In re Kulig

• Decision Date: 15 July 2022
• Docket Number: 21-AP-230
• Citation: 2022 VT 33
• Parties: In re Paul Kulig (Office of Disciplinary Counsel, Appellant)
• Court: Vermont Supreme Court

2022 VT 33

In re Paul Kulig (Office of Disciplinary Counsel, Appellant)

No. 21-AP-230

Supreme Court of Vermont

July 15, 2022

Original Jurisdiction Professional Responsibility Board

Hearing Panel No. 8 Jennifer E. McDonald, Esq., Chair Jonathan T. Rose, Esq., Member Patrick Burke, Public Member

Samantha V. Lednicky of Catamount Law, PLLC, Burlington, for Appellant.

Timothy L. Taylor, Grand Rapids, Michigan, for Appellee.

PRESENT: Reiber, C.J., Eaton, Carroll and Cohen, JJ., and Waples, Supr. J., Specially Assigned

PER CURIAM

¶ 1. In this case, a Professional Responsibility Board (PRB) hearing panel determined that respondent violated several ethical rules in drafting a will and deed that conveyed an elderly client's real property and personal estate to himself. It imposed a three-month suspension as a sanction. The Court ordered review of this decision on its own motion. We agree with the panel that respondent violated the rules in question but conclude that a five-month suspension is appropriate given the nature of the violations and the serious harm caused by respondent's conduct.

I. Hearing Panel Decision

A. Findings

¶ 2. The panel made the following findings after a hearing.^[1] Respondent was admitted to the Vermont Bar in 1978 and has practiced in Vermont since that time. He provided estateplanning legal services to client L.Z. for many years until her May 2018 death. Respondent and L.Z. lived in the same community and attended the same church; respondent considered L.Z. a family friend.

¶ 3. Respondent drafted a series of wills for L.Z. L.Z. had no children and her husband predeceased her. Her 2006 will left her assets to a niece, her niece's two children, and three children of L.Z.'s nephew. At L.Z.'s request, respondent prepared a new will in February 2011 that left L.Z.'s house and its contents to her nephew and his wife; any remaining bonds to her nephew's three children; and the remainder of her estate to her sister.

¶ 4. In 2014, respondent met with L.Z. to discuss estate planning, nursing care, and Medicaid issues, given her declining health. Because L.Z. wanted to remain in her home, respondent advised L.Z. to use a so-called "enhanced life estate" (ELE) deed to prevent the value of her house from being counted as a financial asset with respect to Medicaid coverage. An ELE deed allows a grantor to convey real estate to a third party while reserving a life-estate interest in the property along with the right to sell or mortgage the property. Respondent further advised L.Z. that she could bequeath her real and personal property via a trust agreement.

¶ 5. Under the trust arrangement purportedly discussed by the parties, L.Z. would convey her real property via an ELE deed to someone who would serve as trustee of the trust and, upon L.Z.'s death, the trustee would sell the real property and distribute the proceeds to the trust beneficiaries. A new will would also be prepared naming the trustee as the executor and sole beneficiary of L.Z.'s estate with the understanding that any of her other property that might require the filing of a probate estate would go to the trustee, who would then distribute the property (or funds from the sale of the property) to the trust beneficiaries.

¶ 6. Respondent testified that L.Z. accepted his advice with respect to this arrangement. According to respondent, L.Z. wanted him to receive the ownership interest in her real property and perform the roles described above. Respondent then drafted an ELE deed and a new will along these lines. The ELE deed provided for the conveyance of L.Z.'s ownership interest in her home to respondent and his heirs and assigns and the new will left "all of [her] estate" to respondent and appointed him as the executor of her estate.

¶ 7. Respondent briefed a partner at his law firm on his discussions with L.Z. and asked the partner to have L.Z. execute the ELE deed and will. The partner had concerns about the proposed transfer but ultimately agreed to respondent's request. L.Z. executed the documents in 2014 and the partner concluded that she was of sound mind and "comfortable" conveying her property to respondent. At the PRB hearing, the partner had a vague recollection of his meeting with L.Z. and he relied heavily on cursory notes that contained unexplained discrepancies.

¶ 8. The panel found that respondent's drafting of these documents created a conflict of interest on respondent's part. L.Z. did not sign any document that disclosed this conflict of interest to her or that described the nature of the risks associated with conveying her home to respondent and designating respondent as the beneficiary of her estate.

