Ethics in Estate Planning: Key Issues Checklist

This checklist covers the key ethics rules that estate planning counsel should consider when meeting, consulting with, and planning for clients. The checklist is based on the ABA Model Rules of Professional Conduct and also includes information on the sources of ethics rules in individual states and the key ethics rules affecting estate planning counsel, including rules regarding attorney competence, client capacity to plan, managing the attorney-client relationship, attorney’s fees, preserving client confidences, handling joint representations and conflicts of interest, non-clients paying attorney fees, and attorney as beneficiary or fiduciary.

Key Ethics Resources for Trusts and Estates Counsel

• The ABA Model Rules of Professional Conduct (the “Model Rules”), which were created in their modern form in 1983 by the American Bar Association. The Model Rules have been adopted to some extent in all 50 states and the District of Columbia. However, counsel should always consult the rules in the state of practice since some state rules may vary in certain ways from the Model Rules.
• State specific ethics rules, which establish the foundation of attorneys’ obligations, vary by state and are typically found in:
  • state statutes;
  • bar association regulations; and
  • other bar association resources.

Key Ethics Rules that Apply to Trusts and Estates Counsel

Attorney Competence in Estate Planning Matters

• Relevant factors in determining a lawyer’s competence for a particular matter include:
  • the relative complexity and specialized nature of the matter;
  • the lawyer’s general experience;
  • the lawyer’s training and experience in estate planning;
  • the preparation and study the lawyer can give the matter; and
  • whether it is feasible to refer the matter to, or associate or consult with, a lawyer of established competence in estate planning if the lawyer lacks the required competence.
• In many instances the required proficiency is that of a general practitioner.
• Some circumstances may require expertise.
• Providing competent estate planning representation does not necessarily require prior experience or special training in estate planning. Inexperienced estate planners or attorneys presented with unfamiliar legal matters may provide competent representation by:
  • undertaking additional study of relevant topics; and
  • consulting or associating with other, more experienced colleagues.

(ABA Model Rule 1.1 and cmt.)

• Attorneys must stay current on new developments. This includes engaging in continuing study and education and complying with all continuing legal education requirements, including those regarding the use of technology. (ABA Model Rule 1.1, cmt. Maintaining Competence.)

Client’s Mental Capacity to Plan

• Estate planning clients must be mentally capable of participating in the estate planning process and executing the required legal documents.
• The standard for capacity generally varies from state to state and may depend on the different types of documents being executed. Counsel must determine that the client has the capacity to execute all documents in an estate plan, especially if the documents are executed at different times.
• If counsel have concerns about a client’s competence, they should take steps to evaluate capacity and clearly document the file.
• If counsel are concerned or suspicious about the client’s mental status or condition, it may be appropriate for counsel to consult with a physician, psychologist, or other mental health care professional. This should be a last resort and counsel should obtain the client’s authorization before acting. (ABA Model Rule 1.14, cmt. Disclosure of Client’s Condition.)

Managing the Attorney-Client Relationship

• An attorney-client relationship may form at an initial meeting, regardless of whether the client hires the attorney (ABA Model Rule 1.18).
• To properly manage the attorney-client relationship, counsel should:
  • identify the client and the scope of the representation to avoid conflicts of interest (ABA Model Rule 1.2);
  • use engagement letters to set out the relationship and to clearly communicate the basis or rate of the fees and costs for the representation (ABA Model Rule 1.5);
  • ensure the client is informed about the representation on an ongoing basis and makes informed decisions about the estate plan (ABA Model Rule 1.4);
  • obtain the proper consents when non-clients are involved in the estate planning (ABA Model Rule 1.6);
  • properly and completely end the representation (ABA Model Rule 1.16); and
  • maintain all client files (ABA Model Rule 1.16(d)).

