Oklahoma Bar Journal

Ethical Issues That Arise in the Practice of Estate Law

By Alison A. Cave

#227592494 | © designer491 | fotolia.com

Many different ethical issues can arise when a lawyer is an estate planning practitioner. Generally, clients tend to be older, financially established and perhaps have a blended family. Clients will often request the lawyer to prepare documents for multiple members of the family or even family business. Sometimes, the clients rely heavily on someone else to communicate information to the lawyer. These types of scenarios lead to numerous ethical issues.

The lure of multiple representations can present a tempting prospect. An increased fee without dealing and consulting with another lawyer, especially in a circumstance where the client is encouraging it in order to economize fees, have cohesive plans and to help resolve issues, is hard to oppose. The risks of trying to serve more than one client are considerable.

What is the first step in avoiding a conflict of interest? Every law office should devise a conflict of interest procedure and system. Even the law office which has only one attorney may fail to remember having represented a person a few years back when a new party approaches the attorney for assistance. The attorney may have spent several valuable hours on the matter before realizing there is a conflict with a former client. These expended, unbillable hours can be costly to a solo practitioner.

The conflict of interest system can range from a high-tech software program to a card file. However, even the most expensive system is of no assistance if the procedure is not followed or the system is not maintained. The value of the system is actually dependent upon the efficiency of the user. Conflicts need to be checked prior to the attorney accepting the legal project and checking the request for conflict should be an automatic initial response to a new file.

What information needs to be contained in the system? Every conflict of interest system ought to include every client represented by the attorney and in addition to the client, all other protected persons, such as spouse, partners, shareholders, directors and officers of corporations. If additional parties are brought into the matter at a later time, they should be added to the list as well. Also include all names such as the former or maiden name of a client should this client’s name change at a later time, as well as any other pertinent parties.

When a lawyer joins a law firm or simply creates a partnership with another lawyer or lawyers, or when two law firms combine, it is absolutely critical each lawyer provide a complete list of past and present clients which is then merged into a master list, so conflicts can be checked. Similarly, when new staff members are hired who may have worked for other law firms, they should check the law firm’s list of clients to see if by working on a case for the lawyer a conflict could develop from data obtained while working at the previous firm.

Identifying potential conflicts of interest before they occur is essential since one of the crucial elements in the practice of law is loyalty and independent judgment to the client. A breach of these key elements can result in a bar disciplinary action or a legal malpractice action. By its very essence, a conflict of interest will imply the attorney is unable to have complete loyalty or provide independent judgment to the client, because of prior knowledge acquired from another client which may work to the detriment of the current client. The Oklahoma Rules of Professional Conduct (ORPC) can be instructive to the lawyer in recognizing potential conflicts of interest and in what types of circumstances a conflict may arise. In particular, Rule 1.7 through 1.11 of the ORPC and the comments thereto address the issues of conflicts of interest and an attorney’s responsibility to the client when such a conflict arises.

Conflict claims arise in a variety of ways. They often take place when an attorney has performed extensive work on behalf of many members of the same family, frequently in the context of doing work for a family company and then attempting to perform work for one or more of the family members in their estate planning. The other way a conflict occurs is when a husband and wife come in together and it is a blended family with children from previous marriages or relationships. Husband and wife appear to agree on the division of the property, but when the spouse dies, the surviving spouse does not want to share the estate with the children from the previous marriage or the children do not want to share the estate with the stepparent.

There was a recent published opinion discussing the conflict of interest issue.1 Although not an Oklahoma case, it is a good example of how a conflict can arise. Scott Hudson died intestate in 2005 with only two heirs, his wife (Letty) and his son from a previous marriage (Kyle). When Mr. Hudson died, he left an estate consisting of various assets located in a number of countries, totaling multiple millions of dollars. Letty was appointed the administrator of the estate.

Letty hired a firm that had done work for the primary disputed asset in the probate case, a bus company. The firm entered its appearance in the case as the “attorneys for the administrator.” However, the firm in some pleadings noted they were counsel for the estate by its administrator or simply “attorneys for the estate.” As the case became more adverse between Letty and Kyle, it became apparent the firm was advocating Letty’s position that she owned 100 percent of the bus company instead of 50 percent as Kyle asserted, allowing Letty to dissipate the estate’s assets and allowing Letty to withhold assets from Kyle. Eventually, Letty was removed as administrator and a neutral party was appointed administrator. The estate, Kyle and even Letty, filed a legal malpractice action against the firm.

