispose of his estate.  While it might be nice to think that when doing a will an individual can do whatever he wants with his assets, in many situations this is not the case and there are in fact legal limitations when it comes to disposing of assets. 

Some of the “hot button” issues that LawPRO raises include the following:

  1. Matrimonial home – in Ontario, a spouse can’t dispose of a matrimonial home without the consent of the other spouse – irrespective of who holds title to the property.  Keep in mind that that the definition of “matrimonial home” is broad and will frequently include a vacation property. 
  2. Child/Spousal Support – child and spousal support obligations are frequently binding on an individual’s estate – and not simply those obligations that arise by way of court order.  Often, domestic agreements and separation agreements will impose support obligations that should be considered when doing a will. 
  3. Dependant Support EntitlementPart V of the Succession Law Reform Act allows certain classes of people (including a spouse or child) to bring a support claim against an individual’s estate if the individual did not provide adequate provision for dependants in his/her will.  The right to bring a claim of this nature applies to former spouses – and can’t be “contracted out of” by a separation agreement.

LawPRO’s article includes a few other issues which are worth a review – and should be kept in mind by any lawyer drafting wills (as well as the litigators that come on to the scene post-death). And in a future blog, I'll comment on some of the issues that family law lawyers need to remember about estates law.

Be Mindful of Potential Pitfalls When Drafting a Will

“Getting sued” is an unpleasant thought for any lawyer and for estates and trusts lawyers it is an unfortunately common occurrence.  According to the latest LAWPRO Webzine, wills and estates is the fifth most common area of claims (something I’ve blogged about before).  And dabblers beware!...it is one of the areas most commonly subject to claims as a result of insufficient knowledge of the law.

LawPRO has circulated a must-read article discussing some of the most common mistakes made when drafting wills.  Potential landmines include:

  1. Lack of communication – this is the most common reason for claims reported in the wills and estates area.  Frequent errors include: neglecting to compare client instructions with the terms of the will drafted; failing to confirm the marital status of the client; and failing to confirm the client’s assets and debts.
  2. Inadequate investigation – while this includes failing to ascertain many different types of information, a particular “hot button” is a client’s mental capacity.  A lawyer has an obligation to make reasonable enquiries to ensure a client has the requisite testamentary capacity to make a will and basic questions should be asked of all clients to ensure there are no concerns (never assume…ask instead!).
  3. Unfamiliarity with the law – just like clients often think their estate planning is “simple enough”, far too many lawyers believe that drafting a will is “simple enough”.  Mistakes made can range from the mundane (such as not understanding the legal requirements for executing the will) to the complex (such as providing estate planning advice without understanding tax and corporate law relevant to the client file). 
  4. Clerical errors – apparently LawPRO sees this quite a bit!  Common mistakes include typos when it comes to the dollar value of bequests, percentage divisions of residue that do not equal 100, and misdescribing the legal name of a charity (which can result in the charity not getting the bequest). 

The article also includes other frequent mistakes which are worth reviewing.  And, as I’ve noted before – if a lawyer becomes aware that there might be a potential claim against them, they need to report to LawPRO asap.  Failing to do so can result in a denial of coverage.

Worried About Being an Executor? Then Buy Insurance!

I recently came across the website for ERAssure, an Ontario-based company which bills itself as the “only errors and omissions insurance available for estate trustees.”  The purpose of the insurance is to insure executors from personal liability and legal fees that might arise as a result of their negligent administration of an estate.

The coverage territory in Canada and the insurance will cover estates with a value of up to $5 million.  The premiums for the policy will depend on the size of the estate and the extent of the coverage.  While the policy will cover most negligent acts by an executor, there are limits – fraudulent, dishonest, and malicious acts are excluded from coverage. 

The policy is available for estates with more than one executor.  However, it must cover all of them – and it will not cover cross-claims between executors.  

It’s notable that an executor can’t purchase a policy directly.  Instead, law firms have to register with ERAssure and then apply for coverage for an executor client.  However, the website specifies that the company waives any right to subrogation against the estate solicitor, provided that the lawyer wasn’t involved in fraud or disciplined by the law society in relation to the matter and cooperates in the investigation of the claim.  I would be interested to know many lawyers have registered with this service.

I noticed that in a couple of places on the ERAssure website, it says that executors can usually pay for a policy of this nature from the estate assets. Personally, I would warn an executor against doing that.  Given the purpose of the policy is to insure the executor from personal liability for negligence, I think it would be difficult to justify why it is properly an expense of the estate. 

Tips for Avoiding Real Estate-Related Negligence Claims

It’s not unusual for lawyers practicing estates and trusts law to also practice real estate law (providing they've complied with the provincial and insurance requirements).  This might occur when a lawyer is acting as estate solicitor (representing the estate trustees on the administration of an estate) or is representing a party during estate litigation and one or more of the assets is real estate. 

