Reversing a circuit court, the Michigan Court of Appeals rules that a law firm must explain in court the absence of Crummey withdrawal rights in an irrevocable trust it drew up for a now-deceased couple. Sorkowitz v. Lakritz, Wissbrun & Associates (Mich. Ct. App., No. 242016, April 27, 2004).
Morris and Sarah Friedman hired the law firm of Lakritz, Wissbrun & Associates to draw up estate planning documents. The personal representative of the estate of Sarah Friedman, along with other plaintiffs, filed a legal malpractice action against the law firm, alleging that its attorneys violated their duties and standard of care in failing to include a Crummey clause in an irrevocable trust, resulting in unnecessary taxes. Crummey v. Commissioner of Internal Revenue, 397 F.2d 82 (CA 9, 1968). The plaintiffs provided the affidavit of an expert attesting that the standard of practice requires that an attorney practicing in the estate planning field discuss and recommend the use of a Crummey clause, and that the failure to include the clause in the irrevocable trust was unusual and extraordinary.
The law firm countered that the plaintiffs lacked standing, citing a Michigan statute that only those who can establish, without the use of extrinsic evidence, that a decedent's intent has been frustrated by an attorney's negligent drafting have standing to sue. The circuit court agreed, ruling that the plaintiffs were unable to establish that the Friedmans' intent was frustrated other than by use of extrinsic evidence such as that in the expert affidavit.
The Michigan Court of Appeals reverses, ruling that the law firm should explain in court the absence of the Crummey powers. The court rules that extrinsic evidence may be brought to bear because the case does not involve a question of the Friedmans' true intent. Holding that "it is virtually certain" that the Friedmans did not intend to pay more taxes than necessary, the court concludes that "it ignores reality to dismiss legal malpractice cases such at this one based on the fiction that one cannot know the decedent's intent unless it is apparent within the four corners of the estate planning documents, without regard to common sense and expert opinion on estate planning matters."
To download the full text of this decision in PDF format, go to: https://www.michbar.org/opinions/appeals/2004/042704/22903.pdf
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