american college of trust and estate counsel … · {2000/46/00222972.docx} american college of...

{2000/46/00222972.DOCX}

AMERICAN COLLEGE OF TRUST AND ESTATE COUNSEL

FIDUCIARY LITIGATION COMMITTEE

October 21, 2016

1:30 p.m.-4:00 p.m.

Charleston, South Carolina

AGENDA

I. Call Meeting to Order

II. Appointment of Secretary

III. Introduction of Members and Guests (Guests are encouraged to attend subcommittee

meetings)

IV. Review and Approval of Minutes from the Summer Meeting in Boston

V. Report from the Executive Committee Liaison

VI. Report on ACTEC/NCPJ Task Force status

VII. Chair’s Report

VIII. Program

“Conflicts of interest facing estate planners and fiduciaries.” The discussion will include

identifying and managing fiduciary and attorney conflicts in probate and trust proceedings,

and the extent to which conflicts can be waived, judicially allowed or remedied through

judicial relief. The program will be presented by Brian Hewitt, Bob St. John, Gary Ruttenberg

and James Milton.

IX. Subcommittee Breakout Sessions

Choice of Law and Situs of Property

Construction, Instruction & Reformation

Creditor & Other 3rd Party Litigation (N/R)

E-Discovery

Evidence

Fiduciary and Attorney Compensation

{2000/46/00222972.DOCX}

Fiduciary Responsibility

Fiduciary Surcharge and Damage Remedies

Judicial Liaison & ADR

Malpractice & Ethics

Tax Issues in Litigation and Tax Controversies

Will and Trust Contests

Special Projects

X. Reports of Subcommittees

XI. New Business and Interesting Cases

XII. Adjournment

AMERICAN COLLEGE OF TRUST AND ESTATE COUNSEL

FIDUCIARY LITIGATION COMMITTEE

MINUTES

June 17, 2016

10:30 a.m.-1:00 p.m.

Boston, Massachusetts

Call to Order

The meeting was called to order at 10:30 a.m. by the Acting Chair, Michael Simon.

Appointment of Secretary

Michael Schwartz, of Cincinnati, Ohio, was appointed Secretary for the meeting.

Member and Guest Introductions

The Chair opened the meeting with Committee member and guest introductions. A list of those who signed the attendance sheet is attached.

Approval of the Minutes

The Minutes ofthe Fiduciary Litigation Committee meeting ofMarch 15, 2016 in Las Vegas, Nevada was approved.

Executive Committee Liaison Report

Kurt Sommer, Executive Committee Liaison, gave a report from the ACTEC Executive Committee. He brought the following items to the attention of the Committee:

1. If you are coordinating a presentation and would like to invite an outside speaker, please let a member of the Executive Committee know as there are funds, albeit limited, to help cover travel costs.

2. The ACTEC Foundation will again be holding a silent auction at the Annual Meeting next March. They are looking for donations, such as stays in vacation homes, etc. They have set a goal of $50,000-$60,000, and the proceeds are used to fund prjects such as the recent ACTEC Talks, which help promote the College and its Fellows.

3. Please note the College is moving away from having tabletop outlet strips to centralized charging stations, in order to help reduce costs

4. We are approaching committee appointment time, so please remember to sign in to all committee meetings. Participation and attendance is important, and all committee

Page 1 of4

members are expected to attend at least two committee meetings per year. Each Fellow may serve on up to two committees.

Kathleen Sherby then reported she is helping coordinate a presentation at the Fall Meeting, which involves local judges in order to get a view from the bench.

Acting Chair Report

The Chair noted the following items:

1. The next meeting of the Fiduciary Litigation Committee will be held at the Fall ACTEC Meeting in Charleston, South Carolina on Friday, October 21, 2016 from 1:30-4:00 pm.

2. The Committee Appointment process is becoming increasingly an online process.

3. This committee is full, which means new appointment are only may following resignation, retirement, removal or passing. This places a high premium on both attendance and participation. If any member has thoughts on enhancing participation, i.e. additional liaison positions, new subcommittee, etc., please bring them to the attention of Meg or Michael.

4. If not sure what subcommittee you may be on, please let Meg know, and she will confirm on the Committee records.

Program

Fellows Robert Landon, Martin Hecksher, Jordan Weitberg, Jack Falk and Thomas Karr, of the Fiduciary and Attorney Compensation Committee, presented on the evolving trends, statutes and case law regarding Fee Shifting.

Robert Landon introduced the presentation as, "Exceptions to the American Rule." Different states take very different approaches, raising the question of whether fee-shifting is a good thing or a bad thing. These issues are hard to deal with consistently, and the courts are struggling with deriving helpful rules, primarily because the conclusions are very fact intensive on a case-bycase basis.

Martin Hecksher presented next, and said whether fee-shifting is good or bad, it is here. He reiterated the very fact-intensive nature of these issues, and recommended addressing these issues with clients at the beginning of an engagement regarding who is going to pay the fee, the risks the client may have to pay fees of the other side, etc. He included a sample engagement letter in his materials.

Jordan Weitberg presented next on the state of the fee-shifting in New Jersey, particularly in light of several recent NJ Supreme Court cases.

Jack Falk and Thomas Kerr finished the presentation with a discussion of the fee-shifting statutes which have been enacted in Florida.

An active Q&A session followed, and the presentation was very well received.

Page 2 of4

Subcommittee Reports

1. Choice of Law & Situs of Property. Shane Kelley reported this subcommittee is working on a project regarding transfer of trust situs and how choice/conflict of law principles work in this areas. The subcommittee asks anyone coming across, or knowing of, cases which involve this area of the law to contact [email protected].

