Estate lawyers’ duty of responsibility clarified in proposed legislation

Estate attorneys are hoping the Indiana General Assembly will provide a remedy after a ruling by the Indiana Court of Appeals muddied the waters concerning the scope and duties of a lawyer working on behalf of an estate’s personal representative.

Lawyers are optimistic that the proposed bill, which many say puts into law what is already common practice, will pass the 2013 legislative session and answer confusion raised by the court’s opinion. Passage would also give Indiana a law that is consistent with most other states.

The Indiana General Assembly’s Probate Code Study Commission is recommending a bill – currently PD3188 – that would clarify an estate lawyer owes a duty only to the personal representative and not to the beneficiaries.

Proposed by the Probate, Trust and Real Property Section of the Indiana State Bar Association, the bill codifies what has been the majority rule, said Jeffrey Kolb, managing partner at Kolb Roellgen & Kirchoff LLP in Vincennes. The push for legislation arose from a ruling by the Indiana Court of Appeals that sounded an alarm and had estate lawyers questioning what their duty is.

In Corrine R. Finnerty, as Successor Personal Representative of the Estate of Dora Grace Lee, deceased v. Joseph A. Colussi and The Colussi Law Office, No. 39A01-1011-ES-622, the COA reversed the trial court’s grant of summary judgment in favor of attorney Joseph Colussi.

It agreed with the beneficiaries that Colussi owed a duty to the estate to use his skill and knowledge as an attorney. The ruling was contrary to common practice and has attorneys questioning who they represent in such matters.

Jim Martin, an attorney in Merrillville and member of the Probate Code Study Commission, likened the court’s opinion to a “slippery slope.” The decision, he said, makes way for the lawyer to be held liable for the handling of the estate’s assets.

“It opens the door to the attorney having to closely monitor all the activities of the personal representative even more than before,” Martin said. “The personal representative still has power but that would be subjected to the decisions of the attorney. The personal representative would become a figure head.”

A lawyer could not take on that level of responsibility because it would be a heavy burden of work, and malpractice insurance does not provide coverage for an attorney to act as an executor or trustee, Martin said.

Two sections of the Indiana State Bar Association filed amicus briefs, trying to convince the Indiana Supreme Court to grant transfer to Colussi. The Supreme Court denied transfer in a 3-2 vote.

Now the ISBA is turning to the Legislature. Jeffrey Dible, attorney with Frost Brown Todd LLC, echoed other estate attorneys when he advocated for passage of a bill that defines an attorney’s duties.

“I think it’s generally helpful because it says, unless some other agreement is in writing, the lawyer only owes a duty to the personal representative,” he said.

The case

The family of Dora Grace Lee in Madison sued Colussi after they discovered that one of the two personal representatives of the estate had embezzled nearly $250,000. In February 2009, the estate filed a complaint against the attorney, alleging that he had committed legal malpractice by failing to keep apprised of the estate’s assets and monitor their use.

Colussi filed a motion for summary judgment, arguing he had no duty to monitor the estate bank account. The trial court granted Colussi’s motion, but the estate appealed and the COA reversed and remanded for proceedings.

When the estate filed its opposition to the attorney’s motion, it offered the deposition testimony of attorney Thomas C. Bigley, Jr., who maintained Colossi breached the applicable standard of care by failing to control or monitor the estate checking account.

Bigley testified that the applicable standard of care requires an attorney for an estate to retain the estate’s checkbook. He said he would have monitored the paperwork that established the estate’s bank account more carefully than Colussi did, and he would have had the monthly statements sent to his office.

The trial court rejected Bigley’s testimony because it did not establish a uniform and accepted practice among attorneys. However, the COA held a uniform practice was not required and that through his testimony as an expert witness, Bigley did establish the standard of care.

Bigley is listed on the Indiana Supreme Court Roll of Attorneys as retired as of May 2012, and Colussi is listed as active in good standing. Neither have any concluded or pending discipline procedures.

In Dible’s opinion, the COA went further than it needed to when it found the standard of care dictates that lawyers should keep the checkbooks. He is not sure anybody subscribes to that belief. With online access and ATMs, having possession of the checkbook would not prevent the personal representative from getting into the bank account.

PD3188, recommended 11-1 by the commission, would amend Indiana Probate Code 29-1-10-20.

It is a short bill that defines an estate lawyer as representing and owing a duty only to the personal representative, unless a written agreement defines the attorney’s role otherwise. Key provisions in the bill note the lawyer has no duty to monitor or account for estate assets, unless directed by the court, and the attorney is not liable for any loss suffered by the estate, except to the extent the loss was caused by the estate lawyer’s breach of duty owed to the personal representative.

The legislation does not prohibit an attorney taking on more responsibility. Lawyers and personal representatives can still determine the scope of the duties and put the terms in a letter of engagement.

Sen. Joseph Zakas, R-Granger, vice chair of the commission, and Sen. Susan Glick, R-LaGrange, long-time member of the commission, were unavailable to comment on PD3188.

Kolb and Martin are optimistic the bill will be enacted. The draft has the approval of the legislative commission and it does not appear to have opposition.

Passage of the proposed statute will not solve all problems, Dible said. The bill clarifies duties in the absence of an agreement, but it is not going to stop an estate from suing for malpractice.

Martin agreed.

“Even though this law may be passed, the attorney still has an obligation to make sure the estate gets handled properly,” he said.•