Practical Ethics
June 11, 2014
My Client Wants Me! How Can I Ethically Draft Documents that Name Me as
Fiduciary or a Recipient of a Testamentary Gift?
I.
Introduction
During the course of representation, attorneys and their staff may become close to
their clients. When this occurs, clients may wish to give gifts to the attorney and/or staff, or ask
the attorney to serve as a fiduciary for the client, whether as a guardian, trustee, or agent under a
power of attorney. This presentation will discuss how an attorney can ethically draft documents
or assist in other ways to accomplish their client’s objective. We will consider the Model Rules
of Professional Conduct, because these rules serve as the model for the rules that have been
adopted in most jurisdictions throughout the country.
II.
Gifts to Lawyer or Staff
A.
Rule 1.8
Gifts to Lawyers from their clients is constrained by ABA Model Rule 1.8 (c). It
provides that:
(c) A lawyer shall not solicit any substantial gift from a client, including a
testamentary gift, or prepare on behalf of a client an instrument giving the lawyer
or a person related to the lawyer any substantial gift unless the lawyer or other
recipient of the gift is related to the client. For purposes of this paragraph, related
persons include a spouse, child, grandchild, parent, grandparent or other relative
or individual with whom the lawyer or the client maintains a close, familial
relationship. 1
Practical Tip: Always rely on the Rules of Professional
Conduct which have been adopted by your own State
Supreme Court
B.
Restrictions on Attorney
1.
Solicitation of a substantial gift.
This restriction reflects the concern of overreaching. The comments to Rule
1.8(c) indicates that “due to concerns about overreaching and imposition on clients, a lawyer
may not suggest that a substantial gift be made to the lawyer or for the lawyer's benefit, except
where the lawyer is related to the client as set forth in subdivision (c).”2
2.
Preparing documents to convey a substantial gift.
This restriction addresses those gifts that are not requested by the attorney. These
gifts were the donee’s idea and intent, not the lawyer’s. A lawyer is permitted to be named in a
1
2
ABA Model Rule of Professional Conduct Rule 1.8(c)(2012).
Id.
will; he just cannot draft the will. Courts have disbarred3 lawyers for violation of this rule and
even suspended lawyers for violating this rule, even when the lawyer has no other previous
discipline4 and even no intent to keep the money. 5
C.
Substantial Gift
Under the current version of the rule, both constraints revolve around the definition of a
“substantial gift”. The Comment to the Rule 1.8(c) indicates:
A lawyer may accept a gift from a client, if the transaction meets general
standards of fairness and if the lawyer does not prepare the instrument bestowing
the gift. For example, a simple gift such as a present given at a holiday or as a
token of appreciation is permitted. If a client offers the lawyer a more substantial
gift, subdivision (c) does not prohibit the lawyer from accepting it... 6
The definition of “substantial” is found in the Terminology section of the Model Rules
which states that "[s]ubstantial when used in reference to degree or extent denotes a material
matter of clear and weighty importance.” 7 It is unclear whether the “weight” of the matter is
determined from the perspective of the client or the attorney.
The Florida Bar is currently considering a revision to this rule which would eliminate the
word “substantial”. See Attachment A.
Practical Tip: Relying on the idea that a gift was not
“substantial” to explain why you drafted the document
conveying that gift is very dangerous ground.
D.
Permitted gifts
In additional to non-substantial gifts being permitted, gifts from certain individuals are
permitted. Gifts from “related persons include a spouse, child, grandchild, parent, grandparent,
or other relative with whom the lawyer or the client maintains a close, familial relationship.” 8
E.
Other Ethical Issues
There are other ethical issues that can arise when an attorney receives a gift from a client.
The comment to the Rule 1.8(c) recognizes that a gift to an attorney may be “voidable by the
client under the doctrine of undue influence, which treats client gifts as presumptively
fraudulent.” If effectuation of a substantial gift requires preparing a legal instrument such as a
will or conveyance, however, the client should have the detached advice that another lawyer can
3
Florida Bar v. Poe, 786 So. 2d 1164 (Fla. 2011).
Florida Bar v. Anderson, 689 So. 2d 29 (Fla. 1994).
5
Id. (the attorney was attempting to hide the money from the creditors of the intended beneficiary).
6
Id.
7
ABA Model Rule of Professional Conduct Terminology (2012).
8
Id. at Rule 1.8(c) cmt.(2012).
4
provide and the lawyer should advise the client to seek advice of independent counsel.” Some
jurisdictions and scholars have suggested that the standard of undue influence should be weighed
differently when the undue influence purportedly came from an attorney. The trial court opinion
by Judge Lauren C. Laughlin in the case of In Re: The Estate of Virginia Murphy (Pinellas
County, August 1, 2008) is a great example of the interplay between undue influence and this
ethics rule. It is attached as Attachment C.
