The Journal of The DuPage County Bar Association

Back Issues > Vol. 11 (1998-99)

Estate Planning Practice Do’s and Don’ts
By David F. Rolewick

The challenge of professionalism is no less apparent in a lawyer’s estate planning practice than in other areas of the law. In fact, some of the situations involving multiple representation and conflicts of interest are most common in this area of the practice. The estate planning attorney is well advised to regularly study the disciplinary cases, legal malpractice cases, and advisory opinions not only to insure that his or her firm’s practices and procedures are in conformity with, but that their firm exceeds, minimum standards.

This Article briefly addresses opinions regarding the professional conduct of attorneys handling estate planning. Many of these opinions clearly recognize that clients expect a certain level of service or type of service or duty; which in several of these opinions was not performed, or which the attorney did not believe existed.

Interestingly, none of these cases discuss the nature or provisions of an engagement letter.

This implies that in most, if not in all, of the cases an engagement letter either did not exist or failed to address the issue that was the subject of the dispute. It may well be that an engagement letter, or in some cases a disengagement or a nonengagement letter, would have addressed the appropriate issue and created strong evidence of what the understanding and expectations of the client should have been under the circumstances of the case.

In some of the cases the threshold issue is whether the attorney-client relationship and, hence, the attorney’s fiduciary duty existed. In answering this question, courts generally apply a reasonable person or objective standard. Would a reasonable person, in the plaintiff’s position think or believe that an attorney-client relationship existed? A person will be hard-pressed to claim that the attorney-client relationship existed in the face of a properly drafted engagement, disengagement, or nonengagement letter.

Certainly, an engagement letter is not the solution to all the challenges that face estate planners. When a duty to a non-client exists, it cannot be wished away with a letter. This Article is an attempt to assist the estate planner in developing appropriate office procedures.

Some Basic Principles

An estate planning attorney must take certain steps at the beginning of the attorney-client relationship, including: 1) identifying the client; 2) determining if potential conflicts of interest exist; 3) disclosing potential conflicts of interest; 4) determining if the representation is advisable; 5) obtaining consent when appropriate; and 6) revisiting and reevaluating conflicts as the representation matures to determine if representation of the client has become materially limited because of the lawyer’s responsibilities to another client or third person (or the lawyer’s own interests). IL S. Ct. Rules Of Professional Conduct Rule 1.7(b).

In performing this exercise, the estate planning attorney should consider the alternatives to engagement which are available.

Under Illinois Supreme Court Rules Of Professional Conduct Rule 1.2, an attorney has the right to limit the scope of representation. Such a limitation is best put in writing so that the client understands what the attorney is engaged to do and what the attorney is not engaged to do. Limiting the scope of the engagement may be an effective way to avoid certain conflicts of interest problems.

An attorney has the right to not accept a client’s engagement. This is important where an attorney realizes that potential conflicts exist that may develop into material conflicts. An attorney should exercise the right not to take a case when his or her intuition and experience suggests that the case is replete with potential problems that may result in the client’s expectations of the duties and responsibilities of the attorney being quite different from the attorney’s understanding of his or her role as counsel. A non-engagement letter identifying the client’s case or matters and the attorney’s decision not to assume responsibility for one or more such matters will be helpful when the engagement is inappropriate or ill-advised.

A non-engagement letter should clearly suggest that the client seek other counsel promptly.

Illinois Supreme Court Rules Of Professional Conduct Rule 1.7, relating to conflicts of interest, does not require written disclosure or written consent. Some commentators have taken the position that a written attempt to comply with the Rule 1.7 is almost impossible. They argue that an attempt at full disclosure, including explanation of the implications of the common representations and the advantages and risks involved, cannot be accomplished in a letter or other writing.

At the beginning of a case, it is difficult for an attorney to be able to make adequate disclosure under Rule 1.7(c), even though this Rule requires an attorney to make such disclosure. Regardless of whether a written attempt at disclosure has been made, confirming the oral disclosure and discussion of implications in a writing may well be helpful. While my research on this issue is not exhaustive, I have been unable to find many cases where an attorney has made a written attempt at a Rule 1.7(c) disclosure or confirmed such disclosure in writing, but then failed to identify a specific implication, which resulted in a disciplinary charge or complaint being filed.