¶ 9. Respondent did not file the ELE deed in the land records or the will in the Probate Division. Before L.Z.'s death, respondent generated no written record that set forth or otherwise contemporaneously memorialized the terms of the trust including identifying the corpus of a trust and its scope, the identity of the trustee and his related powers and duties, the identity of the beneficiaries of the trust, or a formula for distribution to the beneficiaries.

¶ 10. L.Z. eventually moved into a nursing home in New York and executed a durable power of attorney, drafted by respondent, designating respondent as her agent. During this time, L.Z.'s assets were used for her care and maintenance. L.Z. died at the nursing home in May 2018.

¶ 11. In the months following L.Z.'s death, respondent did not file her will with the Probate Division or otherwise seek an appointment as the executor of L.Z.'s estate. He did not advise any potential beneficiary that a trust was set up by L.Z. and that he was serving as trustee, or describe to any potential beneficiary his authority or intentions. He did not generate or provide any inventory of L.Z.'s personal and real property to any beneficiary or heir at law.

¶ 12. Respondent did secure L.Z.'s former residence, including her furniture, and took her jewelry and photographs into his possession. He had the jewelry appraised (approximately a $2000 value) but took no steps to sell it or make it available to any beneficiary for viewing. He donated L.Z.'s clothing to her nursing home. At the time of the PRB hearing, respondent still had L.Z.'s jewelry and photographs in his possession. With respect to the house, respondent paid for utilities, property taxes, and homeowner's insurance, as well as a water system repair, using his own funds.

¶ 13. At some point in 2018, the widow of L.Z.'s nephew (a beneficiary in an earlier will) asked respondent about L.Z.'s estate. Respondent replied, "there is no estate." He did not tell nephew's widow that L.Z.'s remaining assets would be distributed pursuant to a trust agreement, and he provided no further information to her. Nephew's widow eventually obtained an attorney to assist her. In October 2019, the attorney contacted respondent, who provided some additional information but did not send copies of the 2014 will or 2014 ELE deed as requested. The attorney followed up again with respondent, seeking these items and requesting information regarding L.Z.'s bank accounts, personal effects, and an accounting with respect to rent based on his understanding that someone was living in L.Z.'s house.

¶ 14. Respondent replied in a December 2019 letter and provided copies of the 2014 will and ELE deed. Respondent said that the assets L.Z. had intended to convey to her sister and "other relatives" had been spent on L.Z.'s long-term care; the rental payments had been used to cover expenses associated with the house; and when L.Z.'s house was sold, he would distribute the proceeds to "those she had intended to benefit before her declining health required her to use her assets for her end-of-life care." Respondent did not tell the attorney that a trust had been put in place, identify any beneficiaries by name, or tell the attorney that nephew's widow was not an intended beneficiary. He did not provide the attorney with the requested accounting. The attorney again followed up with respondent, seeking clarification and additional information, without success. In January 2020, a PRB complaint was filed against respondent.

¶ 15. Meanwhile, in the summer of 2019, more than one year after L.Z.'s death, respondent sold L.Z.'s car for $1000 to a friend with whom he also had a business relationship and who was also a former client. Respondent deposited the funds from the sale of the car in his personal bank account. Respondent also advised this friend that he planned to sell L.Z.'s house. The friend was going through a divorce and respondent knew that the friend's wife was looking for a house. Respondent neither had the property appraised nor did he retain a real estate agent to determine an appropriate listing price. He relied on the property's value in the town's grand list and his own opinion to establish a sale price.

¶ 16. In the fall of 2019, respondent entered into a "rent-to-own" agreement with his friend's wife. She made a down payment of $10,000, to be applied retroactively to rent if she opted not to purchase the home. The parties also agreed that the friend's wife would receive credits against the purchase price for payments made to vendors to repair and improve the house. While the house was structurally sound, it needed major repairs to the furnace and septic system. The wife moved into L.Z.'s former residence in December 2019.

¶ 17. Respondent placed the $10,000 down payment in his personal bank account. Respondent testified that he did so to reimburse himself for expenses incurred in maintaining the house. The panel found that respondent failed to provide a definitive accounting concerning reimbursement or any other evidence regarding the precise...