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CONFIDENTIAL Legal malpractice - Failure to transfer decedent's life insurance policy to a trust results in avoidable tax on the estate of $________ - Third-party negligence claims against insurance agent who sold the policy and accountant who prepared estate tax returns.

Middlesex County, Massachusetts

The plaintiffs brought suit as the executors of an estate in which the deceased retained the defendant attorney to prepare an estate plan. The plaintiffs alleged the defendant failed to transfer the ownership of a life insurance policy from the deceased individually to the trust. This action left the policy as an asset of the estate and resulted in an avoidable tax of $________. This case consisted of claims of legal malpractice, breach of contract, breach of fiduciary duty and violation of Massachusetts Protection Law 93A. The defendant alleged the duty to transfer the policy to the trust lie with the insurance agent who sold the policy, and the defendant filed a third-party malpractice complaint against both the agent who sold the policy and the accountant who had prepared the estate tax return.

The insurance policy at issue was purchased in ________, and a trust was subsequently drafted shortly thereafter. The deceased passed away in ________ and it was at that time that the failure to transfer the policy was discovered. It went undisputed that the defendant attended a meeting, as the deceased’s counsel, with the insurance agent where it was agreed that the transfer of the policy to a trust was a favorable idea. The defendant then drafted the trust and transferred another life insurance policy to the trust. It was the defendant’s contention that he did not transfer the policy at issue because he believed it had been previously transferred.

The defendant claimed it was not his responsibility to transfer the policy and contended he had only agreed to draft the trust itself. The defendant argued the insurance agent failed to make the transfer and that it was clear that he was the party responsible for the insurance policy, evidenced by the fact that he had previously made at least three other changes to the policy. As for the defendant’s third-party malpractice claim against the accountant, it was alleged that he had an opportunity to file a petition with the IRS that would have informed the IRS of the administrative oversight with the insurance policy and would have petitioned the IRS to treat the policy as if it were transferred. Because he failed to do so, it was alleged by the defendant that he was also negligent.

The third-party defendant insurance agent motioned for summary judgment, which was granted by the court on the basis that there existed "no basis for a jury to find that special’ circumstances of assertion, representation and reliance’ occurred which might provide a basis for liability." The third-party defendant accountant filed a motion to dismiss, which was granted on grounds that while the IRS may have accepted a claim of "administrative error," it was too speculative to determine whether or not this would have occurred and therefore, it could not have been presented before a jury.

On the defendant’s motion for summary judgment, the court ruled that at most the defendant was merely negligent and therefore, no claim under 93A existed. Additionally, it was ruled that the allegations of breach of fiduciary duty and breach of contract were duplicative of the negligence claim and therefore, were additionally dropped. Yet, the claim of negligence against the defendant stood as a triable issue.

This case would have proceeded to trial on the issue of legal malpractice, but settled pre-trial for a confidential amount.

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