Staying Out of the Minefield: Ethical Considerations in Representing Clients in Estates, Trusts, and Administrations in Local and Other Jurisdictions Jacqueline M. Schuh & Ivory S. Umanah 1521 Northway Drive Suite 115 St. Cloud, MN (320) nd Avenue South Suite 1100 Minneapolis, MN (612) Estate planning & administration requires a working knowledge of The substantive law in the estate planningarea Related areas of law, including divorce law, bankruptcy, real estate law and business law Ethical rules 2 Rogers v. Cruger, 7 Johns. 557 (N.Y. 1808). In re Estate of Stephens, 207 Minn. 597 (1940). 3 The Call The Interview The Conflict Check The Contract for Services and Payment The Drafting Choosing Fiduciaries Administration Considerations Monitoring the Law Periodic Reviews of Estate Assets and Plans 4 Clients are referred to us through several avenues: Phone book Internet Friends Family Seminars Other professionals 5 Failure to get all the information- i.e. middle initials and addresses; and Failure to run a conflict check prior to discussing any facts or information related to the case 6 What is the issue? A lawyer shall provide competent representation to a client.Competent representation requires the legal knowledge, skill, thoroughness, and preparation reasonably necessary for the representation. Minn. Rules of Prof'l Conduct Big ego:I can handle anything with research Not knowing your boundaries and undertaking something beyond your experience Failing to explainthe matter and options as well as risks to the client in a manner the client can understand Making predictions or promises about favorable outcomes that sound easy and sure 8 There is no rule against representing someone with capacity issues When serving a client with diminished mental capacity, the Minnesota Rules of Professional Conduct provides as far as reasonably possible, the attorney shouldmaintain a normal client-lawyer relationship with the client. Minn. Rules of Profl Conduct 1.14 The attorney may take reasonably protective actionsuch as seeking the opinion of physicians, or seeking the appointment of guardian ad litem, conservator or a guardian for the person 9 To identify a client who may have diminished mental capacity, the attorney can ask some basic questions to get an idea of whether or not the person lacks capacity, such as; Where does the person live? Who are the person close relatives? What year is it? Who is the president of the United States? What does the person own? Why does the person want to designate or omit certain relatives or friends from serving in a fiduciary capacity, or being named as beneficiaries? 10 Seeking the appointment of a personal representative or guardian/conservator has several advantages A qualified guardian may be in a better position to assess the clients needs However the attorney still has an obligation not to disclose personal information about the client, except where reasonably necessary to act in the clients best interest. Minn. Rules of Profl Conduct1.14(c). 11 In re Ulanowski, 800 N.W.2d 785 (Minn. 2011). The attorney knew from the beginning of the representation that the client had a mild brain injury After the attorney was accused of professional misconduct, the attorney argued that the clients diminished capacity was mitigated by the fact that the clients mother had assisted him throughout the representation The Minnesota Supreme Court disagreed and disbarred the attorney 12 Before agreeing to represent any new client, the attorney should check to make sure that any such representation would not present a concurrent conflict of interest Therefore the attorney must answer (at least) two questions; Who is the client? Is there a concurrent conflict of interest or not? 13 Spouses? Personal representative v. the estate Guardian? Conservator? 14 General rule: An attorney is liable for professional negligence only to a person with whom the attorney has an attorney-client relationship A direct, intended, third-party beneficiary may bring an action for legal malpractice in those situations when the client's sole purpose is to benefit the third party directly, and the attorney's negligent act caused the beneficiary to suffer a loss. A party is a direct beneficiary of a transaction if the transaction has as a central purpose an effect on the third party and the effect is intended as a purpose of the transaction. Minnesota courts consider the Lucas factors See McIntosh County Bank v. Dorsey & Whitney, LLP, 745 N.W.2d 538, 547 (Minn. 2008). 15 A lawyer may be paid by someone other than the client IF the client is informed of and consents to that fact. Minn. Rules of Prof'l Conduct 1.7, Comment 13. Additionally the arraignment must not compromise the lawyer's duty of loyalty or independent judgment to the client. The Rules also require that, If acceptance of the payment from any other source presents a significant risk that the lawyer's representation of the client will be materially limited by the lawyer's own interest in accommodating the person paying the lawyer's fee or by the lawyer's responsibilities to a payer who is also a co-client, then the lawyer must comply with the rules governing waivable conflicts of interest. 