2. Construction, Instruction and Reformation. Bridget A. Logstrom Koci reported this subcommittee is developing a presentation on Non-Judicial Settlement Agreements, and they anticipate starting with a simple email survey regarding state-by-state experience.

3. Creditor and Other 3rd Party Litigation. No report.

4. ESI Subcommittee fka E-Discovery. Brian Felcoski reported that in light of this subcommittee's recent presentation in Las Vegas, they are in the very early stages of developing their next presentation.

5. Evidence. James Pressly reported that this subcommittee will be making a presentation at the upcoming Annual Meeting regarding expert witnesses, discussing issues such as admissibility of an expert's report, and well as discovery issues involving the expert's work.

6. Fiduciary and Attorney Compensation. Bob Landon reported that in light of this subcommittee's presentation at today's meeting, they are in the very early stages of developing their next presentation.

7. Fiduciary Responsibility. Clary Redd reported this subcommittee is looking into the topic of who falls within the definition of a fiduciary in the 21st century. They have already come up with 10-12 different examples ofunclear situations. They are also exploring the related are of fiduciaries may who have existing duties that not always readily apparent.

8. Fiduciary Surcharge and Damage Remedies. Dom Campisi reported this subcommittee is continuing to gather data in its 50-state study of fiduciary surcharge and damage remedies. They are looking for volunteers in states not covered, but have very good results for the states where information has already been submitted.

9. Judicial Liaison and ADR. Steve Hem reported this subcommittee is in the early stages of developing a presentation regarding Judicial Mediation, including the evaluation of mediators - what they are getting right, and what they are getting wrong.

10. Malpractice and Ethics. Ed Downey reported that this subcommittee will be making a presentation at an upcoming national ACTEC Meeting regarding dealing with clients with diminished capacity and how you protect yourself.

Page 3 of4

11. Tax Issues in Litigation and Tax Controversies. Jerry Chariton reported this subcommittee is exploring 2-3 potential presentations, and is looking for contacts with IRA Appeals offices or Chief Counsel's office. He also noted the IRS is reportedly going to hire 750 new appeals officers, probably from revenue agents, who are individuals people generally trained to be anti-taxpayer.

12. Will and Trust Contests. Robert Borteck reported this subcommittee is currently exploring several possible presentations, including attorney conflicts of interest, aiding and abetting, burden of proof, pre-mortem contests, and contested accountings.

13. Special Projects. Pete Matwiczyk reported this subcommittee has a completed presentation ready to go on Challenges based on Marital Rights and Dissolution, after death and while a diminished or incapacitated spouse is still alive.

New Business/Interesting Cases.

None

Adjournment.

There being no new business, the meeting was adjourned at 1 p.m.

Michael Schwartz, Acting Secretary

Page 4 of4 23021913

T H E A MERICAN COLLEGE OF

TRUST AND [STATF. COUNSEl.

ACTEC 2016 Summer Meeting Boston, Massachusetts

Fiduciary Litigation Committee

Friday, June 17, 2016 • 10:30am- 1:00pm

SECRETARY /1 1 Utt otf I

Name Signature

Lodise, Margaret G. Chair

Sommer, Kurt A. Member & EC Liaison

Barnosky, John J.

Barulich, Paul J.

Baumann, Phillip A.

Bayern, Arthur H.

Belcher, William Fletcher

Benefield, Steven A.

Bishop, MaryEllen

Bixby, Brian D.

Borteck, Robert D.

Boyes, William E

Brew, Gerard G.

Brower, Robert D.

Brown, James J.

Bruton, Frayda L.

Butters, Sarah S.

Byam, Clark R.

Campisi, Dominic J.

Carlisle, David R.

Carp, Gerald I.

Caughman, Rita Bragg

Challis, T. Jack

Char, Patricia H.

Please return this sign-in sheet to the AcrEe Registration Desk.

Following the meeting, please send it to Donna Braman at [email protected] or By Fax: (202) 684-8459 or By Mail : AcrEe, 901 lS'h Street NW, Suite 525, Washington, DC 20005

TilE AMERICAN COLLEGE OF

TRUST AND EsTATE COUNSEl .



Friday, June 17, 2016 • 10:30am- 1:00pm

Name

Chariton, Jerry B.

Conetta, Tami

Cowan, Gerald L.

Davis, William E.

Davis, Heywood H.

Donovan, Erin

Downey, Edward

Dribin, Michael A.

Dudley, Bruce K.

Falk, Jack A.

Felcoski, Brian J.

Ferrucci, Danielle P.

Flubacher, Todd A.

Foster, Stanbery

Franklin, Terrence M.

Freidman, Gary B.

Gallant, Keith Bradoc

Gamer, Lauren

Gaslowitz, Adam R.

George, James R.

Gillick, Mary F.

Godwin, Michael H.

Goldman, Robert W.

Grossenburg, Bradley C.

Halley, Philip J.

Harmon, Bryon

Please return this sign-in sheet to the AcrEC Registration Desk.

Following the meeting, please send it to Donna Braman at [email protected] or By Fax: (202) 684-8459 or By Mail: ACTEC, 901 15111 Street NW, Suite 525, Washington, DC 20005

THE A M E RICAN C OLL£CE or T RUST AND F.STATE COUNSEl ,



Friday, June 17, 2016 • !0:30am- 1:00pm

Name

Hearn, Steven L.

Heckscher, Martin A.

Heintz, Paul C.

Hennessey, William Thomas

Hewitt, Brian C.

