McCarthy Fingar LLP
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NYSBA CLE
Trusts and
Estates Law Section
An Introduction to Estate
Planning – Ethical Issues
October 5, 2005 –
Introduction – Source
Materials
·
Introduction:
·
Our goal: raise issues for Surrogate’s Court practitioners so we are
better able to work with the ethics rules and to become effective lawyers for
our clients
·
What is professionalism? How
does a lawyer maintain professionalism and a successful business?
·
What are lawyers selling?
Knowledge, competence and experience in solving a client’s problem?
·
In the wake of the internet, how can you, the lawyer, compete in this
market place? How do you compete in
market in which, following a community based seminar on estate planning, someone
asks you if you could recommend (1) books or periodicals on estate planning or
(2) good web sites
·
Have you ever talked to anyone who attending a “lawyer bashing”
revocable trust seminar?
·
Canons of Ethics: Code of Professional Responsibility
·
Ethical Considerations (ECs) (aspirational standards)
·
Disciplinary Rules (DRs) (black letter rules)
·
American Bar Association’s Model Rules of Professional Conduct (adopted
by 4/5ths of states) (black letter rules, with commentary)
·
Bar Association Opinions
·
New York State Bar Association Committee on Professional Ethics
·
Association of the Bar of the City of
·
·
Court decisions
Introduction: Take us through the Canons
of Ethics and to focus on particular ECs and DRs relevant to Surrogate’s Court
practice
Canon 1: A Lawyer Should Assist
in Maintaining the Integrity and Competence of the Legal Profession.
Canon 2: Lawyer Should Assist
the Legal Profession in Fulfilling its Duty to Make Legal Counsel Available.
·
Factors
for the Fixation of Fees
·
The time, labor, difficulty and skill involved;
·
The likelihood that the employment will preclude other employment;
·
The customary fee charged in the locality;
·
The amount involved and the results;
·
The time limitations imposed;
·
The length and nature of the relationship with the client;
·
The experience, reputation and ability of the lawyer
In general the court, in
determining the justice and reasonableness of an attorney’s claim for services,
should consider the time spent, the difficulties involved in the matters to
which the services were rendered, the nature of the services, the amounts
involved, the professional standing of the counsel, and the results obtained.
o
Application for Attorney Fees under SCPA 2110
o
Rule 207.45:
§
Petition;
§
Affidavit of services;
§
State
·
when by and by whom the attorney was retained;
·
terms of retainer;
·
amount requested;
·
whether the client has been consulted as to fee requested;
·
whether client has consented to fee requested; if not, the extent of
disagreement and nature of controversy;
·
period in which services rendered;
·
services rendered;
·
the time spent;
·
method or basis of compensation;
·
whether fee includes services to be rendered through decree and
distribution; and
·
whether hearing is waived;
o
Attorney/Fiduciary Issues
o
SCPA 2111 (an attorney who is also a fiduciary must obtain court
approval to received advance legal fees).
o
See balance of outline under Canon 5, including SCPA 2307-a
· Written Letters Of Engagement In Civil And Criminal Matters With Fees Of $3,000 Or More
o
Part 1215 to Title 22 of the Official
Compilations of Codes, Rules and Regulations of the State of
·
Effective March 4, 2002, all attorneys must
have a written letter of engagement before commencing representation OR within
a reasonable time after commencing representation of a client if it is
impracticable at the time of commencement or if the scope of services cannot be
determined at the time of the commencement of representation.
·
For purposes of Part 1215, where an entity
(such as an insurance carrier) engages an attorney to represent a third party,
the term "client" shall mean the entity that engages the attorney.
·
Where there is a significant change in the
scope of services or the fee to be charged, an "updated letter of
engagement" must be given to the client.
·
Part 1215 does not apply:
o
if legal fees are expected to be less than
$3,000
o
where the attorney's services "are of
the same general kind as previously rendered to and paid for by the
client" [i.e., regularly existing clients]; or
o
to domestic relations matters which are still
subject to Part 1400 of the Joint Rules of the Appellate Division.
·
Contents of Letters of Engagement
o
Letters of Engagement Must Include:
§
scope of legal services;
§
attorney's fees to be charged, expenses and
billing practices; and
§
where applicable, notice of the client's
right to arbitration of fee disputes under Part 137.
o
Letters of Engagement May Include:
§
Under §137.1(b)(2), an attorney may make fee
arbitration apply to disputed amounts less than $1,000 or more than $50,000
"if the parties have consented. ..."
Without the client's consent, fee arbitration does not apply to sums
less than $1,000 or more than $50,000.
§
Under §137.2(b), an attorney may make fee
arbitration mandatory for the client by obtaining the client's written consent
in "a retainer agreement or other writing..." If not included in the retainer agreement,
fee dispute arbitration commenced by a client is mandatory for the attorney but
is not mandatory for the client if commenced by the attorney.
§
Under §137.2(c),
an attorney can make the arbitration award final, instead of subject to a de
novo review, by obtaining the client's written consent.
§
Under §137.2(d),
an attorney can select a different arbitral forum for fee dispute arbitration,
by obtaining the client's written consent.
·
What if there is
no retainer agreement?
·
Fee Dispute
Arbitration v. Determination of Fees by Surrogate’s Court
Canon 3: A Lawyer Should Assist
in Preventing the Unauthorized Practice of Law.