Common Situations

The following are fact patterns which estate planning attorneys face on a regular basis. These fact patterns are not intended to be exhaustive, but only to present a convenient format for the reader to consider the cases and issues.

Representing Both Spouses in Estate Planning

The most common estate planning client situation is representing a husband and wife. Applying our principles of engagement to this setting, an attorney must first ask, "who is the client?" The answer to this question may be a difficult one. If the attorney assumes that both spouses jointly are his or her clients, then he or she needs to be concerned that the clients understand that the confidences obtained through the representation from either client, if material to the representation of the other, must be revealed to the other spouse.

Additionally, if the clients’ estate exceeds the exemption equivalent amount ($625,000.00 in 1998) and the attorney intends to discuss credit shelter planning or qualified terminable interest property (QTIP) trusts, he or she must also reveal to the clients that this discussion will involve conflicts of their respective interests since the QTIP or the credit shelter trust will be limiting the access of one spouse to the assets of the other.

If the clients own most of their assets in joint tenancy and trusts are to be involved in the estate plans, the attorney might find himself or herself involved in the division of joint tenancy assets in order to fund the appropriate estates or trusts designed to utilize the unified credits of the clients. Such a division will limit one spouse’s access to assets which he or she currently owns jointly.

In an Illinois disciplinary case which has been discussed by commentators on estate planning at length, an attorney’s responsibility in the marital setting has been somewhat clarified. In In re Eisel, 94 CH 878 (1995), the Attorney Registration and Disciplinary Commission reprimanded two attorneys for violating Rule 1.7 for failing to disclose to their former client (the wife) the element of her husband’s estate plan which adversely affected her. Id. Additionally, the attorneys failed to advise the wife of her right to retain independent counsel in drafting her estate plan in violation of Rule 1.7. Id.

While some Illinois practitioners typically treat the husband and wife as joint clients thereby suggesting that there may be no confidences kept by the lawyer from either party, the Professional Ethics Committee of the Florida State Bar Association has issued a proposed advisory opinion which might assist in resolving these issues in an different manner. Op. Fla. St. Bar Ass’n 95-4 (May 30, 1997). The Florida Bar Opinion suggests that in representing a husband and wife in estate planning matters, the attorney must discuss the manner in which separate confidences will be handled and explain that if the attorney receives separate confidences from either spouse, he or she will maintain the confidences from the other spouse. Id.

This approach gives precedence to the duty of confidentiality over the duty of loyalty. The Florida Bar Opinion approach treats the husband and wife as separate clients relative to issues of confidentiality.

In representing a husband and wife in estate planning, an attorney is well advised to recall the provisions of Illinois State Bar Association Advisory Opinion 701. This opinion suggests that it is improper for an attorney to represent the spouse of a former client of a law partner in a dissolution of marriage proceeding unless there is evidence that the attorney has been and will continue to be adequately screened from obtaining any confidences obtained in the prior representation of the other spouse by the law partner. See Op. Ill. St. Bar Ass’n 701 (1981). Thus, it seems that representing estate planning clients in a subsequent divorce has its challenges.

Representing The Children Of Existing Estate Planning Clients

In this setting, it is easy for an attorney to identify the client, but it is more difficult to identify if there is a potential conflict of interest. In Florida Bar Association v. Hunt, 429 So. 2d 1201, 1204 (Fla. 1983), the Florida Supreme Court held that an attorney violated the Florida State ethical rules of conduct by representing both the heir and the personal representative of an estate.

In an earlier case, the New Jersey Supreme Court held that an attorney violated the state ethical rules of conduct by counseling a client with regard to a bequest to a beneficiary who was also a client of that attorney. Haynes v. First Nat’l State Bank, 432 A.2d 890, 901-02 (N.J. 1981).

As a practical matter, it is not uncommon for estate planners to prepare trusts, wills, and other estate planning documents for two or three generations of the same family. In doing so, the attorney may be preparing documents for one client which provide benefits to another client and create a potential conflict of interest. After analyzing the conflict, the attorney may be confident that the representation of one client will not materially limit the attorney’s responsibilities to the other client or clients. Nevertheless, disclosure of the conflict along with an explanation of the implications of the conflict appears to be appropriate and necessary. After the disclosure is provided and consents obtained, a letter or waiver of the conflict by the various parties may go a long way to solving potential future problems that could be raised when the clients are deceased and the attorney is dealing with dissatisfied, children, spouse, or other relatives.