Imami, Shaheen I.

Jackvony, Bernard A.

Kelley, Shane

Kelley, Sean W.

Kelley, Rohan

Kennedy, Catherine Hood

Klyman, Carol Cioe

Knee, Peggy Sheahan

Knee, Robert A.

Koenig, Raymond Joseph

Kovar, Shirley L.

Lamar-Hart, Cynthia G.

Landon, Robert D.W.

Levitan, Shari A.

Lewis, David T.

Logstrom Koci, Bridget A.

Loomis-Price, Stephanie

LoPrete, James H.

Macauley, Leiha

MacKenzie, Gregory W.

Mannion, James

Please return this sign-in sheet to the ACTEC Registration Desk.

Following the meeting, please send it to Donna Braman at [email protected] or By Fax: (202) 684-8459 or By Mail: ACTEC, 901 15th Street NW, Suite 525, Washington, DC 20005

T HE AMERICAN COLLEGE Of

TRUST AND EST AT£ COUNSEl.

ACTEC 2016 Summer Meeting Boston , Massachusetts


Friday, June 17, 2016 • 10:30am- 1:OOpm

Name Signature

Marchetti, R. David

Marshall, Stewart Andrew

Matwiczyk, Peter

Mautner, Gail E.

McCrindle, C. Kevin

McCulloch, W. Cameron

McDonnell, John L.

Meek, John F.

Mignogna, Steven K.

Milton, James C.

Monihan, M. Elizabeth

Moore, Karen M.

Moorman, R. Hal

Moran, John C.

Morken, John R.

Morrison, Ralph R.

Okada, Raymond K.

Parrent, Homer

Pasquesi, Thomas A.

Peetz, Jeffery T.

Pressly, James G.

Redd, Charles A.

Reynolds, Hanson S.

Rogers, John T.

Ross, Bruce S.

Roth, Randall W.

Following the meeting, please send it to Donna Braman at don braman actec.or or By Fax: (202) 684-8459 or By Mail: ACTEC, 901 lStn Street NW, Suite 25, Washington, DC 20005

THE AMERICAN COLLEOE OF

TRuST AND EsTATE CouNSEL

ACTEC 2016 Summer Me.eting Boston, Massachusetts


Friday, June 17, 2016 • 10:30am- 1:00pm

Name Signature

Sacks, Robert N.

Sager, Margaret E.W.

Sharp, Joel H.

Sherby, Kathleen R.

Shier, Suzanne L.

Silver, Alan I.

Simon, Roger B.

Simon, Michael D.

Skidmore, David L.J.M.

Smith, Eddy R.

Smith, Edward V.

Snyder, Susan D.

Spivey, Barry F.

St. John, Robert M.

Stanley, Doug

Stanton, Lois Ann

Stewart, C. Jean

Streisand, Adam F.

Stryker, Nina B.

Swirbalus, Mark E.

Tedford, Deborah J.

Thoreen, Vivian Lee

Vryhof, John C.

Warnick, Carol

Weinig, Gregory J.

Please return this sign-in sheet to

Following the meeting, please send it to Donna Braman at donna.bram actec.or or By Fax: (202) 684-8459 or By Mail: ACTEC, 901 15th Street NW, Suite 525, ashington, DC 20005

T t tE A M E RICA N COL LECE OF

T RUST AN D ESTATE COUNSEL



Friday, June 17, 2016 • 10:30am- 1:00pm

Name Signature

Weitberg, Jordan S.

Wells, H. Neal

White, Dennis R.

Wohlust, G. Charles

Wright, Norris P.

Wyle, Geraldine A.

Young, Raymond H.

Members = 80, Visitors = 59

VISITORS L SIG,NATUR!=

Adams Angela McClendon (f~ y: 't/ , /J,. w~~'} ~~ Beller Amy B. "d~

Bertles James B.

Boje Debra L.

Bright James R.

Bronner Tae Kelley

Bucher Elaine M.

Chen Kevin M.

Chrystal Neil R.

Culler M. Patricia

Davis Lora G.

Filmore Scott T.

Fisher Julia B.

Fitzsimons Dana G.

Franke FRederick R.

Furniss John F. ~ ~::\~;;;? 0~ (~

Please return this si n-in sheet to ACTEC Re istration Desk. g g

Following the meeting, please send it to Donna Braman at [email protected] or By Fax: (202) 684-8459 or By Mail: ACTEC, 901 15th Street NW, Suite 525, Washington, DC 20005

~

THE AMERICAN COLL£0£ OF

T RUST ANO EST AT£ COUNSEl .



Friday, June 17, 2016 • !0:30am- 1:00pm

VISITORS SIGNATURE Goethe Jeffrey S.

Gorin Steven B.

Holbrook Dan W.

Holzman Susan M. -Hunter Laurie A.

Kingma Kenneth W.

Kiziah Trent S.

Knebel Jeffrey Thomas

Lindquist Philip M.

Lucina Pamela

McGregor Erica E.

Mclaughlin Nancy

Michael Jonathan W. A--"-t:.,. Moffatt Phoebe A <... .._

Montgomery Janet Rae v~U.h/rV>f.1t.~l/ Nair Suma v( ~.~---- ·I I

Nelson Scott r{ v tJr1 rn I} 1M w..,...._._-~~-Nenno Richard W.

!' V r /1 \.../' '-../

Peck Kelley Galica

Penzer Eric W. (i (2.u- '>(V\~ "' -Perlow Matthew G.

