Who’s My Client? Ethical Landmines in Representing , The Elderly, and their Families

Alabama State Bar BBA Solo/Small Firm Section Joint Meeting Birmingham, Alabama February 12, 2020

Kristin Waters Sullivan The Five Points Law Group, LLC 205.352.4455 [email protected]

As a representative of clients, a lawyer performs various functions. As advisor, a lawyer provides a client with an informed understanding of the client’s legal rights and obligations and explains their practical implications. As advocate, a lawyer zealously asserts the client’s position under the rules of the adversary system. As negotiator, a lawyer seeks a result advantageous to the client but consistent with requirements of honest dealing with others. As intermediary between clients, a lawyer seeks to reconcile their divergent interests as an advisor to and, to a limited extent, as a spokesperson for each client. A lawyer acts as evaluator by examining a client’s legal affairs and reporting about them to the client or to others.

Alabama Rules of Prof. Conduct, Preamble: A Lawyer’s Responsibilities

Speak up for people who cannot speak for themselves. Protect the rights of all who are helpless. Proverbs 31:8

Who’s My Client? Ethical Landmines in Representing Fiduciaries, the Elderly, and their Families Kristin Waters Sullivan | The Five Points Law Group, LLC Page 2 of 12 I. Trusts and Estates

A. Governing Rules

Ala. Rules of Prof. Conduct, Rule 1.7. : General Rule

(a) A lawyer shall not represent a client if the representation of that client will be directly adverse to another client, unless:

(1) The lawyer reasonably believes the representation will not adversely affect the relationship with the other client; and

(2) Each client consents after consultation.

(b) A lawyer shall not represent a client if the representation of that client may be materially limited by the lawyer’s responsibilities to another client or a third person, or by the lawyer’s own interests, unless:

(1) The lawyer reasonably believes the representation will not be adversely affected; and

(2) The client consents after consultation. When representation of multiple clients in a single matter is undertaken, the consultation shall include explanation of the implications of the common representation and the advantages and risks involved.

Ala. Code § 19-3B-813; Duty to inform and report.

(a) Except as otherwise provided in Section 19-3B-603, the following rules apply:

Who’s My Client? Ethical Landmines in Representing Fiduciaries, the Elderly, and their Families Kristin Waters Sullivan | The Five Points Law Group, LLC Page 3 of 12 (1) A trustee shall keep the current permissible distributees of income or principal of the trust reasonably informed about the administration of the trust and of the material facts necessary for them to protect their interests.

(2) Unless unreasonable under the circumstances, a trustee shall promptly respond to a qualified beneficiary's request for information related to the administration of the trust.

(b) A trustee:

(1) upon request of a beneficiary, shall promptly furnish to the beneficiary a copy of the trust instrument;

(2) within 60 days after accepting a trusteeship, shall notify the qualified beneficiaries of the acceptance and of the trustee's name, address, and telephone number;

(3) within 60 days after accepting the trusteeship of an irrevocable trust, or the date the trustee acquires knowledge that a formerly revocable trust has become irrevocable, whether by the death of the settlor or otherwise, shall notify the qualified beneficiaries of the trust's existence, of the identity of the settlor or settlors, of the right to request a copy of the trust instrument, and of the right to a trustee's most recent report as provided in subsection (c), except no notice shall be required to be given to any beneficiary of a split interest charitable trust whose interest is not irrevocable until that beneficiary's interest becomes that of a current permissible distributee; and

(4) shall notify the current permissible distributees of income or principal of the trust in advance of any change in the method or rate of the trustee's compensation.

(c) A trustee shall send to the distributees or permissible distributees of trust income or principal, and to other qualified or nonqualified beneficiaries who request Who’s My Client? Ethical Landmines in Representing Fiduciaries, the Elderly, and their Families Kristin Waters Sullivan | The Five Points Law Group, LLC Page 4 of 12 it, at least annually, a report of the trust property, liabilities, receipts, and disbursements, including the source and amount of the trustee's compensation, a listing of the trust assets and, if feasible, their respective market values, and, upon termination of the trust, a final report commencing with the date of the most recent annual report through the last transaction of the trust. Upon a vacancy in a trusteeship, unless a co-trustee remains in office, a report must be sent to the qualified beneficiaries by the former trustee. A personal representative, conservator, or guardian may send the qualified beneficiaries a report on behalf of a deceased or incapacitated trustee.

