The Perils of Leaving Out Important Information When Asking for Advice

When a client asks a lawyer for advice, the lawyer may make a mistake if the client leaves out some information. This is particularly true when the proposed advice relates to a broader plan instead of just a single transaction. A recent case from Nevada illustrates what might go wrong.

The case involved an estate plan. A mother owned houses in Arizona and New York, each worth about $500,000, and a condo in Nevada, worth about $2 million. She originally created three trusts and gave each trust a one-third interest in the Arizona and New York properties to each trust. Each of her three daughters was named the beneficiary of one of the trusts. One of the daughters lived in the Arizona property, another lived in the New York property, and the third daughter lived with the mother in the Nevada condo.

The mother then discussed with the third daughter whether to place the condo in a trust. The daughter referred the mother to a lawyer. The lawyer and the mother discussed such matters as ensuring the mother retained control during her lifetime if she placed the condo in a trust, and what might happen if the property was not placed in trust, but the mother did not provide copies of the other trusts to the lawyer or authorize him to contact the lawyers who prepared them. Based on the limited information the mother gave him, the lawyer prepared a deed transferring the condo into the trust for the third daughter.

When the lawyer learned that the mother’s usual plan was to divide her properties into three trusts, he advised the mother to sign a correction deed to make clear the condo should have gone to all three trusts. The mother refused and went to another lawyer, who prepared a deed taking the condo out of the trust and transferring it back to the mother.

Unfortunately, the trusts had all been made irrevocable. As a result, the third daughter sued, challenging the removal of the condo from her trust. The mother argued that she had been mistaken about the effect of transferring the condo into only one trust and the need to transfer property into the trust to ensure that her daughters would inherit.

Fortunately for the mother, the Nevada Supreme Court ruled in her favor, but it took the time and expense of going through the suit and appeal and the necessity of resolving when Nevada law allowed a donor to take property out of an irrevocable trust as a result of mistake. (Oregon and Washington allow the mistake to be undone, but not by the sole action of the donor.)

Often, it’s better to avoid a suit if possible. In estate and business planning, it is often possible to minimize the risk of mistakes or disputes that might lead to a suit by taking the time to discuss matters with a lawyer. In order to get the full benefit of this advice, however, the lawyer may need to know more information that a client might expect to give. When consulting the lawyer, be ready to provide all of the information that you might think is relevant and to answer questions from the lawyer. There’s usually a good reason the question is asked, and if you can’t answer it, the lawyer might not be confident in his or her advice. Worse, the lawyer’s recommendations might prove poorly suited to the situation.

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