Volume 19, Number 5
Hidden Conflicts of Interest
By Joseph M. Hartley
Many of my friends call themselves recovering litigators who have found great pleasure in the comparative quiet of a practice emphasizing wills and estates. They report how much more relaxed they feel, how easily they put forth their best efforts to create work product, and how often they produce work that clients really appreciate. In addition, they point out, they now have a built-in source of referrals from other members of the happy clients' families.
Everything my friends report is true. But as a lawyer who actually tries legal malpractice cases, I don't know of a single area of law practice that is nastier to try to a jury than a case involving battles between family members after the paterfamilias has shuffled off this mortal coil and left the lawyer who drafted the estate documents stuck with the squabbling family members. The only cases that rival legal malpractice cases involving estate planning are criminal cases, divorce cases, and cases where the lawyer was foolish enough to enter into a sexual relationship with the client. The estate planning practice is a minefield of hidden conflicts of interest that even a careful lawyer might not be able to detect.
Estate planning clients have two problems that most other clients do not: (1) They often confide to the lawyer secrets they have never divulged to another family member; and (2) the family structure is not nearly as sound as it appears. An estate planning lawyer who is unaware of these possibilities may fail to anticipate the most common conflicts of interest that arise in estate planning practices.
Many practicing lawyers have clients who relay confidential information to them, but clients who actually have a deep, dark secret are unusual. By contrast, estate planning lawyers often hear real secrets: a long-ago prison sentence, an abandoned illegitimate child, a wrong needing to be made right (if only from the comparative safety of the testator's death). Or the client may confide that he hates one of his children, or that she never loved her husband of 50 years, or any number of other startling revelations.
Why do estate planners elicit such confessions when other lawyers do not? Clients planning for their demise are facing an issue no one likes to acknowledge. Mortality requires each of us to assess our lives, deciding whether it was, for better or worse, a life well lived. Some people facing the prospect of death realize they lived a life of lies or want to make amends for past misdeeds.
Unhappily, these secrets tend to be extremely disruptive of family structure when they are revealed. They are also highly emotional. Although not every estate planning matter has such explosive potential, a statistically significant number do; some lead to bitter disputes among surviving family members when they are revealed.
The easiest way to solve this problem and remove it as a potential for conflicting interests down the road is to suggest the client with such a secret address the matter while still alive. The client may demur, however, and the lawyer may move into the uncomfortable position of being a therapist rather than a legal advisor. If the client insists that no disclosure of the secret be made until after death, the lawyer must be extremely cautious about taking on other family members as clients.
The best thing about representing estate planning clients is that they often appear to be happily taking care of business and looking after their loved ones. Seeing families working together the way we like to think they should gives lawyers a warm glow and can be one of the real attractions of an estate planning practice.
But, as in life, things are often not as they seem in the family that is happily planning the distribution of the estate. The happy wife may in fact feel browbeaten by the husband; the quiet, dutiful daughter may feel her father always favored her more vivacious sister; and the son may resent that his mother stifled his creative instincts and forced him into a job he hates. When one of the members dies, the forces holding the family together are changed, sometimes weakened; and extremely personal and primitive emotions often erupt after years of suppression.
This is not simply the reverse of the problem of the client's intimate secret. The two may well exist simultaneously, and there is nothing more explosive than the hurtful secret of a tyrannical parent revealed after death.
How can an estate planning lawyer anticipate such problems? In many cases, you simply can't because the clients live their covers so well and have fooled themselves as well as the public about how secure and happy the family actually is. In every case, however, you should operate on the assumption that the family structure may in fact alter after a death and turn into a civil war among the remaining family members.
The two ways families can be affected during estate planning or distribution should be assumed to be present in every case an estate planning lawyer handles. With luck, they won't be, but the only way to avoid the resultant problems is to assume they are, without exception. If this takes away from the joy of estate planning, it at least has the compensation of protecting both the lawyer and the clients.
An examination of some of the more common conflicts can reveal how sensitivity to the downside of multiple representation might help avoid claims.
Future adverse representation. Any lawyer with more than one client faces the prospect that two or more of the firm's clients will end up in a dispute against one another. This possibility does not necessarily require disclosure of potentially conflicting interests. But the lawyer should keep in mind that, when the lawyer or firm represents more than one family member, conflict among family members in most cases disqualifies the lawyer or firm from representing any of the parties to the dispute. If you sense any likelihood of conflict, you may want to decide at the beginning to represent only one family member.
Family members as new clients. The client with a deep, dark secret often sends family members to the estate planning lawyer nonetheless, sometimes for estate planning but often for unrelated matters. Such potential cases require extremely careful scrutiny by the lawyer at the outset; by keeping the secrets of the initial client, the lawyer may not be advancing the interests of the family members who might be affected by the secret. The safest course when the original client has a secret is simply to decline representation of any other family member or person who could profit from knowing the client's secret. If the original client will not consent to disclosure, which would be required to resolve the potential conflicts, the lawyer must avoid representation of other family members.
Parenting the parents. The reverse scenario is also typical: An adult child brings an aged parent to the lawyer to make an estate plan. If the child is already a client of the firm, this is a normal type of referral-but it should be examined closely. Would other family members ordinarily expect to be included in the estate plan? A case in which the adult child is an only child with a sole surviving parent is quite different from (and safer for the lawyer than) a case in which an adult child brings in a parent who will leave the bulk of the estate to that child, excluding other siblings. Some courts have even presumed undue influence in such circumstances and invalidated the will prepared by the lawyer. You definitely do not want to be that lawyer, especially if you already represent the adult child.
A disclosure of potential interests is often wise. If you smell trouble, decline the representation. The fees will not be worth the aggravation you will suffer if you get named as a coconspirator with the overreaching child.
Multigenerational estate planning. Wealthy, sophisticated families frequently try to devise an estate plan that incorporates the wills and trusts of all family members. Economically it makes a great deal of sense to have a single lawyer or law firm prepare documentation to maximize coordination. This also is a good job for the lawyer because the fees can be substantial and the clients are often grateful…at least at the beginning.
Problems arise if the family starts to feud. Suddenly the apparent unanimity of opinion within the family starts to dissolve, and the lawyer can no longer represent any of the family members. If you spent a lot of time (and a lot of the clients' money) preparing an estate plan that now requires another lawyer, at even more cost to the clients, the clients will not be happy. It is best to disclose upfront, and in writing, that conflicts may arise among family members, in which case the lawyer or the law firm will not be able to represent any of them.
Public conflict. Occasionally the lawyer gets lucky with a family whose arguments are all out in the open. With proper disclosures, you could represent all of them-but why on earth would you want to? You are knowingly stepping into a hornet's nest. Just because the family members know about the conflicts doesn't mean they won't sue you. True, your insurance company may be able to get you out of the situation after spending $100,000, but why risk having that on your record when the simple caution of declining multiple representation could avoid the mess in the first place?
The most important thing for the estate planning lawyer to know about conflict of interest has nothing to do with its technical definitions. Rather, the careful estate planner must realize that all conflicts stem from two factors that are basically unique to the estate planning practice: secretive clients and family structures that aren't necessarily what they appear to be. Only by keeping these two factors in mind can estate planning lawyers anticipate and identify the minefield of potential conflicts of interests they face in the practice.
Joe Hartley is a trial lawyer in Santa Monica, California, representing lawyers and clients on legal malpractice matters and litigation involving professionals.