(d) A beneficiary may waive the right to a trustee's report or other information otherwise required to be furnished under this section. A beneficiary, with respect to future reports and other information, may withdraw a waiver previously given.

(e) Subsection (b)(2) and subsection (b)(3) shall apply only to trustees who accept a trusteeship on or after January 1, 2007, to irrevocable trusts created on or after January 1, 2007, and to revocable trusts which become irrevocable on or after January 1, 2007.

B. Representing Fiduciaries

When undertaking representation of a party to a trust or estate matter, it is important for an attorney to be very clear with all parties about whom he or she does and does not represent. When representing a trustee, beneficiaries should be advised that the trustee’s attorney does not represent them; however, the attorney for the trustee may owe certain duties to the beneficiaries. Ala. Code § 19-3B-813 (full text above) does not resolve whether or not attorney- trustee communication is protected from discovery by beneficiaries under attorney-client privilege, so a lawyer should keep this in mind at all times while communicating with a trustee client. If an attorney discovers that a Personal Representative whom he or she represents has misappropriated funds, the attorney must either have the client reconcile the mistake or agree to inform the court of it. If the client refuses to either reconcile the mistake or inform the court of the misappropriation, the attorney should withdraw and ask the court to order an accounting. If the conduct is ongoing, the attorney additionally has an affirmative duty to disclose to the court under Who’s My Client? Ethical Landmines in Representing Fiduciaries, the Elderly, and their Families Kristin Waters Sullivan | The Five Points Law Group, LLC Page 5 of 12 Rule 3.3(a)(2)’s guidelines pertaining to candor toward the tribunal. If the conduct is in the past, however, this is not permitted under the confidentiality rule.1 When an attorney represents more than one party in a trust or estate matter, and the interests of those two parties become contrary to one another, the attorney should withdraw from representation of each of them. This is also true when representing a Personal Representative or trustee in both a and individual capacity. When corresponding with unrepresented parties, which happens often in the context of trusts and estates, a lawyer should be clear about his or her role. If there is a potential for a conflict, it is important not to offer legal advice to a non-client, further blurring the lines of representation. Instead, if necessary, the other party should be advised to obtain his or her own legal counsel. When representing a trustee, a lawyer has an obligation to advise beneficiaries of decisions that could substantially affect them. However, it should be emphasized that the lawyer represents the trustee and not the beneficiaries.2 There are three differing views regarding representation in an estate matter: 1) That the attorney represents the estate itself; 2) That the attorney represents the Personal Representative; and 3) That the attorney represents the beneficiaries of the estate. In Opinion 2010-03, two questions were posed to the Office of General Counsel of the Alabama State Bar. The first dealt with who the lawyer represents in the administration of an estate, the second with the lawyer’s ethical obligations when he or she becomes aware of malfeasance by a Personal Representative of an estate. The Alabama Disciplinary Commission determined that a lawyer retained by a Personal Representative represents the Personal Representative, not the estate or the beneficiaries of the estate, as in the second (and most popular) view outlined above. The General Counsel’s opinion suggests that lawyers hired by a Personal Representative draft a carefully tailored engagement letter and send it not only to the client, but also to the beneficiaries and other interested parties as a safeguard to protect against a violation of Rule 4.3, Ala. R. Prof. C., Dealing with Unrepresented Persons. In addition, when representing to Personal Representative of an estate, an attorney should make it clear to other heirs and beneficiaries that he or she does not represent them; otherwise, it could be determined that the attorney actually undertook representation of them as well, creating an affirmative duty that did not otherwise exist.

1 See Ethics Opinion 2010-03, Alabama State Bar Office of General Counsel 2 See ACTEC Commentaries to Rule 1.2 Who’s My Client? Ethical Landmines in Representing Fiduciaries, the Elderly, and their Families Kristin Waters Sullivan | The Five Points Law Group, LLC Page 6 of 12 II.

