Opinion ID: 1748199
Heading Depth: 2
Heading Rank: 2

Heading: Violation of SCR 20:1.3 Regarding Closing of Estate

Text: ¶51 Next, Attorney Phillips argues that the referee erroneously charged him with the responsibility for filing an estate tax return. He argues that this was to be the responsibility of the accountant. ¶52 Attorney Phillips also argues that the evidence shows that the delay in closing the estate was due to R.M.'s failure to provide Attorney Phillips with complete and accurate information regarding R.M.'s father's assets, rather than due to Attorney Phillips' delay in acting after he had received the information. As support for his claim, Attorney Phillips points out that R.M. had been handling his father's financial affairs for more than 3 1/2 years prior to his father's death. The initial inventory, prepared by Attorney Phillips based on information R.M. provided, showed assets of $595,080.21, just under the $600,000 limit at the time for imposing estate taxes. Attorney Phillips argues that R.M. initially hid assets from Attorney Phillips in the hope of avoiding estate taxes. Attorney Phillips claims that R.M. consciously delayed providing information to Attorney Phillips, trickling the information in little by little over the next 2 1/2 years. Ultimately, when Attorney Phillips was in possession of all of the information, he prepared a final inventory that listed over $1.1 million in assets. Attorney Phillips cites statutes and cases that describe a personal representative's duties as including the marshalling of assets and overseeing the actions of the professionals (lawyers and accountants) the representative hires. Attorney Phillips argues that it is undisputed that R.M. never complained during the probate process because he recognized that he was the sole heir and the delay was due to his own foot-dragging. Attorney Phillips points to 11 notices that R.M. received from the probate court concerning the probate process. ¶53 Attorney Phillips also points out that R.M. failed to file any complaint with the OLR until three years after the estate was filed. Although he does not claim that the OLR is barred by a form of laches, he does argue that this delay prejudiced his defense and should be a mitigating factor for the referee, resulting in more deference being given to the lawyer's recollection of events. ¶54 Even if R.M. may have been partially responsible for some of the delay, Attorney Phillips' claims do not undercut the referee's conclusion that Attorney Phillips did not act with reasonable diligence. First, Attorney Phillips states that the referee found that R.M. gave Attorney Phillips all of the necessary financial information in the summer and fall of 1997, but that Attorney Phillips simply sat on the information without taking action for nearly three years. This is not an accurate characterization of the referee's findings. ¶55 The referee did not specifically find that it was Attorney Phillips' responsibility to file the estate tax returns personally. [11] Rather, the referee found that, given the November 1997 initial inventory showing assets approaching the $600,000 limit and the knowledge that there was at least one other annuity not included on the inventory that was producing a monthly payment in the thousands of dollars, Attorney Phillips had enough information that he should have advised the client and his accountant of the likely need to file a Federal Estate Tax Return. Because it appears that Attorney Phillips did not say anything to R.M. or the accountant about the need to file an estate tax return and because he did not take reasonable steps to move the estate toward closing, the referee concluded that Attorney Phillips violated SCR 20:1.3. ¶56 The referee's factual findings and legal conclusion are supported by the hearing transcript. As the referee pointed out at the hearing, Attorney Phillips knew, based on the initial inventory, that the estate was at least $595,000, only $5000 under the triggering amount at the time for an estate tax return. A memorandum by Attorney Phillips' paralegal also informed Attorney Phillips that there was at least one other annuity not listed on the inventory. Even if it had been the accountant's responsibility to prepare and file the return, as R.M. admitted, Attorney Phillips should at least have warned R.M. and the accountant of the need to file a return and that they should be working on the return. Instead, the filing of the return slipped through the cracks until August 2000 when the client learned of more than $155,000 in penalties and interest caused by the late filing of the return. Moreover, in the malpractice case, a jury found Attorney Phillips 35 percent negligent in the failure to file the return. Thus, the referee's finding that Attorney Phillips did not act with reasonable diligence is amply supported by the record.