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Estate planning can involve many variables and can be fraught with potential ethical pitfalls and malpractice issues. It’s especially important for new estate planning attorneys to be aware of these risks and how to avoid them. With the proper precautions, you can prevent exposing yourself to severe case mismanagement consequences, including suspension or disbarment, civil action, and criminal charges.
Extreme examples of estate planning mismanagement include a Wisconsin lawyer who stole $2 million from a pair of clients as they neared death. The attorney was sentenced to four years in prison followed by five years of supervised release and was ordered to pay $2.1 million in restitution.
Ethical violations in estate planning do not need to be so flagrant. Even minor lapses in judgment and naiveté can create problematic situations. Luckily, you can mitigate these concerns by following these five rules and instituting regular precautions.
Here are four ethical considerations to put in place now.
1. Competent Representation
Being sufficiently skilled and competent to perform estate planning services is essential to an ethical attorney-client relationship. The Model Rules require that lawyers shall not intentionally, recklessly or repeatedly fail to perform legal services with competence. However, you do not need to decline a project if you lack particular expertise. Instead, consider co-counseling with another lawyer and disclosing this plan to your client in writing.
By carefully defining the scope of representation, you not only clarify the services you will be providing to your client, but also disclose services you will not be providing. For example, you can set clear expectations by stating that your services do not include funding of certain assets or providing updates on future changes to tax and related laws.
2. Maintain Confidences
Be clear on confidentiality rights. All communications between joint clients—husband and wife, for example—are confidential to the outside world but not between one another. Confidential information cannot be kept a secret between joint clients and according to ACTEC, a lawyer may urge the communicating client to impart the confidential information directly to the other. In the event that a client opposes, attorneys face a difficult situation and must consider their duties of impartiality and might, ultimately, need to withdraw.
3. Disclose Conflicts of Interest
It is fairly common for an estate planning lawyer to represent multiple family members, as well as multiple generations of the same family. However, multiple representation can be complex and risky. ACTEC defines the representation of multiple clients to include:
- members of the same family
- more than one beneficiary in a trust administration
- co-fiduciaries of an estate
- two investors in a closely held business
Potential conflicts of interest exist in every joint representation, which can make certain ethical duties challenging. It is important to analyze each set of circumstances independently to determine if representation is appropriate. Precautions to consider include complete disclosure of the potential conflict with fully informed written consent and a statement of what will happen in the case of a conflict.
4. Ensure Legal Capacity
Estate planning for mentally impaired, sick, and aging clients raises capacity concerns that can result in ethical issues if not carefully considered. As our population lives longer, mental health and guardianship laws continue to evolve and become more complex. Here are some key areas to examine as you consider capacity:
- Is your client 18 years old and of sound mind?
- Can your client comprehend the nature and extent of his/her property?
- Is your client able to determine and understand the disposition of property which he/she desires to make?
5. Create an Engagement Letter
Establishing clear guidelines for the attorney-client relationship in your engagement letter can go a long way toward eliminating ethical concerns. An engagement letter establishes your working relationship with the client. It allows you to customize your legal maintenance plan options, billing structures, retainer and deposit requirements, and closed file policies. A thoroughly outlined engagement letter should include items such as:
- Who is a client
- Scope of services
- Fees
- Fee Structure (Fixed, hourly, third-party, etc.)
- Conflicts of interest
- Deadlines
- Fee dispute procedures
- Arbitration provision
Addressing these details upfront can help avoid ethical issues as you collaborate with your client on the nature and scope of representation.
With careful consideration, you can avoid many of the ethical concerns related to estate planning. Learn more about estate planning ethical concerns in this article by Kristen Yokomoto, JD who has been a WealthCounsel member since 2014.