A. Governing Rules

Ala. Rules of Prof. Conduct, Rule 1.2. Scope of Representation.

(c) A lawyer may limit the scope of the representation if the limitation is reasonable under the circumstances and the client gives informed consent.

(1) The client’s informed consent must be confirmed in writing unless:

(i) the representation of the client consists solely of telephone consultation;

(ii) the representation is provided by a lawyer employed by a nonprofit legal-services program or participating in a pro bono program approved by the Alabama State Bar pursuant to Rule 6.6 and the lawyer’s representation consists solely of providing information and advice or the preparation of legal documents; or

(iii) the court appoints the attorney for a limited purpose that is set forth in the appointment order.

(2) If the client gives informed consent in writing signed by the client, there shall be a presumption that:

(i) the representation is limited to the attorney and the services described in the writing; and

(ii) the attorney does not represent the client generally or in maters other than those identified in the writing.

Who’s My Client? Ethical Landmines in Representing Fiduciaries, the Elderly, and their Families Kristin Waters Sullivan | The Five Points Law Group, LLC Page 7 of 12 B. Duties to the Estate Planning Client An estate planning attorney’s duty is always to the client/, not to the beneficiaries, heirs, or potential beneficiaries. i. Potential Beneficiaries A California Appellate court upheld summary judgment in favor of an estate planning lawyer who was sued by a potential beneficiary of an unsigned estate plan. The lawyer, Kalfayan, had been appointed in a Guardian ad litem capacity by a court after Hall, a longtime friend of a woman named Alexandra Turner, filed a conservatorship petition. The conservatorship was granted, and Kalfayan subsequently undertook revising Ms. Turner’s estate plan. He determined that the revisions should be approved by the court due to Ms. Turner’s diminished state and conservatorship. Hall was to be the majority beneficiary under the proposed plan, which was opposed by Ms. Turner’s niece. Ms. Turner died before the case was resolved, and Hall received nothing from her estate. The court based its decision on Kalfayan’s duty being solely to Ms. Turner, his client, and not to Hall, a potential beneficiary. Hall v. Kalfayan, 190 Cal. Appl. 4th 927 (Cal. App. 2010). Likewise, in Stangland v. Brock, 747 P.2d 464 (Wash. 1987), attorney Brock was sued by the beneficiaries under Ralph Schalack’s will, as the property bequeathed to them in the will had been sold by Mr. Schalack prior to his death (and the deed was prepared by another lawyer in Brock’s firm, who was also named by the beneficiaries as a defendant in this action). The court held in Brock’s favor, stating that “the attorney has no continuing obligation to monitor the testator’s management of his property to ensure that the scheme established in the will is maintained.” This is, of course, fact-dependent, and the result could be vastly different if it is found that the attorney has actual knowledge of a subsequent transaction or is representing the client in an ongoing fashion. ii. Scope of Representation The ACTEC Commentaries provide that once representation is dormant, upon the completion of the agreed-upon work by the attorney, a lawyer is not obligated to send a reminder to a client whose representation is dormant or to advise a client of the effect that changes in the law or the client’s circumstances might have on the client’s legal affairs. The engagement letter should the scope of the attorney’s representation, setting expectations and limiting representation accordingly.3

3 Sample language for limiting the scope of representation in an engagement letter: “Services to be performed. We will perform such of the following services as we believe are reasonably necessary to assist you in designing, preparing, and implementing a comprehensive estate plan: 1. Review your existing wills and other dispositive instruments (trusts, life insurance policies, etc.); 2. Review your property holdings, including how the Who’s My Client? Ethical Landmines in Representing Fiduciaries, the Elderly, and their Families Kristin Waters Sullivan | The Five Points Law Group, LLC Page 8 of 12 Attorneys are also subject to the provisions of the Internal Revenue Code. It is important to advise clients of the scope of an attorney’s representation in this regard as well, even if the attorney is qualified to give tax advice. iii. Conflicts of Interest and Confidentiality between Spouses In a particularly nightmare-inducing New Jersey case, the law firm of Hill Wallack was retained by a husband and wife to prepare their estate plan. At the same time, another woman retained different lawyers at Hill Wallack to represent her in a paternity action against the husband. Once they became aware of the conflict, the firm withdrew as counsel for the mother of the extramarital child and wrote to the husband advising him that they would disclose the child’s existence to the wife. He sued to stop the firm from doing so, but the court held that the firm was allowed – though not obligated – to disclose the information to the wife as it could affect or outright frustrate the wife’s estate planning objectives. A v. B. v. Hill Wallack, 726 A.2d 924 (N.J. 1999). Other states have differed in their handling of situations similar to the Hill Wallack case, some requiring disclosure and some disallowing it. ACTEC has taken the position that the attorney should not disclose information without permission but should withdraw if the issue is one of “serious adversity” between the parties. The engagement letter should clarify communications between jointly represented parties, most often spouses, to avoid a Hill Wallack scenario.4 An appropriate conflict check, of course, would have also been helpful in avoidance of such a conflict.