Duty To The Children Or Beneficiaries Of Estate Planning Clients

In the estate planning practice, the beneficiary of a client is not also a client. It is a well-established principle under Illinois law, however, that the beneficiaries of a will are owed a duty by the attorney. See, e.g., McLane v. Russell, 546 N.E.2d 499, 502 (Ill. 1989) (holding that, in limited circumstances, an attorney owes a duty of care to a non-client beneficiary). The attorney must recognize this duty in drafting the will and may need to take such additional actions as are appropriate to fulfill the intent of the testator for the benefit of the beneficiaries.

In Simon v. Wilson, No. 1-96-2529, 1997 WL 355838, at *2 (1st Dist. 1997), the defendant attorney drafted a will for the wife of his married client. The attorney also drafted a trust for the husband. Id. The couple was married for forty years, but the wife had a daughter prior to this marriage to whom she devised her interest in certain real estate by the will. Id. at *1. In implementing the wife’s estate plan, the attorney failed to sever the joint tenancy that the wife had in the real estate with her current spouse. The daughter, being the intended third party beneficiary of the attorney-client relationship, then sued the attorney. The appellate court held that the daughter could state a cause of action for professional negligence against the attorney who drafted the will without severing the joint tenancy because the attorney had previously created the joint tenancy for his clients. Id. at *9

In light of this case, it seems appropriate for an attorney in such a situation to attempt to limit any potential liability to third party beneficiaries. It would appear, however, that IL S. Ct. Rules Of Professional Conduct Rule 1.8(f) prohibits an attorney from attempting to limit his or her liability to third party beneficiaries through any written agreement or understanding with the client. On the other hand, if the scope of engagement is limited, proof of the limitation would be helpful in defending a claim based on a failure to perform a service. For example, an engagement letter that specifically states that the attorney is not examining title to real estate or drafting deeds at the client’s direction might be helpful.

Representing The Estates Of Minors Or Disabled Persons

In comparison to the setting where the identification of the client provides no assistance in identifying the duties and obligations that the attorney assumes in estate planning, the determination of who the client is when representing the estates of minors or disabled persons is difficult to answer, but is critical to the attorney’s proper performance. The Court of Appeals for the District of Columbia Circuit has held that an attorney for the personal representative of an estate violated the rules of conduct by failing to prevent the representative from depleting estate assets. In re Hopkins, 677 A.2d 55 (D.C. 1996). This opinion suggests the duty of loyalty to the client estate supersedes the confidentiality requirements placed upon an attorney relative to the conduct of the representative. Id.

The Hopkins case is consistent with an ISBA opinion on the subject. Illinois State Bar Association Advisory Opinion No. 91-24 suggests that the attorney for the guardian of a disabled adult is required to inform the court when the guardian takes money from the estate, even when the guardian is acting under a claim of right. Op. Ill. St. Bar Ass’n 91-24 (1992). This opinion goes on to explain that the attorney does not represent the guardian individually so that disclosure by the attorney is not a violation of Rule 1.6. Id. The opinion also suggests that the attorney represents the disabled person’s estate first and the guardian second, but only in the capacity as guardian and not personally. Id. The Illinois Supreme Court, in a case concerning the disqualification of an attorney has concluded that the attorney, in appearing on behalf of a guardian represented the ward. Schwartz v. Cortelloni, 177 Ill. 2d 166, 685 N.E. 2d 871 (1997).

These opinions suggest that an attorney might consider informing the personal representative of an estate, whether it is an estate opened for a minor, disabled person, or decedent, that there can be no confidentiality imposed upon the attorney relative to the improper conduct of the guardian or the personal representative.

An engagement letter identifying this issue and explaining the attorney’s duties may be very helpful in helping the personal representative understand the obligations and duties of the attorney and to avoid a false feeling of security or confidentiality. Such a letter, however, may be impossible or impractical in some circumstances.

Representing The Trustee

While the trend toward the use of trusts has changed the nature of the practice of attorneys who deal with estates and assets of decedents, guidance from the courts in this area is less than clear regarding an attorney’s responsibilities. Courts have not yet clearly answered the question "who is the client?".