Canon 4: Lawyer Should Preserve
the Confidences and Secrets of a Client.
* * *
B. Except
when permitted under DR 4-101(C), a lawyer shall not knowingly:
1. Reveal a confidence or secret of a client.
* * *
A.
A lawyer may reveal:
* * *
4.
Confidences or secrets necessary to establish or collect the lawyer’s
fee or to defend the lawyer or his or her employees or associates against an
accusation or wrongful conduct.
CPLR 4503(a) “[U]nless the
client waives the privilege, an attorney . . . shall not disclose, or be allowed
to disclose such communication . . . .”
CPLR 4503(b) “in any action
involving the probate, validity or construction of a will, an attorney or his
employee shall be required to disclose information as to the preparation,
execution or revocation of any will or other relevant instrument, but he shall
not be allowed to disclose any communication privileged under subdivision (a)
which would tend to disgrace the memory of the decedent.”
·
Clients under Disability
·
Attorney client privilege
Do not reveal client confidence, unless you will:
·
Prevent death/harm
·
Prevent financial injury
·
secure legal advice
·
establish lawyer claim
·
Reconciling the traditional attorney-client privilege rules with the
attorney-client relationship between a lawyer and a fiduciary of an
estate. What is different about trusts
and estates clients? In theory, estate
planning clients are no different than any other client whose confidence we
must uphold. But see CPLR 4503(b) (will exception) (“tend to disgrace” the
decedent’s memory; concerned about how the decedent will be seen)
·
After the client’s death, who does the lawyer represent:
·
the estate?
·
the executor(s)?
·
specific legatees of tangible personal property
·
cash or pecuniary legatees
·
the independent trustee of residuary trust?
·
permissible lifetime beneficiaries of residuary trust?
·
remainderman of residuary trust?
·
the outright residuary beneficiaries?
·
all of the above?
·
In Hoopes v. Carota, 74
N.Y.2d 716 (1989), the Court of Appeals held that, since the trustees of a
trust were acting in a fiduciary capacity, the privilege is not absolute and
may be set aside on a showing of “good cause” by the beneficiaries. The Court also noted that “some courts have
held that the privilege does not attach at all.”
·
What does it mean to “act in a fiduciary capacity” Is it different to “act in a representative
capacity”? No; you are acting “in
behalf” of someone else – the beneficiaries.
·
In Matter of Baker, 139 Misc.
2d 573 (Surr. Ct., Nassau Co. 1988), Surrogate Radigan, after analyzing the
various cases and issues as to whether a privilege can be asserted by a
fiduciary of an estate, compelled the fiduciary to turn over a sensitive
document in the estate that pertained to distributions from the estate. Surrogate Radigan held as follows:
·
When does a lawyer advise the fiduciary that “litigation . . . is
anticipated”? For purposes of
privilege, should we be identifying areas where litigation might be
“anticipated”?
·
The answer: tell executors and trustees that, with few exceptions, they
cannot be expected to have a true privilege.
As in the case of Justice Stewart’s famous definition of pornography –
you’ll know that the subject is “privileged” when you see it
·
How about:
·
Conflicts between beneficiaries of estate and fiduciary/beneficiary of
nonprobate assets
·
Estate tax penalty issues
·
Noninterest bearing funds and possibility of surcharges
·
A “blown deal” for the sale of estate assets on the part of the
executor, with clear fault/imprudence on the executor’s part; communications
with executor before and after the blown deal
·
Retention by client to represent executor in contested estate
accounting proceeding, and objectant seeks surcharges against the executor
·
Is there risk in asserting privilege for trusts and estates lawyers
whose fee applications may need to be determined by the Court; and the lawyer
is considered, more than in other areas, to be “officers of the Court”? Ethical dilemmas for advocates: When does
your duty of advocacy end and your relationship to the Surrogate’s Court and
its personnel begin?
·
Do lawyers have conflicts of interest as to potential privilege issues when
the lawyer’s fee may be compromised if the lawyer becomes an “advocate” on a
privileged issue?
·
Amendments to CPLR 4503 re eliminating fiduciary exception
Canon 5: A Lawyer Should
Exercise Independent Professional Judgment on Behalf of a Client.
(1)
If
the testimony will relate solely to an uncontested issue.
(2)
If
the testimony will relate solely to a matter of formality and there is no
reason to believe that substantial evidence will be offered in opposition to
the testimony.
(3)
If
the testimony will relate solely to the nature and value of legal services
rendered in the case by the lawyer or the lawyer’s firm to the client.
·
Witness Advocacy Rule. When can a lawyer:
·
Act as the sole advocate?
·
Act as “co-counsel” and use a trial counsel?
· Examples:
· Will contest on your Will. Answer: Get trial counsel for probate proceeding; and represent estate if the fiduciary wants you. In many instances, it might be advisable to have a different lawyer acting as counsel of record; and not simply as a trial counsel.
·
Estate Litigation seeking
surcharges. Likelihood that your
fiduciary is the person in control.
However, when there is estate litigation, you may have estate counsel
giving testimony; and it may be helpful or harmful to fiduciary
·
Estate Litigation dealing
with nonprobate assets payable to fiduciary. Keep
in mind who you represent.