Additionally an attorney needs to be aware that a gift can be later held by the court to be
a portion of the fee for services. If the gift is construed to be a fee, it must comply with the
requirements under ethics rules. Rule 1.5 of the Model Rules of Professional Conduct states
that:
(a) A lawyer shall not make an agreement for, charge, or collect an unreasonable
fee or an unreasonable amount for expenses. The factors to be considered in
determining the reasonableness of a fee include the following:
(1) the time and labor required, the novelty and difficulty of the questions
involved, and the skill requisite to perform the legal service properly;
(2) the likelihood, if apparent to the client, that the acceptance of the particular
employment will preclude other employment by the lawyer;
(3) the fee customarily charged in the locality for similar legal services;
(4) the amount involved and the results obtained;
(5) the time limitations imposed by the client or by the circumstances;
(6) the nature and length of the professional relationship with the client;
(7) the experience, reputation, and ability of the lawyer or lawyers performing the
services; and
(8) whether the fee is fixed or contingent.9
Practical Tips: Attorneys, who receive a substantial gift from a client, should
document the receipt of that gift and all circumstances that surround that gift to
F.
Rules under Consideration
show that it was freely given and not a fee for services. Any note or
correspondence related to the gift should also be maintained.
F. These restrictions are imputed to other members of the attorney’s firm
The restriction that prohibits the attorney who is receiving the gift from drafting any
documents precludes other members of the same firm from creating those documents. Rule
1.8(k) states “[w]hile lawyers are associated in a firm, a prohibition in the foregoing paragraphs
(a) through (i) that applies to any one of them shall apply to all of them.”10
III.
Naming the Attorney as a Fiduciary or other Agent
A growing trend among elder law attorneys is taking on the role of a fiduciary for a
client. At a recent National Academy of Elder Law Attorney conference a session dealt
exclusively with the attorney acting in this role. The presenters made it clear that this was a very
9
ABA Model Rule of Professional Conduct Rule 1.5(a) (2012).
ABA Model Rule of Professional Conduct Rule 1.8(k) (2012) (the restriction as to gift is paragraph c).
10
lucrative part of their practices and an area of growth with their firm. Although much can be
said for and against attorneys acting in this role from a marketing perspective, the purpose of this
outline is to alert the attorney intending on acting in this role to do it ethically.
A.
Rules 1.7 and 1.8(c)
The ethics rules make it clear that Rule 1.8(c) does not prohibit this activity but that an
attorney must act with care to not violate other rules. Comment 8 to Rule 1.8(c) says:
This rule does not prohibit a lawyer from seeking to have the lawyer or a partner
or associate of the lawyer named as personal representative of the client's estate or
to another potentially lucrative fiduciary position. Nevertheless, such
appointments will be subject to the general conflict of interest provision in rule
1.7 when there is a significant risk that the lawyer's interest in obtaining the
appointment will materially limit the lawyer's independent professional judgment
in advising the client concerning the choice of a personal representative or other
fiduciary. In obtaining the client's informed consent to the conflict, the lawyer
should advise the client concerning the nature and extent of the lawyer's financial
interest in the appointment, as well as the availability of alternative candidates for
the position.11
The conflicts Rule 1.7 states that:
(a) Except as provided in paragraph (b), a lawyer shall not represent a client if the
representation involves a concurrent conflict of interest. A concurrent conflict of
interest exists if:
(1) the representation of one client will be directly adverse to another client; or
(2) there is a significant risk that the representation of one or more clients will be
materially limited by the lawyer's responsibilities to another client, a former client
or a third person or by a personal interest of the lawyer.
(b) Notwithstanding the existence of a concurrent conflict of interest under
paragraph (a), a lawyer may represent a client if:
(1) the lawyer reasonably believes that the lawyer will be able to provide
competent and diligent representation to each affected client;
(2) the representation is not prohibited by law;
(3) the representation does not involve the assertion of a claim by one client
against another client represented by the lawyer in the same litigation or other
proceeding before a tribunal; and
(4) each affected client gives informed consent, confirmed in writing. 12
The conflict that the attorney must be aware of is defined as a materially limiting conflict. This
is a conflict that arises because there is “is a significant risk that a lawyer's ability to consider,
recommend or carry out an appropriate course of action for the client will be materially limited
as a result of the lawyer's other responsibilities or interests.”13 The attorney may have an interest
11
ABA Model Rule of Professional Conduct Rule 1.8 cmt. 8 (2012).
ABA Model Rule of Professional Conduct Rule 1.7(2012).
13
Id. at cmt 8.
12
in being named as the agent or fiduciary and therefore he may be influenced and limited by that
desire in advising the client as to other courses of action (naming someone else as the agent).
