Estate Planning and Conflicts of Interest

by Thomas D. Sands, Esq.

There are few things that are clear in the law. With that said, knowing who your client is should be one of them. Not having a clear understanding of who your client is can lead to a whole host of problems such as conflicts of interest, malpractice, and ineffective representation.

This blog will focus on the representation of a client in the context of estate planning. First, you must understand at what stage of the estate planning your representation is being requested. Are you simply drafting a will, a trust, or other estate document? Or are you past this stage and now working through a probate proceeding?

First, if you are in the estate planning and draft phase the following should be considered:

Defining your client

1. Are you working with a married couple or an individual married spouse?
2. A child who is either a beneficiary under an estate document?
3. One or more beneficiaries of an estate?
4. Have you been retained by a trustee to assist in the administration of an estate or to file a petition on behalf of the estate?
5. Is the client a domestic or foreign individual/personal representative?
6. Finally, are you representing someone related to the estate, for example an "interested person?"

Once you have determined who your client is, you must consider whether there is an actual conflict or potential conflict. You may consider first running an internal conflict check with current clients.

Bear in mind that in the estate planning context, a conflict may not exist just with whom the attorney is representing but in the action sought to be accomplished by the attorney's services.

Are there any actual conflicts or potential conflicts?

In this blog, conflicts are considered in the context of the American Bar Association's ("ABA") Model Rules. ABA Rule 1.7 Conflict Of Interest: Current Clients states the following:

(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.

The most common scenario is an elder, vulnerable individual who has either previously executed a trust document or has not yet executed a trust document. It is imperative to first verify the individual's capacity to execute documents.

Another consideration is whether there is a power of attorney involved. This is the typical distant cousin or family member who has recently worked with the elder individual to transfer or move the assets of the estate into a new trust or to change the beneficiaries.

In the estate planning context, a conflict typically arises where a fiduciary is being designating fiduciaries inside estate planning documents.

For example, when drafting a trust and the appointment of a trustee, how does the trustee relate to the intended beneficiaries? Are they related? One solution to this is to appoint a local bank as the trustee of the estate. This will avoid any inherent conflicts between family members or friends in the estate planning context.

Finally, the most common area where a conflict exists is the planning of the estate of a husband and wife. 

A starting point before working through the estate is to read through your local state's advisory opinion in relation to estate planning. A common minefield here is the duty of confidentiality versus the duty to disclose. Some states have found that the duty of confidentiality outweighs the duty to disclose.