Estate Planning – Carroll County Style

There are basic principles of estate planning – proper titling of property during life, balancing property ownership between the spouses if federal taxation could come into play, and utilization of annual exclusion gifts to manage estate size and pass interests in the farming or other family business operation during life, just to name a few.  If gifting is utilized, the donor must be prepared to part with the property and understand that once the property is gifted it is gone.  Estate planning can be as complex or as simple as necessary to carry out the goals and objectives of the family.  There is no such thing as a “one size fits all” estate plan and, usually, not doing any estate planning can be the least desirable approach.  But, doing nothing would have been better than what happened in this case.

Mom and Dad had four kids – two boys and two girls.  They operated various farms in Carroll County.  In 1972, Mom and Dad gave one of the boys a 184-acre farm.  From 1977 to 1982, they gave this son the necessary funds to buy three more farms.  However, the parents apparently intended that the son would hold title to the farms until both Mom and Dad had died.  At that time the son was to sell the farms and split the proceeds with his siblings.  Dad died in 1982 and Mom inherited two more farms.  The defendant was the attorney that handled Dad’s estate.  Two years later, the defendant represented Mom when she gave one of the inherited farms to the son that received the other farms.  From 1984 to 1987, the defendant allegedly represented both Mom and the son in several additional land transfers from Mom to the son.  In 1987, the other son questioned the defendant about the transfers, and the defendant told this son that he was looking out for Mom’s best interests.  In 1997, the son that had received the farmland got a divorce, and his brother filed a motion to intervene due to his concern that his brother’s ex-wife might receive some land in the divorce.  The son’s motion was denied and the ex-wife did receive some of the land.  In 1998, Mom sued the son that she had given the farmland to – she wanted it back.  Mom was represented by a different lawyer than the one that assisted her with the land transactions.  At the trial, deposition testimony from the son that had received the land was entered into evidence.  In that testimony, the son stated that the defendant represented him on the land transfers.  The son, however, didn’t appear at the trial and Mom received a default judgment.  But, the land was not recovered from the son. 

Mom died in 2002 and the three kids that hadn’t received land sued the defendant for malpractice in 2005.  They claimed that the defendant had represented both Mom and the other son at the same time thereby breached his duty to Mom – e.g., the defendant had a conflict of interest.  The trial court, however, ruled that the 5-year statute of limitations applicable to legal malpractice claims had expired (knowledge of any conflict existed in 1997, eight years before the suit was filed).  Upon reconsideration, the trial court affirmed, and also held that the plaintiffs lacked standing to sue as individuals.  So, the daughters, as executors of Mom’s estate (the son had died), filed a claim on behalf of Mom’s estate.  The trial court again ruled that the suit was time-barred because Mom was on notice of any potential malpractice claim in 1998 when she sued the son to get her land back. 

On appeal, the appellate court affirmed.  The court determined that the defendant’s knowledge of the son’s deposition statement that the defendant had represented him during the land transactions was imputed to Mom.  So the suit was time-barred, and the recognized exceptions to the rule of imputation did not apply.  But, the plaintiffs had another argument to get around the statute of limitations problem. They claimed that the defendant had fraudulently concealed from Mom that he was also representing her son, and that the statute of limitations didn’t begin to run until 2004 – the time the defendant admitted that he represented both Mom and her son simultaneously.  The trial court didn’t bite and the appellate court agreed, noting that fraudulent concealment is not a form of the discovery rule.   

The plaintiffs also disagreed with the trial court’s ruling that they lacked standing to bring the malpractice claim.  The trial court determined that they weren’t clients and weren’t intended beneficiaries of the land transactions.  There was no evidence that they were contemplated, intended or specifically identified beneficiaries.  However, the plaintiffs argued that they were intended beneficiaries based on a provision in Mom’s 1998 will which devised the farmland to all of the children equally.  That clause, they claimed, raised at least a question as to whether they were intended beneficiaries.  But, the appellate court disagreed.  The court noted that Mom’s will was executed after the land transfers had already taken place, and was drafted by a lawyer other than the defendant.  The will was also drafted in the same year that Mom sued her son to get the land back.  As such, there was no evidence that the defendant acted negligently.  Instead, he did what Mom wanted him to do – transfer the land to the son.

Clearly, the estate planning engaged in was foolish.  Doing estate planning through a child (or anyone else for that matter) is not wise.  It’s even worse if the child is married and a divorce occurs – which is exactly what happened in this case.  Then, trying to repair the damage by putting a provision in the will disposing of property that is no longer owned is not only dumb, it’s laughable.  But, the point is that the lawyer is hired by the client to do what the client wants.  Even after counseling the client that what the client wants to do is a bad idea and won’t work, it’s still the client’s decision to make.  But, the lawyer should make sure there is a memo to the client’s file that shows that the client was told their idea was a bad one.  That should provide the necessary protection when the client gets upset at the time their bad decision comes back to bite them. Steffes, et al. v. Bruner, No. 8-831/08-0126, 2008 Iowa App. LEXIS 1291 (Iowa Ct. App. Dec. 31, 2008).