Ethical Duties of Estate Planners - What Would You Do?
By Lawrence J. Fox
Chris Bruce knew the same issue lurked in every joint representation of spouses. He had read about it in a law review article and heard it mentioned at a seminar. But he assumed it was a big city, big money problem that he would never face-not Ethical Duties of Estate Planners - What Would You Do?
Liability Squared out in sleepy Bethlehem.
Chris's clients were good, solid folks -steel company executives and their wives, members of the Saucon Valley Country Club, congregants at First Presbyterian and St. Matthew's Episcopal-the living embodiment of family values.
Chris prepared their tax returns, incorporated their small proprietorships and wrote their wills. He never even talked to them about "estate planning," which sounded way too sophisticated for them.
Chris loved the feeling of satisfaction when a husband and wife placed their confidence in him to craft the words that reflected their testamentary intent, after he explained the various ways to maximize the amount that would pass to their grandchildren and to St. Matthew's.
But suddenly he had a problem. Mr. and Mrs. Charles Recht (Charlie and Sylvia) had come to him for the first time years ago. Chris knew Charlie from the days when Chris served as one of Bethlehem Steel's first in-house counsel and Charlie was just out of Lehigh University and starting out in the foundry. Together they had solved a minor labor problem, giving the company the right to hire part time help, and they had been friends ever since. When Chris left Bethlehem to practice law on his own, Charlie had been one of his first clients. Charlie has given Chris many referrals over the years.
A New Will
The Rechts had come in to review their wills in light of Charlie's announced promotion to executive vice president. This well-earned position meant that the potential value of Charlie's estate might now go well into seven figures. Chris could see them now-Charlie in his usual outsized plaid jacket, one or maybe two sizes too small for his ample frame, and Sylvia following behind him, carrying a white linen clutch bag that matched her gloves and her dated pillbox hat.
Chris had patiently explained to the couple that they now had some serious tax concerns but that the estate planning device they adopted six years earlier-each spouse creating a $600,000 credit shelter trust and giving everything else to the other-was still the best route for them, because the surviving spouse could implement their joint wishes for the ultimate disposition of their assets.
"Sounds good to me," Charlie piped up in his usual blustery manner. "Me, too," echoed Sylvia. She was as much a lady as Charlie was rough around the edges, Chris thought to himself.
"The important thing," Sylvia continued, "is for our grandchildren to have money for college - and for the church to have enough to pay Pastor MacDonald a living wage. He"s such a dear." Sylvia had been surprisingly chatty.
"Then I'll draw up the papers and you can return in a week to sign them," Chris told the couple. "I'll change the executor as we discussed and otherwise just update your wills to reflect the latest tax law changes." Chris felt good about delivering quality services to dear friends at a critical time in their lives.
The next week Charlie and Sylvia returned. Chris rounded up three witnesses and a notary, and the Rechts had new wills for which they happily paid his $1,000 fee by return mail.
On Saturday, only one week later, Chris ran into Charlie at the country club and the situation began spinning out of control. Charlie was sitting in the locker room half naked, playing pinochle with a few of his cronies. Chris had sneaked in nine holes after a half day of work and was looking forward to a long shower. Then Charlie had come over and sat beside him. Dropping his voice, Charlie began, "I hope you won't take it personally, but I went to see Herb Anderson to draw me a new will. I knew you wouldn't want to get involved, seeing as how you represent both of us."
"What do you mean?" Chris asked incredulously. "You just signed new wills last week."
"I know, I know-I paid you, didn't I? But I don't really want to leave everything to Sylvia. She's a pain, to tell you the truth, with all that church stuff. And I shouldn't tell you this, but we haven't slept together in seven years."
Chris could do nothing but listen. "So what's a guy to do? I took up with a woman down at the office. I won't tell you her name so you don't know more than you have to. But anyway, we've been together for some time and I just have to leave her something! Chris, she's the only person who really understands me, so I decided I'd get a new will and take care of her that way."
"But Sylvia thinks you're leaving everything to her," Chris whispered. "Well, you better not tell her different. You're my lawyer and you've always said everything I tell you is confidential. I wouldn't have told you otherwise, but I figured you should know. We've been friends a long time, and I just didn't want to hurt your feelings."