16 An attorney shall not represent a client if the representation involves a concurrent conflict of interestmeaning the representation of one client will be adverse to another client there is a significant risk that the representation of one or more clients will be materially limited by the lawyers responsibilities to another client, a former client or a third person, or by a personal interest of the lawyer Minn. R. Profl Conduct1.7. Under certain circumstances, the conflict may be waived. (Id). Rule 1.8 provides additional guidance 17 In re Severson, 860 N.W.2d 658 (Minn. 2015). The client was a member of the attorneys household, who the attorney treated like his own daughter The attorney convinced client to appoint him as power of attorney and direct the investment of $500,000 of the clients money Attorney used the money to fund his own business interests (which failed) And the attorney was subsequently suspended from practice indefinitely 18 Guiding a client through a matter and using illegal or unethical ways to achieve the goals of the client Making false statements to the client or the court Failing to point out case law taking a contrary position with respect to the an issue Failing to communicate adequately with the client, and update them honestly about their case 19 Do we get all the information we need? Do we review our notes prior to drafting? Do we advise properly? Do we draft what our clients want? Do wethen check our notes again prior to sending drafts to the clients? How about proofreading? 20 Any reason to be concerned? Review and proofreading Have you considered how the documents may be challenged? If challenged, by who? Heirs or others with potential interest? 21 Have you prepared the documents in a timely manner? Have you addressed all contingencies? Is this the right plan for the client? Any potential tax issues to address? Is the signing consistent with statutory requirements? 22 In drafting, what citizenship and domicile Who died and in what domicile What assets are involved Where are the assets located Where are the beneficiaries If more than one country or beneficiaries from different countries are involved, you need to research and understand the laws of succession in the other countries, and may need to secure counsel in the other county 23 Should accurately reflect the scope of representation, including; Who is the client? What are you doing to help the client? As well as the terms of payment And other expectations, such confidentiality, honesty, communication and what will happen if the attorney needs to withdraw. 24 In discussing fiduciaries Do we provide all options to each client? Do we discuss their choices in depth enough? Do we discuss fiduciary duties and provide enough information so they truly understand the duties? Do we recommend background checks? Should we disclose recent publications about problems with corporate fiduciaries? 25 Attorneys are frequently asked to step into this role by our estate planning clients and as flattering as this is, attorneys as fiduciaries can work fine or can be trouble, but You should never appoint yourself in a document either you or a colleague at your firm drafts for any client and 26 You should never appoint your firm as a fiduciary, but if you are asked by others outside the firm or you are appointed in a matter by the Court, then: 1. Be certain you have coverage under your malpractice policy and the firm approves 2. Understand the duties 3. Know that you will be held to a higher standard than others 27 Determine the scope of representation and who you represent the PR, or a beneficiary? Beware of filing deadlines for taxes (estate, trust or income) or legal action to secure estate assets or defend an action Understand the dispositive provisions of the underlying documents 28 Understand the elections available to the fiduciary, e.g., disclaimers, QTIP, Clayton QTIP, 6166, etc. County-specific procedures Different counties or different judges may have different methods or ways of handling probate matters. including processes, procedures, appearances or lack thereof Dealing with pro se persons 29 The attorney should continue to monitor developments in the law that may affect the clients interest, including; Changes in tax law and policy New statutory methods of safeguarding assets I.E. gun trusts or similar developments Developments in case law 30 Consult with the client periodically to ensure that the original estate plan is adequate and that the clients assets are protected Make any changes that may be necessary due to changes in the clients wishes I.E., changing or adding beneficiaries, fiduciaries, etc. 31 Forassistancewiththeissues inthis the discussedpresentation, pleasecontactlawfirmof P.A.at Engelmeier&Umanah, (612) or(320) 0375andasktospeakwithour 230- estate planning attorneys. 32