Illinois caselaw does not provide much guidance. In 1987, the First District Appellate Court ruled in Green v. First National Bank of Chicago, 516 N.E.2d 311, 316 (Ill. App. Ct. 1987) that the attorney who drafted a will which contained provisions for a testamentary trust did not owe a fiduciary duty to a co-appointee under the trust. A federal case applying Illinois law has held that a law firm representing a financial consultant employed by a trust to handle its investments owed no duty to the trust or to the trustee to disclose or advise either of the on-going fraud by the consultant. Lewis v. Hermann, 775 F. Supp. 1137, 1152 (N.D. Ill. 1991).

In California it appears that a trustee can anticipate that the trustee’s communications with an attorney are confidential when the conversation or subject of the communication relates to potential fiduciary liabilities and claims of trustee misconduct. When the trustee’s communication with the attorney relates to the administration of the trust and the rights of the beneficiaries, however, the trustee cannot anticipate such confidentiality.

Thus, it appears that a trustee is well advised to obtain separate counsel when claims have been made against the trustee.

California caselaw is worthy of investigation by an attorney who represents trustees and trusts. See, e.g., Fletcher v. Superior Court, 52 Cal. Rptr. 2d 65, 68 (Cal. Ct. App. 1996) (holding that the exception to the attorney-client privilege for communications relevant to an issue between parties claiming through a deceased client applies only to communications between the deceased client and the attorney and not to communications between the attorney and the trustee of deceased client’s trust); Moeller v. Superior Court, 53 Cal. Rptr. 2d 222, 226 (Cal. Ct. App. 1996), petition for review granted, 921 P.2d 602 (Cal. 1996) (holding that since a trustee’s records regarding the administration of the trust must be fully disclosed to the beneficiaries, there can be no attorney-client privilege operating with respect to those records when a beneficiary seeks to examine them); Wells Fargo Bank, N.A. v. Superior Court, 57 Cal. Rptr. 2d 335, 341, (Cal. Ct. App. 1996) (holding that a trustee’s confidential communications with an attorney regarding potential liability for alleged misconduct is protected by the attorney-client privilege).

Additionally, the Texas Supreme Court in Huie v. Deshazo, 922 S.W.2d 920, 922-23 (Tex. 1996), held that the attorney-client privilege protects all confidential communications between the trustee and his or her attorney regardless of whether such communications are made during the course of normal trust administration or after the assertion of the claim of malfeasance.

Representing The Probate Estate

Illinois law provides better guidance regarding the obligations of an attorney in representing a probate estate. In In re the Estate of Halas, 512 N.E.2d 1276 (Ill. App. Ct. 1987), the First District Appellate Court examined the responsibilities of a law firm serving as counsel to the executor of an estate and also representing some of the beneficiaries, the executor, and other related parties, including a corporation which is a major asset of the estate. Writing for the Court, Judge McNamara found that the attorneys for the executor must act with due care and protect the interests of the beneficiaries. Id. at 1280. The Court held that the attorneys for the estate had both a direct and derivative duty to the beneficiaries. Id. This opinion emphasized the need to provide full disclosure of dual or conflicting representations. The opinion did not characterize the beneficiaries as clients of the law firm, but the disclosure analysis suggests that the court was looking to Rule 1.7 and equating the duty to beneficiaries with the duty to clients.

The Halas case demonstrates the value of revisiting and reevaluating potential conflicts as the representation matures. The materiality of the conflicts and the subsequent reanalysis of the limitation of the ability of the attorney to properly represent her clients must be undertaken on a regular basis. An attorney should not be hesitant to realize that a potential conflict has grown into a material conflict and withdraw as counsel for some or all parties.

In Barner v. Sheldon, 678 A.2d 717 (N.J. 1996), the New Jersey Appellate Court held that an attorney representing the executrix of her husband’s estate had no duty to advise the beneficiaries of the tax savings consequences of the executrix’s exercise of a disclaimer. The attorney testified that the testator did not intend to shelter his unified credit, but intended that his wife receive all of his assets.

Both Halas and Barner can be reconciled based upon their specific facts and a careful application of the rule of reason. Representation of multiple interests in probate estates may be undertaken if careful disclosure and analysis of the conflicts are made by the attorney. Notably, in Halas, the beneficiaries who complained of the attorney’s breach of fiduciary duty were represented by separate and independent counsel and the court made a finding of bad faith not against this counsel but against the law firm representing the executor, the corporation, and other various parties.