That was the last thing Chris felt. But what should he do now? He represented both Charlie and Sylvia. Could he tell Sylvia? Must he tell Sylvia? Could he tell Charlie he was telling Sylvia? His mind spun in circles as he mustered a feeble "Thank you, Charlie. I'm not hurt. Why don't you go back to your pinochle and I'll shower up."
As the water pounded his skin, invigorating his tired body, Chris came up with a plan. He couldn't solve this problem himself, so he would hire a lawyer who specialized in ethics. He had read about those ethics experts. They charged a lot, but even if he spent the entire fee from the Rechts, it would be worth it to find a way out of this dilemma.
"Five thousand dollars? For an initial consultation? That's five times what I charge my clients for the same amount of work." Those were Chris's first words after he introduced himself to Jeremy Dorfman, the University's leading ethics expert.
"I'm really sorry," Dorfman responded. "I can't make exceptions, but I would be glad to talk to you as early as next Monday if you're still interested."
Chris thought quickly. He really had no choice, and by getting Dorfman he was certainly hiring the best. "I'll be there, Mr. Dorfman. I'll be there."
"You can call me Jerry. And don't forget the check, Chris."
As he was driving onto the magnificent campus and locating the imposing neo-Gothic stone building that housed the law school, Chris hoped all that ivy would translate into sage advice. He found Dorfman in a comfortable corner office, with floor-to-ceiling bookshelves except where three large windows provided a splendid view of the campus, which was just then at the peak flowering of dogwoods and azaleas.
Dorfman himself cut an imposing figure: he was perhaps six foot four, dressed in a three piece suit. After a hearty greeting and the check exchange, Chris launched into his tale of the Rechts and followed with his questions.
"You should have made it clear in the beginning how you would handle the receipt of confidential information from one of them," Dorfman pronounced. "You could have avoided a lot of anguish if you had set up ground rules in advance."
Chris felt appropriately chastened-but getting a scolding was not what he had spent $5,000 for. Tell me what to do, he thought.
"Now," Dorfman continued, "in the absence of any ground rules, the question is, what rule applies. Frankly, there is no clearcut answer. Most commentators and case law take the view that you must share the information. Some say you have the discretion to decide. And a responsible but minority body of opinion says you must keep Mr. Recht's confidence.
"My advice to you," Dorfman concluded, "is to share the information-but only after you tell Mr. Recht what you plan to do. I think you breach your duty to Mrs. Recht if you have information related to your representation and fail to share it with her."
"Then I guess I'll tell her," Chris responded. "But frankly, just the thought of telling Charlie I'm going to tell her scares the hell out of me. He's got a ferocious temper, and he sure doesn't want his wife to know about his other will."
"Well, there is a responsible body of opinion that says you can keep the secret. After all, if Mr. Recht hadn't told you, the effect on Mrs. Recht would have been the same."
Chris felt like a life preserver was being thrown to him. "You mean it's okay if I don't tell Sylvia?"
"That's not my advice," Dorfman answered. "I think you should tell her. What I'm saying is, if you choose not to, there will be some support for your position if it ever comes out."
Chris thought for a long time. He looked at Dorfman. He stared out the window. He envisioned Charlie's bear hug turning into a hammerlock. "Then I'll keep Charlie's confidence. I will. And I thank you for the ethics lesson. Cost me more than my first year of law school, but it was worth it."
As Chris left the campus, he passed law students engaged in endless conversation and thought how little they appreciated the real dilemmas practicing lawyers faced. How ironic that he had chosen to return to this unreal world to solve such a problem.
Less than two years later, Chris was awakened at 6:00 a.m. by a sobbing and hysterical Sylvia on the phone. Charlie had died in Singapore, she said, the victim of a massive heart attack, while he was traveling to a sales meeting. A younger executive named Rebecca Calvin had called from the hospital. "'They did all they could do,' she told me. 'They did all they could. It just wasn't enough.'" Sylvia was beside herself.
"I'll be right over," Chris replied.
Arriving within half an hour, Chris found a distraught but composed Sylvia in the living room with her eldest daughter Heather. After an uncomfortably long embrace, Sylvia announced to Heather, "Chris will take care of everything. He wrote our wills two years ago."