Porter Susan \

Portuondo Tina , j / {) /) Prekel Leonard J. ~~ // J ,/ /LbK/

Rafferty Michaelle D. ~ / v

Rodriguez Thomas Anthony ~ ~~f ___. Romania Catherine


Following the meeting, please send it to Donna Braman at [email protected] or By Fax: {202) 684-8459 or By Mail : ACTEC, 901 151h Street NW, Suite 525, Washington, DC 20005

Til £ A M ERICAN COLLECE OF

TRUST AND ESTATE COUNSEl .



Friday, June 17, 2016 • 10:30am- 1:00pm

VISITORS SIGNATURE

Rosenberg Paul I.

Savage Jennifer A.

Scuderi Jon

Siegel Anita J.

Simon Gregg M.

Sloan David E.

Stautberg Lee M.

Tescher Donald R.

Vaughan Patrick J.

Virgil Eric

Wallace John A.

Wehrle Richard M.

Welsh John

White Dennis R.

Wolven Lauren


Following the meeting, please send it to Donna Braman at [email protected] or By Fax: (202) 684-8459 or By Mail: AITEC, 901 15111 Street NW, Suite 525, Washington, DC 20005

Estate / Trust / Beneficiary CounselConflict Tree

Beneficiary or Multiple Beneficiaries

Attorney Fiduciary

Mediation?

NO!

Can Represent a Fiduciary and a

Beneficiary?

Drafted Instrument?

Challenged -Contested -Construed -

Get Litigation Counsel!

Ever do individual work for a different

beneficiary?

Represent more than one beneficiary?

Interests aligned?

Multiple instruments? Treat your clients differently?

Your clients have distinct contract rights?

Drafted instrument?

Contested or construed?

GET LITIGATION COUNSEL

Settlement goals differ?

Can you now represent one beneficiary?

Represent one beneficiary of an instrument?

Fiduciary inherits non-probate assets disproportionately?

Interests aligned with fiduciary?

Is attorney named as fiduciary in document he/she drafted?

Officers of entity same as fiduciary?

Rarely, if ever

Potential claim your fiduciary should investigate against your other client? (eg. POA cases)

Rep. entity in which Estate has interest?

Rights flow between entity and Estate/Trust?

Ownership of entity same as Estate or Trust beneficial interests?

Make fiduciary get separate individual counsel

Fiduciary has individual right or goal of any kind

Didn’t draft instrument that is contested or challenged

Don’t assume communications are privileged or work product is protected

Label carefully

YES!

ACTEC SEMINAR / OCTOBER, 2016

BRIAN C. HEWITT, ESQ.ALERDING CASTOR HEWITT, LLP47 S. PENNSYLVANIA STREET, #700INDIANAPOLIS, IN 46204(317) [email protected]

mailto:[email protected]

FIDUCIARY CONFLICT TREE

Fiduciary Also a Beneficiary?

Unique or specific interest

in an asset?

Non-income producing

assets

Discretion to shift tax or expense?

Previously acted as POA – Duty to

account

Why conflict? Because 95% of

POA’s mess up!

Discretion to invade multiple trusts with different

remaindermen

Tenant or Landlord?

FMV rent?

Officer, director, shareholder of entity

held as corpus?

Holder of option to buy or sell

Desire to purchase or lease asset? (See Ind.

Code 30-4-3-5)

ACTEC SEMINAR / OCTOBER, 2016

BRIAN C. HEWITT, ESQ.ALERDING CASTOR HEWITT, LLP47 S. PENNSYLVANIA STREET, #700INDIANAPOLIS, IN 46204(317) [email protected]


{2000/46/00222970.DOCX}

UNIVERSAL TRUTHS OF CONFLICT ANALYSIS

IN REPRESENTING FIDUCIARIES OR BENEFICIARIES

ACTEC SEMINAR

OCTOBER, 2016

BRIAN C. HEWITT, ESQ.

ALERDING CASTOR HEWITT, LLP

47 S. PENNSYLVANIA STREET, SUITE 700

INDIANAPOLIS, IN 46204

(317) 829-1910

[email protected]

1. You should only represent your client in one capacity?

2. Never forget who your client is.

3. Revisit who your client is as issues arise.

4. Paper your file confirming you represent your client in only one capacity.

5. If you client has a conflict, you may or may not have a conflict.

Probably don’t as long as you represent your client in only one capacity.

6. NEWSFLASH: If you drafted the document and you are the named

fiduciary and the document is contested or construed, you are a target and

this mess is your fault.

7. In a Will or Trust contest, privilege and work product are precarious –

Know your state law on fiduciary exception.

Having non-drafter litigation counsel greatly increases privilege and

work product protection for post-death communications and work

product.

8. Your client believes he/she is entitled to the entire estate.

9. If conflicts are so obvious, why do I run into them constantly?


I.

Trust and Estate Practice: Avoiding Trouble

By: Randy]. Curato

The Claims Environment

Most ALAS firms have a trust and estate (T&E) practice, and T&E lawyers have consistently accounted for 3% of our total census. Over our 30-plus-year history,

and conflicts of interest. Claims in the T &E practice reflect the same issues. Analyzing the 900-plus claims, we see that many T&E claims involve unworthy clients- such as a settlor client who fraudulently transferred assets into trusts, or a fiduciary client who engaged in improper activities; mistakes- such as errors in the preparation of a will or trust, failures to timely file, and failures to structure trusts to meet desired tax strategies; and conflicts of in

we have had more than 950 T &E claims, which cost ALAS almost $190 million and our firms, through their self-insured retention (SIR) payments, more than $86 million. As the diagram below shows, historically 7% of our claims have come from the T &E

T &E claims involving conflicts, drafting errors, and trustee issues seem to be

terest-such as claims involving multiple clients, family members, or other beneficiaries. We also see claims alleging breach of fiduciary duty, typically in the lawyer's capacity as legal counsel, trustee, or other fiduciary capacity. These and

on the rise.

practice, and those claims have generated 4% of our total incurred loss. The average cost (excluding the SIR) to resolve a T&E claim is $220,500, which is higher than the average for litigation claims, but less than the average for transactional claims.

