The Court of Appeals has rendered a landmark decision, chipping away at privity in holding that an estate fiduciary may maintain a legal malpractice claim against its decedent’s estate tax planning attorneys for negligent representation.  Until now, privity, i.e., a legal connection between two parties, was a strict condition precedent to maintaining a legal malpractice claim.  

In Estate of Schneider, 2010 NY Slip Op 05281, decided June 17, 2010, the estate argued that the decedent should have been provided advice that would have decreased his estate’s tax liability.  Specifically, it was asserted that the decedent’s attorneys should have advised him to transfer, or not to transfer, his $1 million life insurance policy to or from an entity of which he was the principal owner in order to reduce his gross taxable estate.

The Supreme Court dismissed the claim for failure to state a cause of action, but the Court of Appeals reversed.  In upholding the claim, the high court equated the relationship between an estate and its decedent to one of privity, or one “sufficiently approaching privity” for purposes of pursuing a legal malpractice action.  It aligned its reasoning with that of the Texas Supreme Court, and opined that “‘the estate essentially stands in the shoes of the decedent’ and therefore ‘has the capacity to maintain the malpractice claim on the estate’s behalf’”.  

In determining the foregoing, the Court stated that its holding complies with EPTL 11-3.2(b), which permits the fiduciary of an estate to “maintain an action for ‘injury to person or property’ after that person’s death”.   The Court further noted that its decision had no altering effect on the strict privity rules against beneficiaries bringing legal malpractice claims against a decedent’s estate planning attorneys.

It would not be surprising if the natural outgrowth of this decision is an increased number of legal malpractice claims against estate planning attorneys.