Expanding the Duty to Advise: Attorney Liability to Third-Party Beneficiaries in Estate Planning

I. Introduction

The case of John Wisniewski et al. v. Anthony J. Palermino et al. presents a significant examination of attorney liability in the estate planning context, particularly as it pertains to the duty to advise a client regarding beneficiary designations that interact with a client's will. The litigation centers around allegations of professional negligence and breach of contract arising from the drafting and subsequent administration of an estate plan for the decedent, Edward Wisniewski.

In this matter, the plaintiffs – which include two grandchildren, Emma and Madelyn Wisniewski, and a friend, Barbara Saccardo – contend that the defendant, an estate planning attorney, failed to advise the decedent on the critical importance of ensuring the beneficiary designation on his TD Ameritrade account was consistent with the instructions set forth in his will. Although a portion of the claims was dismissed as a breach of contract, the pivotal issue on appeal concerns whether an attorney may owe a duty to intended third-party beneficiaries beyond the classical error in drafting or execution of a will.

This commentary explores the background of the case, the procedural posture, the court’s intricate analysis of standing and public policy considerations, and an in-depth evaluation of the precedents that have shaped the decision.

II. Summary of the Judgment

The Supreme Court of Connecticut reversed, in part, the trial court’s complete dismissal of the plaintiff’s professional negligence claim. The ruling holds that while an attorney does not have a duty to ensure that a client changes an account’s beneficiary designation, a duty nevertheless attaches to advise the client when the client has expressly indicated an intent to distribute assets in accordance with a testamentary instrument. The court concluded that the failure to advise constitutes professional negligence, thus granting standing to the third-party beneficiaries seeking to enforce their rights. Conversely, the court affirmed the dismissal of the breach of contract claim on the basis that it was a collateral attack on an already dismissed claim and did not diverge substantively from the allegations underpinning the professional negligence claim.

III. Analysis

A. Precedents Cited

The judgment rests on two fundamental precedents: STOWE v. SMITH and KRAWCZYK v. STINGLE.

• STOWE v. SMITH: This case set forth that third-party beneficiaries of a will may bring claims in tort or contract against an attorney for failing to draft a will according to testator’s explicit instructions. The plaintiffs, in this case, reference Stowe as a basis for arguing that any deviation from the client’s wishes related to the drafting process can give rise to a cause of action.
• KRAWCZYK v. STINGLE: This decision is pivotal because it explored the boundaries of an attorney’s duty to third-party beneficiaries. While the court in Krawczyk refrained from broadly imposing liability for failures outside of drafting or executing errors, it also acknowledged that some state courts have imposed liability for an attorney's failure to advise clients on the consequences of their estate planning choices. The present opinion relies heavily on Krawczyk’s policy factors – foreseeability of harm, proximity, prevention of future injury, and balancing the burden on the legal profession.

Additionally, the trial court referenced LEAVENWORTH v. MATHES to support the notion that traditionally, liability extends only to errors in drafting or execution. However, the Supreme Court distinguished this precedent by emphasizing that once a client communicates a specific desire – in this case, to distribute assets in a particular manner – the attorney’s failure to advise adequately can establish a breach of duty.

B. Legal Reasoning

The court’s decision hinges on a careful analysis of both the facts and applicable doctrines:

• Standing and the Duty to Advise: The court found that while an attorney traditionally owes duty strictly to the client, when a client’s instructions are explicitly aimed at benefiting a third party (i.e., the intended beneficiaries of the will), there arises a foreseeable risk of harm if the attorney’s advice is deficient. The court recognized that the decedent explicitly instructed his attorney regarding his estate plan and beneficiary designations, and thus, any failure to provide accurate advice regarding the necessary steps (e.g., changing the beneficiary designation) results in injury to the third parties.
• Distinguishing Advice from Drafting: A pivotal aspect of the reasoning was distinguishing between errors in drafting versus errors in advising. The plaintiffs did not allege a drafting error in the will itself; rather, they contended that the attorney’s advice regarding the security account designation was faulty. This subtle distinction allowed the court to determine that while traditional privity would limit liability, a duty to advise may be imposed by public policy considerations.
• Policy Considerations: In discussing public policy, the court stressed that common law and prior decisions require that attorneys act competently when providing advice that affects third-party rights. By failing to advise about converting what was presented as a testamentary asset into an actual non-testamentary asset (due to the beneficiary designation), the defendant compromised the decedent’s express intent and injured the intended beneficiaries. The court balanced this potential burden on the legal profession against the overriding need to provide effective redress for third parties who were disadvantaged by the attorney's negligence.

C. Impact on Future Cases and the Legal Profession

The decision is significant because it sets a precedent that may broaden the scope of an attorney’s liability in estate planning contexts:

• Third-Party Beneficiary Claims: The ruling reinforces that third-party beneficiaries have standing if they can prove that an attorney’s failure to advise properly resulted in them not receiving benefits in accordance with the decedent’s wishes.
• Advisory Duty versus Execution: Future cases may more closely scrutinize the advisory aspect of estate planning undertakings. Attorneys may now be expected to effectively counsel their clients about the implications of external designations (such as those on financial accounts) that can override testamentary documents.
• Deterrence and Public Policy: By expanding liability on a narrow but important ground, the court seeks to enhance the standard of care within the legal profession, encouraging meticulous communication and documentation so as not to inadvertently injure intended beneficiaries.

D. Clarification of Complex Legal Concepts

Several legal principles and doctrines are central to this judgment. To aid understanding:

• Privity and Third-Party Beneficiaries: Traditionally, an attorney owes a duty of care only to their client. Privity, a legal doctrine, restricts claims against attorneys by non-clients (third-party beneficiaries). However, this judgment makes clear that when the estate planning transaction is explicitly designed to benefit a third party, the attorney’s duty to advise can extend to that third party.
• Testamentary vs. Non-Testamentary Transfers: A key issue is that a beneficiary designation held by a financial institution often creates a non-testamentary asset, meaning that it operates as a contract between the account holder and the institution rather than as an instruction in a will. Understanding this distinction is essential because even a properly drafted will cannot change the effect of an existing beneficial form.
• Standard of Care in Legal Advice: The standard of care here encompasses not only ensuring that documents are correctly drafted and executed but also that clients are fully aware of the potential consequences of their choices. Attorneys must provide sufficiently detailed advice to ensure the client understands the procedural mechanisms that affect estate distribution.

IV. Conclusion

In summary, the Supreme Court of Connecticut’s decision in John Wisniewski et al. v. Anthony J. Palermino et al. marks a pivotal moment in extending an attorney’s duty of care in the estate planning arena. While the ruling stops short of holding an attorney accountable for ensuring a client follows advice, it unequivocally establishes that a failure to advise – particularly when a client’s instructions are designed to benefit specific third parties – can result in professional negligence.

The judgment clarifies that the traditional privity rule, which limits claims to direct client relationships, is not absolute when public policy and foreseeability of harm compel the imposition of an advisory duty. By emphasizing that intended beneficiaries must be able to seek redress when injured by negligent advice, the ruling not only enhances the accountability of legal practitioners but also serves to protect the decedent’s true intent.

Ultimately, this decision encourages attorneys to maintain meticulous standards in communicating the critical aspects of estate planning, particularly with respect to beneficiary designations. It underscores the importance of clear, documented legal advice in ensuring that a client’s estate is administered in the precise manner intended. Future litigants and legal practitioners will undoubtedly look to this case as a guiding precedent when addressing the complex interplay between attorney advisory duties and the rights of third-party beneficiaries.