Area of practice Percent of Percent of total Average per total claims incurred loss claim severity*

Litigation 39% 16% $165,800

Transactional** 43% 71% $667,505

Estate/Trust/ 7% 4% $220,500 Probate

*Dollars are in excess of SIR **Includes corporate, securities, banking, tax/ERISA, and real estate

We continue to see a significant number of T &E claims each year. In fact, firms have reported nearly one-quarter of T &E claims that we have experienced in just the past five years. Firms reported 61 claims and circumstances in 2013; 41 in 2012; and 53 in 2011. And, these T &E claims have been more costly than one would expect.

The leading causes of claims against ALAS firms are unworthy clients, mistakes,

other issues also often arise during the administration of a trust or estate.

By alerting T &E lawyers to the recent claims issues and offering our suggestions on how to respond, we hope we can together improve the T&E claims experience.

II. Recent Claims Developments

T &E claims involving conflicts, drafting errors, and trustee issues seem to be on the rise. For example, our current inventory of mistake claims includes: failing to draft the type of trust that was intended; failing to record trust documents affecting property title; and filing gift, estate, and protective refund returns late. Our recent conflict claims involve advising one estate planning client about her rights in property that was the subject of a trust of the client's relative, whom the firm simultaneously represented; representing one group of siblings that allegedly cheated the other siblings who were former firm clients; and representing multiple family members (a father, stepmother, and son) at once. And our current fiduciary claims involve lawyers being sued in their capacity as trustees for allegedly making bad investments, or for favoring one group of beneficiaries over the other. The inventory also includes claims where lawyers who represented trustees are accused of aiding and abetting similar allegedly wrongful con-

Winter 2014 ALAS Loss Prevention Journal 23

duct by the trustees. We will focus here on three issues- conflicts, mistakes, and trustee issues.

III. Conflicts

A lawyer's duty of undivided loyalty requires a lawyer representing multiple clients to recognize and deal with any disparities in their interests. For example, when the lawyer is representing a husband and wife in preparing an estate plan, as lawyers frequently do, the lawyer needs to identify any actual or potential conflicts. Although the representation may not be "directly adverse" within the meaning of the rules of professional conduct, it could nonetheless present a significant risk of another type of prohibited conflict: namely, that the representation of one spouse will be "materially limited" by the lawyer's responsibilities to the other spouse.

an extramarital relationship. Client confidentiality in joint representation is a frequent and worrisome challenge and can lead to a confidential information conflict requiring withdrawal. See ALAS Loss Prevention Manual, Tab II, Sections 2.2.4 (multiple representation) and 2.2.5 Goint confidences).

Some individuals seek estate planning for their entire family. A detailed discussion of this type of representation (and other professional liability issues in the estate planning context) is found in ACTEC Commentaries on the Model Rules of Professional Conduct (4th ed. 2006), available at www.actec.org/public/ CommentariesPublic.asp (last visited Feb. 5, 2014). It may be tempting to have several generations participate in the process in an effort to create a single estate plan to which all agree. But conflicts are much more likely to occur and give rise to claims against the lawyer in family

Examples of the different interests that even happily married couples may have include whether to characterize particular property as separate or community, whether gifts should be made outright or in trust, and how to treat children from prior marriages. Even if couples agree on these is-

Client confidentiality in joint representation is

a frequent and worrisome challenge and can lead to

a confidential information conflict requiring

withdrawal.

representations. These claims can result from family feuds, jealousies, or resentments that have nothing to do with the lawyer or the quality of the legal services rendered. They may also arise from unanticipated changed circumstances long after the legal work is done.

sues when the will is executed, the failure to document the agreement precisely may come back to haunt the lawyer. These differing interests often arise in second or third marriages. A lawyer is not required to suggest or assume a conflict where none exists, but when a conflict is reasonably apparent or foreseeable, the lawyer should discuss the issues with the clients and proceed with a multiple representation only after all affected clients have given informed written consent.

The situation can be further complicated if one spouse conveys information to the lawyer with a direction that it not be shared with the other spouse. The .information can vary from a desire to benefit one child over others, to an undisclosed prior marriage, to the existence of

The potential malpractice issues here are the same as those with respect to spouses or any other co-clients. In "family" representations, however, the number of individual clients is often greater, and the nature of the conflicts may be less obvious. Lawyers should be cautious about intentionally undertaking a "family" representation. Indeed, in most cases, a lawyer should disclaim, in writing, a representation of the entire family on any given matter. Absent that precaution, family members, particularly those the firm represents in other matters, may assert that they were firm clients, that they were less favored in the estate plan than other family members, and that "their" lawyers failed to protect their rights. Sometimes claims result when parents, perfectly within their rights,


change their minds about a previous decision. After the testator dies, an heir who was allegedly disfavored by the change argues that the lawyer had a conflict of interest in representing multiple family members and failed to obtain fully informed consent to the conflict. Frequently, the family members allege that they would have sought independent counsel had they been properly advised.

