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Going Deeper – South Carolina Expands the pool of Plaintiffs in Estate Planning Malpractice

By R. Wallace posted 11-12-2014 10:00

  

In the case of Fabian v. Lindsay, the South Carolina Supreme Court joined the majority of states that extend standing to third-party beneficiaries to sue the lawyers who draft estate planning documents that harm the beneficiaries.  Prior to Fabian, testamentary beneficiaries generally lacked privity to sue lawyers for malpractice in South Carolina.

The plaintiff Fabian was a beneficiary of her uncle’s testamentary trust. The trust agreement mentioned the plaintiff by name and ostensibly provided a ¼ share of the decedent’s estate (valued over $13 million). Through a scrivener’s error, however, the trust was read to eclipse plaintiff’s interest, which devolved to her cousin, who received a “double share.”  After the plaintiff settled with the trustee, she sued the lawyer who drafted the instruments for legal malpractice. The trial court dismissed the action because the law recognized no duty in the absence of an attorney-client relationship.

In reversing the trial court, the Supreme Court considered three theories justifying the beneficiary’s claim to proceed: (1) the balancing of factors test; (2) the “Florida-Iowa Rule;” and (3) the third-party beneficiary test. The Court adopted the third-party beneficiary test, holding that “[the testator’s] intent can be effectuated, in the event of a breach by the attorney, only by giving the beneficiaries a right of action...”  Furthering their reasoning, the Court stated “This intent in estate planning is directly and inescapably for the benefit of the third-party beneficiaries. Thus, imposing an avenue for recourse in the beneficiary, where the client is deceased, is effectively enforcing the client's intent, and the third party is in privity with the attorney.” 

In adopting this new rule, the Court carefully limited its application to “persons who are named in the estate planning document or otherwise identified in the instrument by their status (e.g., my children and grandchildren, my wife's children).”  While there is a new class of claimants in South Carolina, this holding merely extends existing law on third-party beneficiaries while vindicating the traditional policy reasons underpinning professional negligence law in South Carolina. 

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