property was acquired, the way in which the title to the property is held, and tax bases; 3. Help you identify your estate planning goals and the ways by which those goals might be achieved, including how you wish to dispose of the property over which you have any power of disposition (including life insurance and employee benefits); 4. Prepare assessments of the federal tax consequences of the various ways in which your estate planning goals might be achieved; 5. Prepare the estate planning documents necessary to implement the plan you select, including drafting wills, trusts, property agreements, health care directives, and durable powers of attorney; and 6.Supervise the execution of documents, changes of beneficiary, transfer of property, and other steps required to implement your plans. The execution of documents and implementation of your plan will conclude the active phase of our engagement. However, as a service to you, we will periodically send you letters suggesting that you review your estate plan and consider whether any changes should be made. We usually send the first reminder letter on the third anniversary of the date of execution of your documents.” 4 Sample engagement letter language for managing conflicts of interest and confidentiality issues in joint representation of spouses: “Confidentiality. Any information that we receive from either or both of you may be shared with others in our office in order to carry out our engagement. The information will not be communicated to others, particularly persons outside our office, except to the extent we believe it is reasonably appropriate to review it with your financial advisors. As between the two of you, you have agreed that there will be complete and full disclosure and exchange of all information we receive from either of you that is relevant and material to our engagement. Accordingly, we will be free to share information with one of you that we receive from the other, regardless of the time or manner in which it is communicated to us. Conflicts. Each of you is free to develop an independent plan for the disposition of your property. Some couples establish plans that are mirror images of each other, but others do not. It is entirely possible that there may Who’s My Client? Ethical Landmines in Representing Fiduciaries, the Elderly, and their Families Kristin Waters Sullivan | The Five Points Law Group, LLC Page 9 of 12 iv. Conflicts of Interest and Confidentiality with Family Members As a practical point, estate planning attorneys should be sure to advise clients of the many dangers of using joint accounts as an estate planning tool, regardless of whether or not other family members push back on this suggestion. If necessary, put this advice in writing. If an attorney suspects undue influence or a particularly vulnerable client, there are several precautions that can be taken and safeguards that can be recommended. Careful consideration and diligent evaluation of reasons for drastic changes are important. Further, the attorney can recommend protections like the requirement of periodic accountings by trustees, limitations in durable powers of attorney, and the requirement of second signatures or third-party approval of certain kinds or amounts of transactions. v. Death of the Client Just as the termination of the attorney-client relationship by other means does not discharge the attorney’s obligations to him or her, the death of the client similarly does not change the attorney’s duties. In particular, the duty of confidentiality survives the death of the client.5 “[T]he general rule with respect to confidential communications … is that such communications are privileged during the testator’s lifetime and, also, after the testator’s death unless sought to be disclosed in litigation between the testator’s heirs. [Citation omitted.]” Swidler & Berlin v. U.S., 524 U.S. 399 (1998). However, “[a] personal representative of a deceased client generally may waive the client’s attorney-client privilege … only when the waiver is in the interest of the client’s estate and would not damage the client’s reputation.” United States v. Yielding, 657 F.3d 688 (8th Cir. 2011).6