IV. A voiding Conflicts

To avoid conflicts, T&E lawyers should, in consultation with the firm's loss prevention partner, take these precautions:

• At the outset of the representation, decide precisely whom you will represent and whom you will not. Identify the potential beneficiaries or other affected parties and run appropriate conflicts checks.

• With the client's consent advise everyone involved or directly affected by the work whom you will and will not represent. Be especially wary about misunderstandings when dealing with unsophisticated parties.

• If you decide to represent multiple parties, make sure that they agree there will be no secrets among them. Consider what will happen if conflicts arise and you cannot continue to represent all the clients.

• Confirm these matters in writing. Engagement terms, "I'm not your lawyer" warnings to nonclients, conflict of interest disclosures and consents (waivers), and the ground rules on confidences and future representation if conflicts arise, should be in writing. See ALAS Prototype Lawyers' Manual, Appendices 2.4.6, 2.4.7, 2.4.9.9 (sample T &E engagement and conflicts waiver letters).

• If you structure a limited representation to meet conflict concerns (e.g., representing only one or some family members), do not forget about, or act

inconsistently with, the limited nature of the representation as time passes. Importantly, do not offer legal advice to nonclient family members.

• A void representing related clients "separately" given the serious confidentiality issues that can arise. If you do so, advise each of them that you do not represent them in connection with the other matters and, absent written consent otherwise, cannot share information with them about those other matters.

V. Obtaining Informed Consent

Aside from, perhaps, competency issues, obtaining informed consent to conflicts in estate planning representations presents the same issues as in any other situation. Under the Model Rules, the fundamental requirement for valid consent is that it be "informed" (see Model Rules 1.7(b)(4) and 1.9(a)-(b)), which means that the client is provided adequate information about the material risks and reasonably available alternatives to proceeding with the representation. See Model Rule 1.0(e) and related Comments [ 6] and [7]. See also Restatement Third, The Law Governing Lawyers § 122(1). Complicating the disclosure requirement conflicts are frequently detected and consent sought at the initial stages of a representation, when the lawyer may not know all of the facts, like all of the intended beneficiaries or the client's other advisors. However, any lawyer trying to obtain valid consent needs to ascertain enough facts to describe sufficiently the nature and potential effects of the conflict. Similarly, if a lawyer subsequently learns additional facts that materially alter the situation, the lawyer should supplement the initial disclosure and obtain a new consent. See Restatement § 122, Commentf

Given these varied considerations, it is difficult to generalize about what constitutes adequate disclosure. Nevertheless, we suggest that most disclosures include a thorough description of: (1) the conflict, including an explanation of the interest of the lawyer or other


client that creates the conflict and a citation to the applicable rule(s) of professional conduct; (2) the consequences of the representation, including any alternative action that is precluded because of the conflict; (3) in a multiple client representation; the consequences of any client withdrawing its consent; and (4) any effect the representation will have on client confidentiality.

Because action taken today may not have effect until much later, lawyers must consider whether consent they obtain at the outset will suffice to waive a conflict that arises later. Two scenarios are common:

some other client, so, at the very least, a full conflicts check is required. Further, the lawyer might not have the mother's permission to act on her behalf as required by the rules of professional conduct. See, e.g., Model Rule 1.8(f). Moreover; the son may have siblings or other relatives. By not consulting the mother and by offering only one choice for an estate plan, the lawyer might later be accused of conspiring with the son to benefit him at the expense of the mother or other family members. This situation also eliminates the lawyer's ability to assess the mother's testamentary capacity.

ABA Formal Opinion 02-(1) an estate planning client is an officer of one of the firm's corporate clients (the Company); and (2) an estate planning client is a developer whose principal construction lender is a major bank client of the firm (the Bank). In either case, the estate planning lawyer should anticipate the possibility of future dealings

Because action taken today may not have effect until much later, lawyers must consider whether

consent they obtain at the outset will suffice to

428 (Aug. 9, 2002) considered these issues and concluded that the lawyer may draft the will in these circumstances only if the lawyer: (1) has no conflicts prohibited by Model Rule 1.7; (2) complies with the requirement of obtaining informed consent as required by Model Rule 1.8(f); and (3) complies with the require

waive a conflict that arises later.

between the estate planning client and the Company or the Bank. The lawyer should seek consent from the estate planning client, as part of the engagement letter or otherwise, that other firm lawyers may represent the Company or the Bank in any umelated negotiation or dispute (including litigation) between the Company or the Bank and the estate planning client.

Another kind of conflict arises when a person agrees to pay a lawyer to prepare a will or trust for someone else. It can begin innocently. A current client, say the son of an elderly widow, asks the lawyer to do a 11 simple" will for his mother who lives far away and cannot travel. The son tells the lawyer what the mother wants to do, handles execution of the documents, and pays the lawyer's fee. In these situations, however, the lawyer must not forget that the mother, not the son, is the lawyer's client, to whom the lawyer owes independent duties. It could be that the lawyer's firm is adverse to the mother on a matter for

ment of Model Rule 5.4(c) that the person who recommended the lawyer not be permitted to direct or regulate the lawyer's independent professional judgment. The lawyer also is required to protect the testator's or settlor's confidential information under Model Rule 1.6. In addition, in most situations, the lawyer should insist on personal contact with any person for whom the lawyer is preparing estate planning documents. Severe claims have resulted when a T &E lawyer relied on a (trusted) intermediary to communicate with an estate planning client.