Realizing this was no time to correct misapprehensions, Chris simply patted SylviaÕs shoulder, which seemed to suffice. But Chris was not surprised, two days after the funeral, when he received a call from a very different Sylvia Recht.
"Chris, I just got off the phone with Herb Anderson, and now I know why he was at the funeral. He tells me the will you wrote for Charlie wasn't his last one. Seems Charlie wrote another will within a week of the wills we signed together. This one names Anderson executor and gives one-third of Charlie's estate to-get this, Chris-that woman, Rebecca Whatsit, the one who called me about Charlie's death. I can't believe it. I've never been so angry in my life. Can you imagine? The way that man fooled both of us."
"Well, not exactly both," Chris responded. He felt consumed with guilt.
"What do you mean?" said Sylvia.
"Well, to tell you the truth, I knew about the new will. And about the woman. Though not about the size of the gift."
"And you didn't tell me!" Sylvia practically screamed into the phone.
"I couldn't. Charlie was my client. What he told me was in confidence. Just like anything you told me."
"But I never told you any secrets you couldn't tell Charlie."
"I'm sorry. I even consulted Jeremy Dorfman at the University Law School to confirm what I should do. Paid him four or five times what you paid for the wills. I wanted to do the right thing for both of you."
"Well, you sure did the right thing for Charlie, but I guess that's not surprising. When you had to choose, you chose the big shot from the steel company, not the little lady from the church dinners. You men are all the same."
"No, Sylvia. You don't understand. This is the ethics of our profession."
"I've learned all I need to know about your ethics, Mr. Turncoat. If I had only known back then, I could've saved a lot of money for my grandkids. Now some lady I never met will be going to the Bahamas on our Princeton tuition. I'd be surprised if your ethics let you sleep at night."
Five weeks after Sylvia's tirade, the complaint was served on Chris. He had almost forgotten that awful encounter when a process server showed up with a blueback in hand. As Chris stared at the caption on the document, he realized he had never seen his name as a party to litigation. This was a sad first.
The second jolt came when he saw he was not the only defendant opposite the name of Sylvia Recht. There in prominent capitals was the name of Jeremy Dorfman. How could that be? Dorfman had never met Sylvia Recht. He had been Chris's lawyer. Chris flipped through the pages to find the farfetched allegations Sylvia's new lawyer had cooked up. He soon found what he was looking for:
26. In connection with Mr. Recht's disclosure of his new will naming his paramour as a substantial beneficiary, Defendant Christopher Bruce consulted an ethics expert, Jeremy Dorfman, with respect to Mr. Bruce's fiduciary duties to his client, Mrs. Recht.
27. Upon information and belief, Mr. Dorfman knew Mr. Bruce had decided not to inform Mrs. Recht of Mr. Recht's testamentary decision, knew Mrs. Recht had no other way of finding out, knew Mrs. Recht was relying to his detriment on her late husband's agreement to leave all his estate to his wife and failed to fulfill his duty under Restatement of the Law Governing Lawyers section 73(4) to prevent or rectify Mr. Bruce's failure to notify Mrs. Recht.
Chris didn't know whether to feel good or bad that he would have company in defending this claim. After all, his codefendant would testify that he had recommended that Chris tell Mrs. Recht. But Dorfman was also the one who had pointed out the split in authority.
Just two days later, Dorfman called.
"I can't believe it. I knew that ALI proposal was an unwarranted expansion of attorney liability. This just proves that fiduciaries can't get the same quality of legal services non-fiduciaries can receive. A fiduciary in search of legal advice is a little like Typhoid Mary, infecting every lawyer she consults. And one thing's for sure. Even if we convince the Northampton Common Pleas Court that section 73(4) is not good law, it's going to cost me five times what you paid me to get out of this mess. Fuzzy-headed academics . . ." Dorfman trailed off.
"I'm sorry. I'm really sorry," was all Chris could muster after he told Dorfman his lawyer's name. How he wished, now, that he had taken the harsh medicine before Charlie died and told Sylvia about the other will. But he hadn't.
Lawrence J. Fox is a partner with Drinker Biddle & Reath in Philadelphia, Pennsylvania. He is chair of the ABA Section of Litigation and a member of the ABA Standing Committee on Ethics and Professional Responsibility. This story is excerpted from his book Legal Tinder, recently published by the ABA.
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