Representing Disabled Persons Or Persons With Diminished Capacity

Few areas of the law have experienced as much change and controversy as elder law and estate planning for the elderly and disabled.

The American Bar Association Committee on Ethics and Professional Responsibility has set out its guidelines regarding an attorney’s representation of a petitioner for guardianship. Op. A.B.A. Comm. On Ethics and Prof’l Responsibility 96-404 (August 2, 1996). This opinion states that an attorney may not represent a family member or third party if such representation is adverse to the representation of the petitioner for guardianship. Id. The lawyer may only seek the appointment of herself as the guardian under extreme situations where there is no practical alternative and the delay would result in irreparable harm. Once the guardian is appointed, the lawyer is permitted to represent the guardian, but any expectation of such representation must be disclosed to the court at the earliest possible opportunity.

The American Bar Association House Delegates Resolution 113 (1997) added commentary to Rule 1.14. Although the commentary is not part of the Illinois Supreme Court Rules of Professional Conduct, it provides guidance for an attorney’s conduct regarding a person who is not a client but who the attorney knows to be disabled. The attorney in such a situation may act in a manner which is necessary to prevent imminent or irreparable harm to the person’s health, safety, or financial interest if that person has no other agent or representative. It is not clear whether the attorney may act or has a duty to act if irreparable harm to a person’s health, safety, or financial interest is at stake. It may be important in such a situation to analyze how the attorney has come to the conclusion of the person’s disability. Illinois State Bar Association Advisory Opinion 89-12 suggests that an attorney learning of a person’s disability in the attorney-client relationship breaches Rule 1.6 if the attorney petitions for appointment of a guardian. Op. Ill. St. Bar Ass’n 89-12 (1990).

In dealing with the disabled and elderly, some guidelines are in place and helpful, but many questions remain unanswered. In these scenarios it may be easy to identify the client, but may be impossible to effectively disclose a conflict and obtain consent. In such case, the presence of any conflict may mean disqualification.

In Schwartz v. Cortelloni, No. 80614, 1997 WL 332204, at *8, (Ill. June 10, 1997) the Illinois Supreme Court gave us the best guidelines to date for analyzing conflicts of interest. In this case, the defendant sought to disqualify the plaintiff’s attorneys because they represented the defendant’s guardian regarding the minor’s estate forty years earlier. Id. The minor’s estate related to real property unrelated to the current litigation. Id. The court explained that the mere appearance of impropriety is not sufficient to disqualify the attorneys, and that a prohibited conflict of interest exists when there is a substantial relationship between the attorneys’ present and former representations. Id. at *8. A determination of a substantial relationship is made by careful examination of the factual context of the subject matter of both representations. Id. If any information from the prior representation is relevant to the present representation, a further consideration whether the confidential information will be available for use by the lawyer in the present representation is necessary. Id. at *7. This case is very helpful in following two of the principles discussed above, i.e. determining if representation is advisable and revisiting and reevaluating conflicts as the representation matures to determine if representation of a client has become materially limited because of the lawyer’s responsibilities to another client or third person.

Conclusion

The estate planning attorney is well advised, at the commencement of engagement, to carefully: analyze what he or she is about to do, identify the client, determine if any potential conflicts exist, disclose such conflicts, decide whether it is appropriate to take the case in light of the conflicts, obtain consents where appropriate, continue to monitor the potential conflicting responsibilities, and communicate these issues clearly with all of his or her clients. Such action will maximize the possibility that clients have reasonable expectations for the attorney-client relationship.

David F. Rolewick is a Principal of Rolewick & Gutzke, P.C., Wheaton. His practice is concentrated in Business Representation, Real Property and Estates. He received his Undergraduate Degree in 1968 and his Law Degree in 1971 from Loyola University-Chicago. He may be reached at rgpclaw@aol.com.

The author thanks Charles R. Wulf of Rolewick and Gutzke, P.C., Wheaton Administrator Mary Robinson, Christine Anderson and Mary Andreoni of the ARDC, and Leon Schrauben of LAP for their assistance in the preparation of this article.


 
 
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