The comment to the rule says “[t]he lawyer's own interests should not be permitted to have an
adverse effect on representation of a client.”14
Probably the best guidance in this area of law comes from the ACTEC commentary to
Rule 1.7. Initially the section entitled Selection of Fiduciary makes clear that the selection of the
fiduciary is solely the client’s decision. It states:
The lawyer advising a client regarding the selection and appointment of a
fiduciary should make full disclosure to the client of any benefits that the
lawyer may receive as a result of the appointment. In particular, the lawyer should
inform the client of any policies or practices known to the lawyer that the
fiduciaries under consideration may follow with respect to the employment of the
scrivener of an estate planning document as counsel for the fiduciary. The lawyer
may also point out that a fiduciary has the right to choose any counsel it wishes. If
there is a significant risk that the lawyer’s independent professional judgment in
the selection of a fiduciary would be materially limited by the lawyer’s self
interest or any other factor, the lawyer must obtain the client’s informed consent,
confirmed in writing.15
The section entitled Appointment of Scrivener as Fiduciary goes on to explain that:
An individual is generally free to select and appoint whomever he or she wishes
to a fiduciary office (e.g., trustee, executor, attorney-in-fact). None of the
provisions of the MRPC deals explicitly with the propriety of a lawyer preparing
for a client a will or other document that appoints the lawyer to a fiduciary office.
As a general proposition lawyers should be permitted to assist adequately
informed clients who wish to appoint their lawyers as fiduciaries. Accordingly, a
lawyer should be free to prepare a document that appoints the lawyer to a
fiduciary office so long as the client is properly informed, the appointment does
not violate the conflict of interest rules of MRPC 1.7 (Conflict of Interest:
General Rule), and the appointment is not the product of undue influence or
improper solicitation by the lawyer.
The designation of the lawyer as fiduciary will implicate the conflict of interest
provisions of MRPC 1.7 when there is a significant risk that the lawyer’s interests
in obtaining the appointment will materially limit the lawyer’s independent
professional judgment in advising the client concerning the choice of an executor
or other fiduciary. See ACTEC® Commentary to MRPC 1.8. (addressing
transactions entered into by lawyers with clients).
14
Id. at Cmt. 10.
ACTEC Commentary to the Rule 1.7 http://www.actec.org/public/CommentariesPublic.asp (last visited June 9,
2014).
15
For the purposes of this Commentary a client is properly informed if the client is
provided with information regarding the role and duties of the fiduciary, the
ability of a lay person to serve as fiduciary with legal and other professional
assistance, and the comparative costs of appointing the lawyer or another person
or institution as fiduciary. The client should also be informed of any significant
lawyer-client relationship that exists between the lawyer or the lawyer's firm and
a corporate fiduciary under consideration for appointment.16
Practical Tip: The ACTEC commentary to the Model Rules of
Professional Conduct is a great resource. It includes not only
commentary but also a comprehensive list of cases by jurisdiction. It
can be found at
http://www.actec.org/public/CommentariesPublic.asp
B.
Independent Judgment
An attorney is called to give the client the attorney’s independent judgment. Rule 2.1
states that
[i]n representing a client, a lawyer shall exercise independent professional
judgment and render candid advice. In rendering advice, a lawyer may refer not
only to law but to other considerations such as moral, economic, social and
political factors, that may be relevant to the client's situation. 17
ABA Ethics Opinion 02-426 puts it this way
[a] lawyer may accept appointment as fiduciary . . . so long as the lawyer
discusses with the client information reasonably necessary to enable the client to
make an informed decision in selecting the fiduciary. If there is significant risk
that the lawyer’s interest in being named a fiduciary will materially limit his
independent professional judgment in advising the client in her choice of a
fiduciary, the lawyer also must obtain the client’s informed consent, confirmed in
writing.
In determining who is the fiduciary, a client needs to consider many different variables. The
attorney needs to assist the client to consider those different issues, without the internal pressure
of the attorney’s own personal issues.
C.
Competence
As with all services that an attorney provides to their client, the attorney must be
competent to provide the service provided. Rule 1.1 states that an attorney “Shall provide
competent representation to a client. Competent representation requires the legal knowledge,
skill, thoroughness and preparation reasonably necessary for the representation.” 18 The
16
Id.
ABA Model Rule of Professional Conduct Rule 2.1(2012).
18
ABA Model Rule of Professional Conduct Rule 1.1(2012).
17
comments to this rule recognize that the “complexity and specialized nature of the matter” will
determine the level of competency necessary. In the area of fiduciary representation, this is
especially true. To take on the role of a trustee, the attorney needs to have the financial
expertise to manage the client’s money.
D.
Informed Consent
Finally, the attorney needs to obtain informed consent before undertaking such
representation. Informed consent is defined in the rules as “the agreement by a person to a
proposed course of conduct after the lawyer has communicated adequate information and
explanation about the material risks of and reasonably available alternatives to the proposed
course of conduct.”19 Therefore the lawyer must explain that being the client’s fiduciary may
have benefits, risks and alternatives, including other people who might do a better job.
Practical Tip: Although the rule does not required
that the agreement be in writing but merely
confirmed in writing, putting the agreement and
having the client sign it is a good practice.
19
ABA Model Rules of Professional Conduct, Terminology (2012).