be some differences between your plans and the manner in which you each choose to dispose of your property. Such differences would not prevent us from assisting both of you. However, as I explained, we may not be able to represent both of you if it becomes necessary to negotiate and define your respective property interests in a property status agreement or if other conflicts of interest develop. Should a conflict arise, we may be required to withdraw from representing one or both of you.” 5 The law firm founded by her lead defense attorney, George Dexter Robinson, still, to this day, keep and maintain confidential the notes and documents associated with Lizzie Borden’s murder case. Some defense lawyer’s documents newly available in Lizzie Borden Case, The Republican, Apr. 11, 2012. 6 Of course, confidentiality and privilege are separate concepts. Confidentiality survives; the privilege may not in certain situations. Who’s My Client? Ethical Landmines in Representing Fiduciaries, the Elderly, and their Families Kristin Waters Sullivan | The Five Points Law Group, LLC Page 10 of 12 III. Clients with Diminished Capacity

A. Governing Rules

Ala. Rules of Prof. Conduct, Rule 1.14: Client with Diminished Capacity

(a) When a client’s ability to make adequately considered decisions in connection with the representation is diminishes, whether because of minority, mental impairment, or for some other reason, the lawyer shall, as far as reasonably possible, maintain a normal client-lawyer relationship with the client.

(b) When the lawyer reasonably believes that the client has diminished capacity, is at risk of BBA client’s own interest, the lawyer may take reasonably necessary protective action, including consulting with individuals or entities that have the ability to take action to protect the client and, in appropriate cases, seeking the appointment of a guardian ad litem, conservator, or guardian.

(c) Information relating to the representation of a client with diminished capacity if protected by Rule 1.6. When taking protective action pursuant to paragraph (b), the lawyer is impliedly authorized under Rule 1.6(a) to reveal information about the client, but only to the extent necessary to protect the client’s interest.

Ala. Rules of Prof. Conduct, Rule 1.6: Confidentiality of Information

(a) A lawyer shall not reveal information relating to representation of a client unless the client consents after consultation, except for disclosures that are impliedly authorized in order to carry out the representation, and except as stated in paragraph (b).

(b) A lawyer may reveal such information to the extent the lawyer reasonably believes necessary:

Who’s My Client? Ethical Landmines in Representing Fiduciaries, the Elderly, and their Families Kristin Waters Sullivan | The Five Points Law Group, LLC Page 11 of 12 (1) To prevent the client from committing a criminal act that the lawyer believes is likely to result in imminent death or substantial bodily harm; or

(2) To establish a claim or defense on behalf of the lawyer in a controversy between the lawyer and the client, to establish a defense to a criminal charge or civil claim against the lawyer based upon conduct in which the client was involved, or to respond to allegations in any proceeding concerning the lawyer's representation of the client.

B. Protective Measures

The ABA, in Formal Opinion 96-404 (August 2, 1996) has argued that any protective action a lawyer takes should be “the least restrictive under the circumstances.” The ACTEC Commentaries to Rule 1.14 agree, going even further by saying that the lawyer should also consider the ramifications of his or her actions in this regard as it may impact future potential challenges to the client’s estate plan. The general consensus regarding a lawyer seeking a guardianship or conservatorship on behalf of a client is that it is an extreme measure that should be taken only when there is no other reasonable alternative, if at all. ABA Comment 5 to the Model Rules suggests further protective measures as follow: 1. Consulting with family members; 2. Using a reconsideration period to permit clarification or improvement of circumstances; 3. Using tools such as a Power of Attorney; and 4. Consulting with adult protective agencies, other governmental agencies, or others who have the ability to protect the client. The ABA argues that in taking protective measures, the lawyer should consider the wishes and values of the client, the client’s best interest, the goals of limiting intrusion into the client’s decision-making autonomy, maximizing client capacities, and respecting the client’s family and social connections. Confidentiality obligations still apply when a client is disabled. Under Rule 1.6(a), the lawyer may only reveal such information about the client to the extent “reasonably necessary to protect the client’s interests.” Even disclosure of the disability itself could be contrary to the client’s interests and should be thoughtfully considered.

Who’s My Client? Ethical Landmines in Representing Fiduciaries, the Elderly, and their Families Kristin Waters Sullivan | The Five Points Law Group, LLC Page 12 of 12