Farhan N. Zarou, Laure A. Meis, Kimberly T. Mydock, Hunter M. Glenn, Stephen W. Murphy, Meghan Gehr Hubbard, Derek A. Farrugia, and Danielle M. Burness of McGuire Woods, have made available for download their article, “Recent Cases of Interest to Fiduciaries”, published on McGuire Woods. The article begins as follows:
Wellin v. Farace, 2021 WL 5445968 (4th Cir. Nov. 22,2021) (unpublished)
The Fourth Circuit held that the statute of limitations for attorney malpractice did not begin when the client became aware of the attorney’s divided loyalty, and instead began to run when the client consulted with a new attorney regarding the transaction at issue.
Facts
Keith Wellin retained attorney Thomas Farace to provide various estate planning services. In 2003, based on Farace’s advice, Wellin and his three children from a prior marriage established Friendship Partners LP, which was funded with shares of stock valued at $90 million. Wellin owned 98.9% of Friendship Partners, while a separate limited liability company controlled by Wellin’s children owned 1.1% of Friendship Partners. The transactions were designed to reduce Wellin’s estate assets by exchanging the stock for less-valuable limited partnership units.
In 2006, Farace advised Wellin that the strategy on which the 2003 transactions were based was considered questionable as a method of reducing estate taxes. Farace recommended a new tax-saving technique, including a sale of Wellin’s limited partnership units to an “intentionally defective grantor trust.” Wellin did not immediately follow Farace’s advice.
In 2008, Farace again recommended that Wellin consider selling his limited partnership units to an intentionally defective grantor trust. In 2009, Wellin implemented the strategy. With Farace’s assistance, Wellin established the Wellin Family 2009 Irrevocable Trust, which named the Wellin children as trustees. In November 2009, Wellin signed the trust agreement and sold his 98.9% interest in Friendship Partners to the irrevocable trust in exchange for a promissory note worth about $50 million, a substantial reduction from the original value of the stock. Farace predicted that the 2009 transaction would result in estate tax savings between $14 million and $18 million.
Click here to see the full article: “Recent Cases of Interest to Fiduciaries”
Posted by Marin Larkin, Associate Editor, Wealth Strategies Journal.
Wealth Strategies Journal 