The executor of the estate of a Houston man who died in September 2010 filed a negligence and negligent misrepresentation suit against Baker Botts on Oct. 10, alleging the firm made an estate-planning error that will cost the estate more than $1 million.
Robert B. Stanfield alleges in the petition that Baker Botts drafted a will and a life insurance trust for Curtis McKallip in 1985. Stanfield alleges that McKallip largely provided for his three children through the will and for his spouse, Geraldine, through a life insurance trust.
“Based upon the documents as drafted, it is apparent that part of the overall estate plan was to minimize estate and gift taxes to the fullest extent possible,” Stanfield alleges in the petition in Robert B. Stanfield, independent executor of the estate of Curtis McKallip v. Baker Botts, which is filed in the 334th District Court in Houston.
Stanfield alleges in the petition that Baker Botts failed to timely file a Gift Tax Return form in 1985 in connection with the transfer of $1.1 million to the life insurance trust, and if that had been done, there would be no gift tax.
“However, the failure on the part of Baker Botts to ensure compliance with all applicable laws, including gift taxes, has resulted in significant financial damages to the Estate and its beneficiaries,” Stanfield alleges in the petition.
Stanfield alleges that, while handling matters for McKallip’s estate, he discovered in May 2011 that the Gift Tax Return form was not filed and the estate owes more than $1 million in gift tax, penalties and interest to the Internal Revenue Service.
Stanfield brings negligence and negligent misrepresentation causes of action against the firm. He seeks actual damages, including the gift tax, penalties and interest assessed by the IRS; attorney fees; costs; and interest. He also alleges the firm violated the Texas Deceptive Trade Practices and Consumer Protection Act, and he seeks fee forfeiture under the act for “unconscionable fees.”
Stanfield also alleges that the statute of limitations does not bar the suit because he filed it within two years of discovering the defendant’s alleged wrongful acts.
The firm declines comment, according to spokesman Mike Cinelli.
Plaintiff’s attorney Ross Sears, a partner in Sears★Crawford of Houston, says, “It’s clear that when you file an irrevocable trust like that for someone, you have to file a form 709 Gift Tax Return, or you lose the tax benefit of it. . . . The 709 form was never filed.”