Although the court chastised the lawyers for the lack of an appellate record, it determined there was a factual question of whether the firm had a conflict of interest in this litigation. The firm attempted to argue they only represented Letty and relied on their engagement letter. However, the engagement letter failed to define the scope of employment and did not state the purpose for Letty retaining the firm. The trial court had agreed with the firm that they represented Letty only and had no duties to the estate or Kyle, thus granting the firm’s motion for summary judgment. The appellate court reversed and remanded the matter for further proceedings.

One of the most important points to take away from the Estate of Hudson case is the engagement letter. A trusts and estates practitioner must clearly and specifically define the client and scope of services to be performed in the firm’s engagement letter.

The engagement letter should identify the client whose interests are being represented. Equally as important is to specifically clarify whose interests are not being represented by the attorney. Identification is key in the estate planning field to avoid the misunderstandings by relatives of the client that the attorney is not the “family” lawyer.

Making the scope of the work performed under the terms of an engagement letter as wide ranging as possible is a natural response. This is often based upon the unwise theory a far-reaching engagement letter will create additional legal work. In fact, an engagement letter with a loosely defined scope of the work covered does little more than expose an attorney to potential liability well outside the range of services the attorney intended to perform. Rule 1.2(c) of the ORPC, provides for a lawyer to reasonably limit the terms of the engagement, provided the client is aware of the limitations and consents.

Issues arise when there are not documents showing an adequate inquiry was made and then detailing that inquiry into the testator’s mental capacity. The estate and trust practitioner must develop questions to ask the client which show the client’s general awareness of the client’s heirs and assets. Some practitioners video their clients to show mental capacity. With regard to assets, relatives, etc., the better practice is to create a questionnaire the client completes and signs.

The attorney must make sure there is documentation that inquiry was made regarding undue influence. The practitioner must meet with the testator alone. The attorney needs to develop a list of standard questions, so the attorney is confident there has been no undue influence.

Standard inquiries often get overlooked when the practitioner is representing friends and/or family. The best recommendation would be not to act for family or friends, but should the practitioner decide to go forward, be particularly vigilant about recording the answers to all of the inquiries to insure capacity, assets, beneficiaries and undue influence.

In administering an estate, claims arise when distributions are made without ensuring adequate money is in the estate to pay the taxes or creditors’ claims. The attorney needs to err on the side of caution when making an interim distribution. Estate taxes can generate ethical issues in these two areas: 1) where the personal representative believes the attorney is going to make sure the estate taxes are handled – the estate tax issue should be addressed in the engagement letter; and 2) if the attorney is handling the estate taxes, the attorney should double check the availability of the deceased spousal unused exclusion portability and be aware of the amount and the time limitations.

The estate and trust practitioner must make sure all heirs are notified. The attorney needs to double check any distributions from the estate include all who are entitled to that distribution and the portion that heir is entitled. In other words, disclose, document and confirm!

Issues arise when the attorney’s notes taken from the meetings do not agree with the drafted estate planning documents and there is no documentation showing the client instructed the attorney differently after the initial consultation. The estates and trusts practitioner needs to make and take the time to compare the draft estate planning documents with the notes taken during the consultations. Fortunately, this issue is one of the easiest to prevent. The attorney must document the work performed for the client. Then, the attorney needs to confirm the information the client provided, the advice given to the client, the client’s instructions and what steps were taken on those instructions. This can be done in the attorney notes, a reporting letter or a confirming email. Taking the time to make detailed dockets, such as “telephone conference with client regarding the following changes to the will” can prevent an error. In other words, document everything! A paper trail can help refresh the practitioner’s memory as to why the document was drafted in this manner.

Proof reading can be tedious, but it is extremely important in estate planning. This requires double checking the math and making sure 100 percent of the estate is accounted for in the testamentary documents. Additionally, the attorney needs to double check beneficiaries and what their distributions will be. One of the most tedious tasks is proof reading the drafted estate planning documents for ambiguities in the wording and double checking to make sure all necessary provisions and/or clauses are included.

With the changing demographics of the population at large, there is more work in estate planning than ever, and at the same time, more exposure to a malpractice claim or an ethical violation. This risk of a legal malpractice claim cannot be totally eliminated. However, the risk can be reduced by improving communications with the client and documentation of all work performed for the client.

Alison A. Cave is senior vice president of claims with Oklahoma Attorneys Mutual Insurance Co. She graduated from the OU College of Law. Ms. Cave began her career as a law clerk for Justice Yvonne Kauger. She has received the OBA President’s Award and the Mona Salyer Lambird Spotlight Award.

1. Estate of Hudson et al v. Tibble et al421 Ill. Dec. 105, 99 N.E.3d 105, (2018).

Originally published in the Oklahoma Bar Journal -- OBJ 89 pg. 6 (December 2018)