The legal landscape in Virginia regarding claims for legal malpractice against estate planning attorneys changed significantly this past year when the Virginia General Assembly adopted legislation to address the issues raised in the Virginia Supreme Court’s Thorsen decision. This blog post discusses some implications of, and observations about, the new legislation, which was adopted as Virginia Code Section 64.2-520.1. My colleague Brett Herbert did a great job summarizing the terms of the new statute itself, in his earlier blog post on this issue (which can be found here).
Implication #1
First, Section 64.2-520.1(B) provides that only a personal representative can bring a claim for legal malpractice against an estate planning attorney. Beneficiaries may not (subject to a very narrow exception discussed below). This is a sea change in Virginia law in light of the Thorsen ruling. It will dramatically shrink the scope of malpractice claims brought against estate planning attorneys.
Interestingly, it will also arguably heighten the obligations of personal representatives to review and assess whether a malpractice claim against the estate planner may be warranted. That’s because now, the personal representative is the only party who may bring such a claim. A failure by a personal representative to bring a valid claim would arguably open up the personal representative to a claim for breach of fiduciary duty by a beneficiary of the estate, who would have been financially disadvantaged by the failure of the personal representative to have maximized the assets coming into the estate via such a claim.
Implication #2
Second, Section 64.2-520.1(B) also provides that the individual for whom the estate plan is being drafted, and the estate planning attorney, may enter into a written agreement “that expressly grants standing [for a malpractice claim] to a person who is not a party to the representation by specific reference to this subsection.” It is hard to imagine a scenario in which an estate planning attorney would ever agree to do so. If an estate planning attorney received such a request during an initial consultation or early in the course of the representation, the rational response would be for him to run for the hills.
Perhaps an estate planner would agree to such a request in a scenario involving an exceptionally wealthy and sophisticated client, who sends large amounts of repeat business to the estate planner, and the estate planner would reluctantly agree to such in order to keep the work flowing in. But the average individual would likely be met with a terse “no, go somewhere else” in response to such a request.
Implication #3
Third, because the malpractice cause of action accrues “upon completion of the representation during which the malpractice occurred,” estate planning attorneys should ensure that they document the representation’s completion. The most obvious way would be to send completion of representation letters to every client after the drafting of each estate plan or amendment. However, that could be both logistically burdensome and cost prohibitive, and moreover, it may turn off clients from returning for future amendments to estate planning documents. Another option would be to clearly define the scope of representation in an engagement letter, such that it only applies to the current set of estate planning documents, specifying that any future amendments or documents would constitute an entirely new representation.
Implication #4
Fourth, the new legislation arguably creates a disincentive to use a written engagement letter. As a risk management practice, not obtaining a written and signed engagement letter is almost always a bad idea. But this scenario may be the exception, given that the statute of limitations for claims arising from an engagement based on a written contract is 5 years, and the statute of limitations for claims arising from an engagement based on an oral contract is only 3 years. To be clear: I don’t recommend deliberately not having a written engagement letter; however, this may be one of those rare incidents where such a risk management failure could actually benefit the attorney.