Some hard-and-fast conflict of interest rules govern lawyers. Put simply, a lawyer may not represent anyone in an action against a current client. The lawyer is also disqualified from acting against a former client’s interests. That latter rule applies, however, only to matters related to the actual representation of the former client. Competent clients can waive the conflict of interest, but the lawyer does not get to make the decision.
Can a lawyer represent a married couple in estate planning?
There is an inherent conflict of interest in representing both halves of a marital community. We might, for example, counsel a couple about the tax value of turning their separate property into community property in Arizona. But that means that the sole owner of the separate property will have to give away an interest in their property. If the couple later divorces, the advice will have favored one spouse over the other.
You can spin out a number of similar conflict of interest scenarios. What about the spouse who has never told the other spouse about children born before (or outside) the marriage? Does each spouse have full information about the other spouse’s property? Can one spouse leave a share of the couple’s assets to someone other than the other spouse, even on the first death?
Lawyers frequently represent married couples, especially in estate planning contexts. Before they act, though, the lawyer should explain conflict of interest rules and give each spouse the opportunity to waive — or decline to waive — the conflict. In most cases, couples are more interested in joint estate planning consultations, and coordinated plans. Conflict of interest rules are often waived, even before the lawyer begins to act.
Can conflicts arise later?
Of course, conflicts sometimes appear after a lawyer begins (or even ends) joint representation. That might be the case, for example, when one spouse has an extramarital affair, and the lawyer learns about it. Must the lawyer disclose the information to the other spouse, also her client? May the lawyer remain silent, and simply decline further representation of the couple? Could the lawyer reveal the information, withdraw from representing one spouse, and continue as the other spouse’s lawyer?
Another way the principles of conflict of interest can arise later is where the lawyer acts as trustee, personal representative or other fiduciary for one spouse. Clients without good family options might, for example, name their lawyer as successor trustee in their estate planning documents. Suppose that one spouse dies, and the surviving spouse is incapacitated. Can the lawyer take over as trustee, and make decisions about distributions to the surviving spouse (her former client)?
That is exactly what happened in a recent New York case. Attorney David Gerstein represented a married couple. Mr. Gerstein prepared their wills, powers of attorney and trust. The trust named him as successor trustee.
After the husband died, Mr. Gerstein determined that the surviving wife was incapacitated. He began to act as trustee, making decisions about how to handle distributions and elections available to the surviving spouse.
Meanwhile, the wife’s daughter, who had been named as agent on her power of attorney, disagreed with some of Mr. Gerstein’s choices. She sought his removal as trustee, and as executor (personal representative) of the late husband’s estate. Mr. Gerstein hired lawyers from his law firm to represent him.
Motion to disqualify
The agent/daughter objected to Mr. Gerstein’s acting as trustee, and also to his law firm representing him in the court proceedings. The New York judge assigned to the case agreed, at least as to the representation by Mr. Gerstein’s firm.
The New York Supreme Court, Appellate Division, reversed that finding. The appellate judges noted that, although Mr. Gerstein’s firm did represent the surviving wife, it was not her estate that was being administered or litigated. There were no confidences between lawyer and client that would be compromised. And although the couple had signed a prenuptial agreement before their joint estate planning, there was no involvement by Mr. Gerstein or his firm in connection with interpreting that agreement. Matter of Kopet, August 8, 2018.
The reported decision doesn’t actually deal with whether Mr. Gerstein had any conflict of interest arising from acting as trustee. Since a former client was a beneficiary of the trust he managed, it isn’t hard to imagine that a conflict could arise. That might have been the daughter/agent’s argument in the parallel case. But the appellate decision makes it seem unlikely that Mr. Gerstein could be disqualified as trustee, unless there is substantially more information to be adduced.
What do we (at Fleming & Curti, PLC) do about this problem?
When we represent married couples — or unmarried couples who want to be counseled as a unit — we always explain the conflict of interest problem. We require clients to sign a waiver of any conflict, and urge them to ask questions if they don’t understand the significance. Although we have not had it happen, we would eagerly facilitate any client’s desire to get more advice on the subject.
We also occasionally act as fiduciary for our estate planning clients. It may be that there are no family members available to handle a trust. Sometimes there are family members, but they are unsuitable because of their training, their history, or their limitations. In such a case, we might end up being the trustee, agent, and/or personal representative.
To minimize the prospect of conflicts, we try to explain what we’re doing as we go along. In facts like those faced in the Kopet case, we expect that we would behave pretty much like Mr. Gerstein — including using our own lawyers for at least some of the legal representation if there were disputes to resolve.
We would likely hire lawyers from a different firm if there were any questions about a possible conflict of interest. Of course we would never allow ourselves to be in a position where we were using confidential information against a former client.
The challenge in dealing with potential conflicts of interest is to see them, recognize them, avoid them and deal with them when they do arise. That’s what any good lawyer and law firm would do, and we fancy ourselves leading Tucson elder law attorneys.