Bad Advice by Trustee Leads to Liability

In Hatleberg v. Norwest Bank Wisconsin, No. 2003AP40, 2005 WL 1574958 (Wis. July 7, 2005),  a bank advised its client to make present interest annual exclusion gifts to an irrevocable trust to reduce estate taxes.  An attorney selected by the client drafted the trust but the trust but did not include a Crummey power.

Three years after the creation of the trust, a trust officer told the drafting attorney about the deficiency but nothing was done.  The bank continued to advise the client to contribute to the trust.

The court held that the bank was liable the for the increased estate taxes because the bank negligently provided information by advising the client to make gifts to a trust it knew to be defective.

Special thanks to Rita and Joseph Solomon  Prof. William P. LaPiana for contributing this case.