Wills and estate documents are not always signed before death makes its inevitable visit. This is a recurring problem, and for law firms that plan estates it is not uncommon that reminders must be sent to clients regarding the status of the unsigned documents. Usually this results in the documents being signed or by the client verifying that he or she does not want to sign the documents for reasons personal to them.
The open question however was always whether an attorney was liable to a proposed beneficiary for the result when documents remained unsigned at death. This question now seems to have been answered; the attorney is not liable to a beneficiary named in a will or trust document that ultimately remains unsigned.
In January of last year, the Pennsylvania Supreme Court decided the case of Estate of Agnew v. Ross. Mr. Agnew, presumably quite sick and in hospice care, determined to make certain changes to his will and living trust that would have resulted in re-directing gifts from four colleges under his existing estate plan (the 2007 Plan) to certain members of his wife’s family (the 2010 Plan). The amount to be re-directed would have been about $1,250,000. Because of the structure of the will and the revocable trust under the 2007 Plan, Mr. Agnew needed to sign a revised will and a revised living trust amendment to effectuate the 2010 Plan. The documents were drafted to make these changes. The attorney visited Mr. Agnew to have the documents signed. Unfortunately, the attorney seems to have not brought a copy of the living trust amendment to the appointment. The Will was signed, other documents not essential to our story were signed, but the living trust amendment was not signed. Mr. Agnew passed away soon after. The result of not signing the trust amendment was that the proposed beneficiaries did not receive the gifts that would otherwise have been theirs.
Is the attorney liable to those proposed beneficiaries? The technical question is whether those beneficiaries had standing to sue the attorney. Typically, there are two forms of legal malpractice, one form alleges that the attorney should be liable because he was negligent; the other alleges that the attorney should be liable because he breached a contract. Over 30 years ago, in the case of Guy v. Leiderbach, the Supreme Court held that a beneficiary (normally) has no standing to bring a negligence case against the testator’s attorney because of a concept called lack of privity. Really, this meant that there was no legally recognizable personal relationship between the beneficiaries and the attorney. However, the question left open by Leiderbach, and which the omitted beneficiaries tried to employ in Agnew, is whether a beneficiary named in an unsigned document could sue the attorney as a third party beneficiary to the contract between the testator and the testator’s attorney. The case began in the Philadelphia Orphan’s Court and was subsequently appealed (twice). The trial court said “no” the attorney could not be sued; the the Superior Court said “yes.” It remained for the Supreme Court to decide. The Supreme Court found for the attorney.
When viewed in light of Agnew’s particular facts this result sounds heartless, or grossly unfair, or maybe it even seems like the judiciary was protecting the attorneys. However, the decision affects more than just these particular beneficiaries; it is a rule that will govern other similar cases, and the decision, no matter what its defects in this instance, does eliminate the case where a decedent specifically decides not to sign a document, while a judge, after the decedent dies, decides to honor the “document” anyway. The Supreme Court recognized the reality of this stating that “A testator may change an estate plan at any time, adding and subtracting legatees, increasing and decreasing bequests. Under such mercurial circumstances, we decline to confer standing to purported heirs to prosecute a breach of contract against the testator’s attorney on the basis the attorney failed to ensure the testator signed the particular document making a potential bequest.” More bluntly, the Court finished with “we hold that individuals who are named only in unexecuted, consequently invalid documents . . . may not claim status as third-party beneficiaries of the legal contract between the testator and his attorney, and may not achieve a legacy (that is a gift of money) through other means, such as a breach of contract action” (parenthetical added).
As always, a signed document is what matters and both attorneys and clients need to remain aware of the status of their documents.
– Rod Fluck