Lowenstein Sandler has been hit with a legal malpractice lawsuit over a series of “dynasty” trusts it established for a high-powered real estate mogul.

The suit says Lowenstein's Eric Weinstock failed to properly assess the risks inherent in transferring real estate assets belonging to Samuel Raia and his family into the dynasty trusts established by the law firm. The tax liability associated with the estate plan when the real estate assets pass from one generation to the next will be greater than anticipated, according to the Feb. 1 lawsuit filed in Bergen County Superior Court.

Raia's family business, which acquires, develops and manages real estate, owns a portfolio of 3,000 multifamily properties in seven states. Raia is a past president of the Republican State Committee and was mayor of Saddle River from 2009-2017.

Lowenstein Sandler has advised the Raia family business and its operators on professional and personal matters for roughly 30 years, according to the lawsuit. The firm began providing the family with estate planning advice in the early 2000s.

Weinstock began advising the Raia family in 2011, working alongside JPMorgan Chase & Co. and accounting firm J.H. Cohn, which became CohnReznick in 2012. A series of dynasty trusts were established in 2012. But in 2016, after consulting with another law firm that was not identified in court documents, the Raia family learned of adverse income tax consequences of the advice from Lowenstein Sandler and Weinstock, the suit claims.

A dynasty trust is designed to pass assets from one generation to the next without incurring transfer or gift taxes. But the defendants failed to alert the Raia family that conveying real estate into dynasty trusts could eliminate the plaintiffs' ability to transfer assets with a stepped-up basis, triggering phantom gains that create tax liabilities and causing losses relating to elimination of the depreciation reset of assets, the suit claims. The failure of Weinstock and the Lowenstein firm to advise the plaintiffs of such consequences was a breach of the applicable standard of care, the suit claims.

The suit brings claims for legal malpractice and breach of fiduciary duty against Weinstock and Lowenstein.

Raia filed the suit along with 17 family members, five trusts and two other corporations. They are represented by Gary Werner of Schenck, Price, Smith & King in Florham Park and Barry Coburn of Coburn & Greenbaum in Washington, D.C.

Coburn declined to answer questions about the suit, and Werner did not return calls.

Lowenstein's general counsel, David Wissert, said in a statement, “While we do not comment on ongoing legal proceedings, we strive constantly to provide the most appropriate legal advice to our clients in all matters, and we look forward to demonstrating this in court with respect to this estate planning matter.”

Raia and members of his family filed a similar suit against CohnReznick in March 2018. Werner said in court documents that the plaintiffs will move to consolidate its suit against Lowenstein and Weinstock with the CohnReznick suit, which has been stayed pending efforts to mediate. JPMorgan was involved in “rendering related advice and in related conduct” but “it is our view that their involvement was such that they should not be made a part of this lawsuit,” Werner said.