Real estate law can be a tricky (and liability filled) business. An article in the December edition of LawPRO Magazine, published by LawPRO, the liability insurer for lawyers in Ontario, discusses some of the most common reasons behind malpractice claims involving real estate transactions.

As the article points out, real estate law gives rise to the second highest number of negligence claims against lawyers in this province (civil litigation is number one) – and that number is rising.  Over the past decade, real estate-related claims have amounted to nearly 30% of the claims LawPRO sees.

Amongst the most common errors cited are the following:

  1. Lawyer/client communications failures (such as failure to inform a client or follow a client’s instructions);
  2. Inadequate investigation or discovery of facts (such as misreading a survey or not obtaining a title search);
  3. Failing to know or properly apply the law;
  4. Clerical and delegation errors (such as over-delegating to a law clerk or failing to review real estate documents for clerical errors); and
  5. Time and deadline-related errors. 

As the article points out, it’s never possible to completely eliminate the possibility of a negligence claim.  However, good client communication, attention to detail, and careful documentation can go along way towards reducing the risk.

If a lawyer becomes aware of a potential claim, it’s absolutely essential to advise LawPRO quickly (even if negligence hasn’t been alleged).  Reporting a potential mistake to LawPRO is never fun – but not nearly as "unfun" as LawPRO discovering the lawyer was well aware of the potential claim and delayed reporting it!

For more information on professional negligence, please see my blog from September on avoiding claims for estates and trusts lawyers.  Additionally, LawPRO publishes the “Avoid a Claim” blog which is a fantastic resource!

Helpful Tips for Avoiding Negligence Claims for Estates and Trusts Lawyers

I came across an interesting article in the September edition of “Risky Business”, the magazine published by LawPro, the liability insurer for lawyers in Ontario.  The article details the various “malpractice hazards” which arise in various practice areas. 

In the area of wills & estates, the types of claims lawyers face appear increasingly influenced by the demographics of the population.  Specifically, with the aging population, LawPRO sees an increased risk of claims arising because of issues related to a client’s capacity.  In addition, the number of elderly individuals with large estates just increases the incentive that families will have to fight and the potential that those disputes will entangle the lawyer who did the estate planning.  

LawPRO makes the following suggestions of ways to reduce the risk of a claim:

a)    Be on the lookout for signs of undue influence.  In situations where the client is making drastic changes to his or her will, explore who is benefitting from the changes and what has motivated the client to make them;

b)    Make sure to meet with the client alone to ensure that the client understands the legal implications of what he or she is instructing you to do and is making decisions freely;

c)    Clarify who you are acting for and taking instructions from so as to ensure there is no conflict of interest.  This is particularly important when your initial contact is not with the client but rather with a family member of the client; and

d)    Make sure to satisfy yourself about your client’s mental capacity and, just as importantly, make sure to document what enquiries you made in case your client’s capacity is later challenged.

When litigation over an estate occurs, the reasons are frequently unrelated to the lawyer who did the estate planning.  However, angry beneficiaries don’t always feel that way.  It is always a good idea for a lawyer doing estate planning to ensure that he or she will be protected in the future if issues involving the will or the client’s capacity arise.   

Estate Planning in the Face of an Ill Client - What are a Lawyer's Obligations?

A fear shared by many estate planners is a situation where a client making a will ("a testator") dies before the will being drafted has been executed.  

That was the situation in the recent decision of McCullough v. Riffert

In McCullough v. Riffert, the testator visited a lawyer to have a will prepared, leaving everything to his niece.  Unfortunately, the testator died of illness ten days later and before the will had been executed. As such, his estate was distributed on an intestacy.  The niece proceeded to bring a claim against the lawyer for negligence, alleging that the lawyer ought to have recognized the seriousness of the testator’s illness and been faster in preparing the will and attending to its execution.     

The court found that while “best practices” would have involved the lawyer preparing a will on the day of the client meeting or recommending that the testator do a holograph will, in the circumstances, requiring the lawyer to have done so would be imposing too high a burden. 

Some of the factors the court looked at in determining whether the lawyer had met the requisite standard of care were as follows:

  • The testator had taken no previous steps to complete a will;
  • The lawyer was never advised that the testator was terminally ill – indeed, it does not appear the testator knew and after his death his niece expressed surprise he had died;
  • The urgency of the situation was not expressed to the lawyer – during the meeting the testator had mentioned that he was planning on visiting relatives in Texas a few months later and, as such, the lawyer had no reason to believe death was imminent; and
  • After the initial meeting, the testator never contacted the lawyer to enquire about the status of the will. 

Ultimately, the court found that in the circumstances the lawyer had met the standard of care required to her and was not negligent.  However, this case does serve as a useful reminder of how important it is to prepare a will quickly when a testator is elderly or presents as ill.  There are certainly circumstances where failing to do so can result in a finding of negligence.