VI. Mistakes

Mistakes in the T &E practice, although similar to those in other practice areas, present unique challenges. The practice requires a range of knowledge and careful attention, not only to substantive law, but also to professional responsibility and liability issues. Nonspecialists who 11 dabble" in the area continue to cause problems. The practice is too complex for 11 dabbling," and even experienced lawyers


need to be careful when dealing with the law of other jurisdictions. We strongly urge that an experienced estate planning partner be assigned to every T&E matter, and that that partner consistently supervise others working on the matter. In matters involving the law of other jurisdictions, practitioners should consult or associate with a local T &E lawyer.

Drafting Errors. Drafting errors frequently result in negligence actions against the drafting lawyers. Typically, the plaintiff's lawyer,

•

•

Ensure that templates and forms are up to date and reflect any relevant changes in the law. Recognize that they must be tailored to the client's specific intent and needs, and instruct associates and others in their use.

Recognize limitations in experience, particularly with complex tax avoidance strategies, and involve appropriate firm experts. Consider second partner review of all will and trust

documents. Do not tell the secsupported by T&E experts, will, outside of the time exigencies and business pressures of the will or trust preparation, rake over the estate documents with a fine-toothed comb. A single error in an estate plan or trust document can lead to significant problems, including unintended tax, beneficiary, and allocation outcomes. For

A single error in an estate plan or trust

document can lead to

ond partner what you are trying to accomplish and ask if she agrees that you have done it. Instead, ask her to read the document and tell you what she thinks it does.

significant problems, including unintended tax, beneficiary, and allocation outcomes.

• Meticulously proofread printed documents rather than electronic versions. Errors are

example, several significant recent claims allege the documents failed to achieve the desired tax advantages, resulting in increased tax liability.

Some documents are doomed from the outset when the drafter fails to identify, or confirm, the client's goals and expected outcomes. Other times T&E lawyers begin with an existing template, but fail to ensure that the form is consistent with the intended strategy, is up to date with the practice group's current approaches, or reflects recent state or federal statutory changes, administrative rulings by the IRS or other agencies, and court decisions.

To avoid drafting errors, we suggest that T &E lawyers:

• Identify and document the client's goal- is it minimizing taxes, ensuring equal distribution to all heirs, fully benefitting a charity, or some other intent? Use checklists to ensure that all relevant circumstances, as well as all potentially relevant will or trust provisions, are discussed with the client.

more easily missed when proofreading solely from a computer screen. Read even the "standard" provisions to ensure each is consistent with the estate or trust plan.

• To guard against "dabbling" by nonspecialists, restrict access to estate planning documents to only those who are in the T&E practice group and the loss prevention partner.

Post-Drafting Errors. Mistake claims in the T &E practice also arise after the drafting phrase is complete. These problems include the failure to revoke or defund previous trusts, the failure to make the asset transfers required for the new plan, and the untimely recording, where necessary, of title documents. These can occur for a variety of reasons, including reliance on third parties, such as a financial adviser or other professional, who fail to follow through. There is no substitute for careful supervision and confirmation of all required steps, and for documentation when other parties have assumed responsibilities that might otherwise belong to the lawyer.


Failure to timely file tax returns and other documents, including during probate, is also a constant risk in the T&E practice. The failure to file can result from miscalculating the applicable deadline, such as when to file an election on the tax treatment of certain assets. Lawyers should implement a dual docketing procedure- for example, by using the firm's central docketing system and the lawyer's own Outlook® calendar. As in any practice area, lawyers should carefully identify, calculate, and docket all deadlines, and when possible, file early to afford an opportunity to correct any erroneous filings.

Some so-called "mistakes"

ABA Formal Opinion 02-426 concluded that a lawyer may serve as a fiduciary and hire his own firm to represent him in connection with his fiduciary duties, so long as the lawyer (1) gives adequate advice to the client about choosing a fiduciary under IV!odel Rule 1.4(b); (2) confirms the client's consent in writing if there is a risk that the lawyer's judgment will be materially impaired within the meaning of Model Rule 1.7(a)(2); and (3) charges reasonable fees in connection with the legal representation and the fiduciary service.

The fact that something may be done, however, does not mean it should be done, at

least not without careful risk are the result of later changes in the client's circumstances or the law. Lawyers should disclaim in writing any duty to keep a client apprised of changes in the law. When an estate plan is concluded and the client has no other business with the firm, lawyers should send a close-out

When an estate plan is concluded and the client

assessment. Before accepting a role as a fiduciary, lawyers should consider their own experience and sophistication as an asset manager, the involvement of a professional co-fiduciary (e.g., a bank trust department), the identity and

has no other business with the firm, lawyers

should send a close-out letter and close the file.

letter and close the file. A sample letter is in the Prototype Lawyers' Manual, Appendix 8.1.2.

VII. Lawyer as Fiduciary or as Counsel to a Fiduciary

Some claims relating to a lawyer's service as an executor or trustee assert that the fiduciary failed to exercise appropriate judgment in investing assets. Others allege a conflict of interest, for example, that the lawyer separately represented some of the beneficiaries and favored those beneficiaries over others. In many such cases, the lawyer-fiduciary sincerely (and perhaps accurately) felt that he or she was acting for the greatest overall good, but some aggrieved individual saw matters differently. In one of our claims, a lawyer-trustee was sued because of alleged mismanagement and financial failure of the business that constituted the corpus of a trust. Other claims allege the lawyer-trustee failed to properly maintain property held in trust, leading to the diminution of its value or injury to a third party.

nature of the beneficiaries (is there a history of litigation?), and the nature and amount of legal work the firm will perform for the estate or trust. The nature of the assets is also important. Lawyers should be cautious about accepting an appointment as a trustee of a trust that has as its primary asset an operating business or holds real estate, particularly commercial or industrial real estate. Generally, lawyers should disclaim any duty to manage such assets and ensure that a professional co-fiduciary is in place to handle those duties. In addition, it is important to assess potential conflicts issues raised by the unique circumstances of the specific matter. Focusing on these issues before serving as a fiduciary will improve the ultimate handling of the matters. To ensure an objective analysis, ALAS has long suggested that firms require management approval for a lawyer to serve as an executor or trustee, and that approval should be granted only after careful inquiry into the specific circumstances.

