Paying for Your Mistake: What Estate Planning Attorneys Should Know About Drafting Errors

Good lawyers work diligently to uphold the highest standard of care in working with clients. However, sometimes things slip through the cracks, and we make mistakes. While in most cases we can correct any issues without harm, there may occasionally be a major error that goes unnoticed for a number of years.

Such was the case with William Radaz, Jr., an elder law attorney hired to draft an irrevocable trust for Ted and Barbara Holland, a married couple. The trust should have instructed that, should Ted die first, his assets would go to his wife for life, and then would transfer to his daughter from his first marriage, Ann, upon his wife’s death. Instead, the attorney accidentally drafted the irrevocable trust so that upon Barbara’s death, the money would be split equally amongst Ann, as well as Barbara’s own five children from a previous marriage. This drafting error meant Ann, who should have been entitled to the full amount of the remainder of the trust (valued at $952,218 at the time of Ted’s death), would only be able to collect 1/6 of the amount she was supposed to collect.

Upon Ted’s death, Ann sued the attorney who drafted the trust. Using an amount derived from a CPA (who calculated Barbara’s life expectancy, the annual growth of Ted’s assets, and the amount of Barbara’s withdraw), her attorney sought relief for $567,423.

Radaz argued that it would be too difficult to accurately calculate Ann’s proceeds from the trust, and the court agreed. However, it also did not think Radaz should live with a potential malpractice suit hanging on until the time of Barbara’s death. It found the CPA’s solution reasonable, and therefore ordered the attorney to pay $472,872 in damages for his mistake in drafting the trust.

Unfortunately, the sum caused Radaz to seek bankruptcy, which thereby discharged his debts and released him from his obligations to Ann.

The financial burdens associated with bankruptcy are real, and Radaz undoubtedly suffered a hit, but it seems like Ann was the real loser in this case. Originally entitled to a sum as high as $567,423, she will now only receive 1/6 of that upon Barbara’s death.

This case makes for a cautionary tale to lawyers and families alike – pay close attention to the words of irrevocable trusts, wills and other unchangeable documents, or you may be left paying the price for unforeseen mistakes.

Sanford M. Fisch
CEO & Co-Founder
American Academy of Estate Planning Attorneys, Inc.
9444 Balboa Avenue, Suite 300
San Diego, California 92123
Phone: (800) 846-1555
www.aaepa.com