Attorney’s Fees

• Fees and expenses charged to a client must be reasonable (ABA Model Rule 1.5(a)).
• Factors to consider in determining the reasonableness of a fee include:
  • the time and labor required, the difficulty of the issues involved, and the skill necessary to property person the legal service (ABA Model Rule 1.5(a)(1));
  • the likelihood that the acceptance of the client will preclude other employment by the lawyer (ABA Model Rule 1.5(a)(2));
  • the fee customarily charged in the locality for similar services (ABA Model Rule 1.5(a)(3));
  • the amount involved and the results obtained (ABA Model Rule 1.5(a)(4));
  • the time limits imposed by the client or by the circumstances (ABA Model Rule 1.5(a)(5));
  • the nature and length of the attorney’s professional relationship with the client (ABA Model Rule 1.5(a)(6));
  • the experience, reputation, and ability of the lawyer or lawyers performing the legal work (ABA Model Rule 1.5(a)(7)); and
  • whether the fee is fixed or contingent (ABA Model Rule 1.5(a)(8)).
• The scope of the representation and the basis or rate of the fee and expenses charged to the client must be communicated to the client before or within a reasonable time after commencing the representation, except when the lawyer will charge a regularly represented client on the same basis or rate (ABA Model Rule 1.5(b)).
• Any changes in the basis or rate of the fee or expenses charged to the client must be communicated to the client (ABA Model Rule 1.5(b)).
• Lawyers who are not in the same firm may divide a single fee if:
  • the division is in proportion to the services performed by each lawyer or each lawyer assumes joint responsibility for the representation;
  • the client agrees in writing to the division of fees; and
  • the total fee is reasonable.

(ABA Model Rule 1.5(e).)

• If the client pays a retainer fee, the attorney must keep the client’s funds in a trust account held separately from the attorney’s business and personal property (ABA Model Rule 1.15(a)). The trust account must typically be either an:
  • interest-bearing account, if the amount the attorney holds for the client is large, where the attorney passes the interest back to the client; or
  • Interest on Lawyers’ Trust Account (IOLTA), if the amount the attorney holds for the client is small. An IOLTA is an interest-bearing checking account, and the nominal interest earned by each IOLTA in a given state is pooled together and used for a variety of charitable causes (for example, see Massachusetts IOLTA). All 50 states, the District of Columbia, and the U.S. Virgin Islands have an IOLTA program. The program is mandatory in 44 jurisdictions, voluntary in 2 jurisdictions, and six jurisdictions have an opt-out program (see IOLTA Overview).

Preserving Client Confidences

• All information the attorney receives from and about the client is confidential, including the representation’s existence. The general rule is that the attorney must always obtain informed consent from the client before discussing confidential information. (ABA Model Rule 1.6.)
• Information the attorney obtains at the initial meeting is confidential even if the client does not retain the attorney’s services (ABA Model Rule 1.18(b)).
• The confidentiality rule applies to all information relating to the representation, whatever its source (ABA Model Rule 1.6, cmt.).
• During routine representation, an attorney is impliedly authorized to make disclosures about a client when appropriate in carrying out the representation except when the client instructs otherwise or special circumstances limit that authority (ABA Model Rule 1.6, cmt. Authorized Disclosure).
• An attorney may reveal confidential information to the extent she believes it is reasonably necessary to:
  • prevent reasonably certain death or substantial bodily harm;
  • prevent the client from committing a crime or fraud that is reasonably certain to result in substantial injury to the financial interests or property of another and in furtherance of which the client has used or is using the lawyer’s services;
  • prevent, mitigate or rectify substantial injury to the financial interests or property of another that is reasonably certain to result or has resulted from the client’s commission of a crime or fraud in furtherance of which the client has used the lawyer’s services;
  • secure legal advice about the lawyer’s compliance with the ethics rules;
  • establish a claim or defense for the attorney in a controversy between the attorney and the client;
  • establish a defense to a criminal charge or civil claim against the attorney based on the client’s conduct;
  • respond to allegations in a proceeding concerning the attorney’s representation of the client;
  • comply with other law or a court order; or
  • deal with potential conflicts of interest that may occur based on an attorney changing firms or a change in composition of a firm, unless the information would compromise the attorney-client privilege or otherwise prejudice the client.

(ABA Model Rule 1.6(b).)