The risk of conflicts is multiplied when a lawyer serves as a fiduciary for an estate or


trust that has multiple beneficiaries and some, but not all, of those beneficiaries are already clients of the firm in umelated matters. In this situation, a nonclient beneficiary who thinks that the lawyer-fiduciary is favoring other beneficiaries who are clients may cry foul. In our experience, jurors are receptive to conflict allegations, and therefore, lawyers should be especially careful and seek the input of the firm's loss prevention partner before they agree to take on such matters.

Even tasks that may seem routine, such as inventorying estate property, require attentive management. Experienced lawyers often send at least two people to inventory personal property, such as the contents of safety deposit boxes or of a residence. Precautions

to the ALAS forms, lawyers should review those prepared by the Professional Responsibility Committee of the American College of Trust and Estate Counsel, published as ACTEC Engagement Letters: A Guide for Practitioners (2d ed. 2007). These forms are available at www.actec.org/ public/ engagementletterspubl ic.asp (last visited Feb. 5, 2014).

Fiduciaries often retain law firms to represent them in connection with performing their duties. The most common situations involve representation of executors, personal representatives, or trustees of testamentary trusts in administering the estate of a decedent. Because the fiduciary's conduct will affect the interests of others, before undertaking these representations, lawyers should, as with any

like changing locks on a residence, arranging for property maintenance, and handling tax payments, might be appropriate.

Some lawyers assume that normal loss prevention suggestions do not apply to situations involving the lawyer's own family, but we have seen several claims arising out of that situation. Some of these claims have

... variations and uncertainty in the law can

make it surprisingly difficult to determine who

prospective client, conduct due diligence on the fiduciary to determine whether the client's background and experience presents any risk.

In addition, variations and uncertainty in the law can make it surprisingly difficult to determine who is "the client," or to whom the lawyer owes duties. In these situations, lawyers must

is '1the client," or to whom the lawyer owes duties. In

these situations, lawyers must know the law in the

relevant jurisdiction.

involved wealth transfers and lawyers serving as fiduciaries. Often the only real complaint the family members have is a quarrel with business judgments the lawyer made. Acting as a fiduciary for family members is not inherently more dangerous than other fiduciary situations. Acting as a fiduciary when the lawyer is also a beneficiary, however, involves potential conflict situations that require a neutral assessment and careful handling. Accordingly, lawyers seeking to serve as fiduciaries should seek objective input and obtain management approval, even in family situations.

ALAS has prepared a sample firm policy and sample engagement letters for lawyers serving as fiduciaries. See Prototype Lawyers' Manual, Appendices 4.3 and 2.4.7. In addition

know the law in the relevant jurisdiction. The three potential "clients" are: (1) the fiduciary (the executor or trustee); (2) the estate or trust; and (3) the beneficiaries. "The client" may differ depending on the jurisdiction, and client identity can have significant consequences. For example, the definition of the client may determine whether certain other potential or existing representations create conflicts issues. It also may affect the scope of the duties that the lawyer owes to various parties and whether certain communications are protected by the attorney-client privilege.

Numerous claims have arisen out of a firm's representation of an executor or trustee. Many involve allegations that the trustee or executor breached a fiduciary obligation to the beneficiaries by failing to manage the assets in a reasonable manner to the disadvantage of


certain beneficiaries. The law firm is alleged to have aided this breach of fiduciary duty. Frequently, an alleged conflict of interest is offered as the motive for the law firm's conduct.

A voiding claims arising out of representation of fiduciaries can be difficult. Lawyers should consider the following:

• Clearly explain to client fiduciaries to whom they owe duties and the nature and extent of those duties. Confirm those important concepts in writing and thereafter monitor the fiduciary's conduct to ensure that it comports with those duties.

• Make clear from the outset whom you represent; for example, that you represent only the fiduciary, not the beneficiaries.

• Avoid "mission creep." Where you represent the fiduciary, do not do anything that would lead a beneficiary to believe you also represent her.

• Suggest to the fiduciary and beneficiaries that, if need be, the beneficiaries should retain their own lawyers to represent them in connection with the administration of the estate.

Even in jurisdictions where it is clear that the fiduciary is the only client, the developing weight of authority is that the lawyer also has a duty to prevent the fiduciary from causing harm to beneficiaries as a result of a breach of fiduciary obligation. See Restatement § 51(4), Comment h. Where court filings are involved, the lawyer may have an obligation to correct any false filings by the fiduciary. See, e.g., Model Rule 3.3(b). Lawyers, therefore, should stay informed about the fiduciary client's activities and if something seems amiss, seek assistance and direction from the firm's loss prevention partner.

VIII. Conclusion

The T &E practice provides clients with valuable legal assistance on personal and financially significant matters, much of which

is emotionally charged. While certain factors such as family feuds, changed circumstances, and frivolous allegations are beyond their control, lawyers in the T &E practice can manage many of the factors leading to claims, includ-ir .. g corJlicts, mistakes, and fiduciary issues. By recognizing and attending to those issues, T&E practitioners can both avoid later claims and provide quality client service.


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