February 4, 2015

Naming a Beneficiary

It is seldom a good idea for an attorney to be the beneficiary of a testamentary instrument written by a current or former client. This includes either a trust or will. The crux of such a scenario is the perception that the attorney unduly influenced the client into leaving them an inheritance. In a typical attorney-client relationship, the client will regularly place much trust and confidence in their attorney. For example, the client will disclose very private and sensitive information to them knowing that what they say to the attorney is privileged. The client is thus in a vulnerable position that can be exploited.  

Recently a California attorney, Carl Dimeff, was ordered by a San Diego County Superior Court judge to pay the trust estate of Siv Ljungwe $4.3M. Yes $4.3M. This ruling stemmed from the fact that Ms. Ljungwe had named Mr. Dimeff as the sole beneficiary of her trust and had, in the judge's opinion, procured it through undue influence.

In 2004, Ms. Ljungwe executed a trust which named four charities as co-equal beneficiaries of her estate, (1) SDSU Research Foundation, (2) UNICEF, (3) NPR and (4) Doctors without Borders. Thereafter, family turmoil ensued and Ms. Ljungwe retained Mr. Dimeff to assist with obtaining restraining orders against her husband. Ms. Ljungwe's health also suffered during this time, principally from the death of her adult son in 2004. This caused her to be hospitalized for paranoia and delusions.

Over the next couple of years, Ms. Ljungwe wrote Mr. Dimeff hundreds of personal notes. According to the court opinion, the notes were bizarre and contained sexual innuendo. Eventually Ms. Ljungwe informed Mr. Dimeff that she wanted him to be the sole beneficiary of her trust. Due to a California law that prohibits an attorney from drafting a trust in which he or she is a beneficiary, another attorney, Kirk Miller, wrote the trust.

Following Ms. Ljungwe's death in 2010, the four charities challenged the validity of the 2008 trust in San Diego Superior Court. Each argued that the 2008 trust was basically the product of undue influence and therefore the operative trust should be the 2004 trust (which named them as the beneficiaries). Judge William Nevitt Jr. agreed and ordered that the 2008 trust be invalidated in October 2014. Later in December 2014, Judge Nevitt Jr. assessed damages of $4.3M for Mr. Dimeff to pay Ms. Ljungwe's estate.       

Mr. Dimeff has indicated that he will appeal this decision. Given the gravity of the situation, I know I sure would.