• The attorney must reveal no more information than is necessary to meet the requirements or accomplish the purposes of a permissible or mandatory disclosure (ABA Model Rule 1.6).

Conflicts of Interest in Joint Representation

• Attorneys generally must not represent clients whose interests are adverse to each other or to the attorney’s other current or former clients (ABA Model Rules 1.7 and 1.9).
• Before agreeing to undertake joint estate planning representation, an attorney must consider whether there is a potential conflict of interest (ABA Model Rules 1.7 and 1.9).
• If there is a conflict of interest or a potential conflict of interest, an attorney may still be able to represent both clients if:
  • the attorney reasonably believes she can competently and diligently represent each client;
  • the representation is not prohibited by law;
  • the representation does not involve a claim by one client against another client represented by the attorney in the same litigation or other proceeding before a tribunal; and
  • each client gives informed consent in writing.

(ABA Model Rule 1.7(b).)

• Informed consent is an agreement by a person to a proposed course of conduct after the attorney communicates adequate information and explanation about the material risks and reasonably available alternatives to the proposed course of conduct (ABA Model Rule 1.0(e)).
• An attorney may include a conflict waiver provision in an engagement agreement or as a separate consent document for each client to sign, assuming that the client understands the risks that the waiver entails (ABA Model Rule 1.7, cmt.).

Non-Client Paying Attorney Fees

• An attorney may accept payment from a non-client if:
  • the client gives informed consent to the arrangement;
  • the arrangement does not interfere with the attorney’s independent professional judgment on the client’s behalf, or with the attorney-client relationship; and
  • the client’s confidential information is protected.

(ABA Model Rules 1.8(f) and 1.7, cmt. Interest of Person Paying for a Lawyer’s Service.)

Attorney as Beneficiary

• An attorney should never solicit a gift from a client or ask to be included in a client’s estate plan. These actions violate the Model Rules of Professional Conduct and many state statutes and subject the attorney to discipline and the instrument to challenge. (ABA Model Rule 1.8(c).)
• An attorney cannot prepare an estate plan for a client that includes a gift to herself unless she is related to the client. Attorneys must also refrain from preparing a client’s estate plan that includes gifts to the attorney’s relatives unless they are closely related to the client. (ABA Model Rule 1.8(c).)
• State law differs on whether a gift to an attorney in a written instrument is permitted. In some states:
  • the part of the written instrument making a gift to the draftsperson attorney is automatically void unless the attorney is related to the person making the gift (§ 732.806(1), Fla. Stat.);
  • the gifts are presumed invalid and the burden is on the draftsperson attorney to prove validity (Cal. Prob. Code §§ 21380 to 21392; Matter of Putnam, 257 N.Y. 140 (1931); Sandford v. Metcalfe, 954 A.2d 188, 191-93 (2008)); and
  • gifts to the attorney are permitted, subject to certain exceptions (In re Estate of Pedrick, 482 A.2d 215, 220 (Pa. 1984); Estate of Younger, 508 A.2d 327, 328-29 (Pa. Super. Ct. 1986)).
• Attorneys may prepare routine estate plans for family members that include the attorney as a beneficiary (ABA Model Rule 1.8(c)).
• Attorneys are not prohibited from:
  • accepting gifts from clients if the transaction meets general standards of fairness and the lawyer does not prepare the instrument bestowing the gift; or
  • receiving token gifts from clients.

(ABA Model Rule 1.8, cmt. Gifts to Lawyers.)

Attorney as Fiduciary

• Naming the attorney who prepares an estate plan as the fiduciary for the estate (referred to as the executor or the personal representative, depending on state law) or as trustee of a trust created under the plan is permissible if certain conditions are met (ABA Model Rule 1.8, cmt. Gifts to Lawyers).
• If an attorney prepares a document that appoints the attorney or a person related to the attorney to a fiduciary office, the commentary to the Model Rules requires that:
  • the appointment not violate Rule 1.7 regarding material limitation conflicts (ABA Model Rule 1.7); or
  • the client gives informed consent, in writing.

(ABA Model Rule 1.8, cmt. Gifts to Lawyers.)