Home » Speaking Engagements » Frank W. Streng, White Plains lawyer, Estate Litigation, Ethical Isssues in Estates and Trusts Litigation

Frank W. Streng, White Plains lawyer, Estate Litigation, Ethical Isssues in Estates and Trusts Litigation

Frank W. Streng, Esq. McCarthy Fingar LLP 11 Martine Avenue White Plains, NY 10606-1934 914-946-0134 (fax) 914-385-1022 (voice) e-mail: fstreng@mccarthyfingar.com web: www.mccarthyfingar.com	Gary E. Bashian, Esq. Bashian & Farber, LLP 235 Main Street White Plains, NY 10601 voice: (914) 946-5100 fax: (914) 946-5111 email: Garybashian@aol.com
Michael H. Friedman, Esq. Kurzman, Eisenberg, Corbin, Lever & Goodman, LLP One North Broadway White Plains, NY 10601 voice: (914) 285-9800 fax: (914) 285-9855 email: mfriedman@kelaw.com	Nancy J. Rudolph, Esq. Bleakley, Platt & Schmidt, LLP One North Lexington Avenue P.O. Box 5056 White Plains, NY 10602 voice: (914) 949-2700 fax: (914)683-6950 email: nrudolph@bpslaw.com

www.mfdds.com

Westchester County Bar Association

Trusts and Estates Section

Ethical Issues in Estates and Trusts Litigation

June 1, 2009

"New" New York Rules of Professional Conduct

"New" ABA Code v. "Old" New York Code

ABA: Restatement-type structure

Black letter rules took the place of the DRs

Explanatory comments (not aspirational) provided additional guidance to lawyers seeking answers to their ethical questions

However, in New York many of the provisions of the "Old" Code have simply carried over from the old Code. It is anticipated that, sometime in the future NY will be ready to join adopt much of the substantive change, but not in the foreseeable future

"Comments" for the new Code have now been released.

However, the new rules will makes it easier for NY lawyers to research the nationwide body of law that has developed under the Model Rules since 1983

Bottom line overview of "New" v. "Old" Code:

Many of the Disciplinary Rules are adopted

Structure of "new" Code permits expansion and possibilities for New York to adopt more of the Model Rules

Structure of New Code:

Rules are logically organized by the various roles that lawyers play and the tasks that they perform

New Code is 37 pages long and can be downloaded from NYSBA web site:

New Code, with comments, is 190 pages long and can be downloaded from NYSBA web site:

8 basic roles/modules for lawyers

http://www.nysba.org/Content/NavigationMenu/ForAttorneys/ProfessionalStandardsforAttorneys/FinalNYRPCsWithComments(April12009).pdf
http://www.nysba.org/Content/NavigationMenu/ForAttorneys/ProfessionalStandardsforAttorneys/NYRulesofProfessionalConduct4109.pdf

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 a 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 attended a "lawyer bashing" revocable trust seminar?

"Old" Canons of Ethics: Code of Professional Responsibility

Canons (Topical Headings)

Ethical Considerations (ECs) (aspirational standards)

Disciplinary Rules (DRs) (black letter rules)

American Bar Association’s Model Rules of Professional Conduct, adopted, in part, in New York, effective April 1, 2009, called the New York Rules of Professional Conduct

Bar Association Opinions

New York State Bar Association Committee on Professional Ethics

Association of the Bar of the City of New York

New York County Lawyers Association

Court decisions

Structure of New Code: the Bullet Points

Client-Lawyer Relationship (The 1 Series)

Terminology and Definitions (Rule 1.0)

Competence and Neglect (Rule 1.1)

Scope of Representation and Allocation of Authority Between Lawyer and Client (Rule 1.2)

Diligence in Representation (Rule 1.3)

Communication with Client(Rule 1.4)

Fees and Division of Fees (Rule 1.5)

Confidentiality of Information (Rule 1.6)

Conflicts of Interest: Current Clients (Rule 1.7)

Current Clients: Specific Conflict of Interest Rules (Rule 1.8) –10 Rules in 1

Business Transactions with Clients

Rule 1.8(b) – Use of Information Relating to a Representation

Rule 1.8(c) – Solicitation of Gifts from Clients

Rule 1.8(d) –Literary and Media Deals with Clients

Rule 1.8(e) – Financial Assistance to Clients

Rule 1.8(f) – Accepting Payment from Third Parties

Rule 1.8(g) – Aggregate Settlements (Multiple Clients)

Rule 1.8(h) – Limiting Liability to Clients and Settling Malpractice Claims

Rule 1.8(i) – Acquiring Proprietary Interests in Litigation

Rule 1.8(j) – Sexual Relations with Clients

Rule 1.8(k) – Imputation of Sexual Relations Conflicts

Specific Conflicts of Interest for Former and Current Governmental Officers and Employees (Rule 1.11)

Specific Conflicts of Interest for Former Judges, Arbitrators, Mediators or other Third-Party Neutrals (Rule 1.12)

Organization as Client (versus employee of organization) (Rule 1.13)

Client with Diminished Capacity (Rule 1.14)

Handling Client and Third-Party Property (Escrow Accounts) (Rule 1.15)

It’s Still the Number One Rule . . . .

Declining or Terminating Representation (Rule 1.16)

Sale of Law Practice ("retirement" only) (Rule 1.17)

Duties to Prospective Clients (Rule 1.18)

Duties to Former Clients (Rule 1.9)

Information About Legal Services (The 7 Series)

Maintaining the Integrity of the Profession (The 8 Series)

Candor in Bar Admission Process (Rule 8.1)

Rule 8.2: Judicial Officers and Candidates

Reporting Professional Misconduct (Rule 8.3)

Definition of Misconduct (Rule 8.4)

Disciplinary Authority and Choice of Law (Rule 8.5)

Advertising and Solicitation Rules (Rules 7.1, 7.2, 7.3 and 7.5)

Advertising of Specialization (Rule 7.4)

Factors to be considered in determining prohibits entering into an agreement to charge or collect an excessive fee

Attorney Fee Issues (

Rule 1.5)) (New Code largely leaves Old Code Alone)

Factors for the Fixation of Fees

Matter of Freeman

, 34 N.Y.2d 1 (1974)

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;

Attorney/Fiduciary Issues

SCPA 2111 (an attorney who is also a sole fiduciary must obtain court approval to receive advance legal fees).

See separate discussion on attorney/legatee and attorney/fiduciary issues

Part 1215 to Title 22 of the Official Compilations of Codes, Rules and Regulations of the State of New York

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:

if legal fees are expected to be less than $3,000

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

to domestic relations matters which are still subject to Part 1400 of the Joint Rules of the Appellate Division.

Contents of Letters of Engagement

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.

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? Trend of cases, especially in Matrimonial Law arena, to disallow fees

Fee Dispute Arbitration v. Determination of Fees by Surrogate’s Court

Written Letters Of Engagement In Civil And Criminal Matters With Fees Of $3,000 Or More (New Code leaves alone)

Attorney Advertising – Highlights of New Rules effective 2/1/2007 (New Code leaves alone)

Rules 7.1, 7.2, 7.3 and 7.5): Partially struck down in Northern District of New York in Alexander v. Cahill by Judge Scullin. Thumb sketch of decision, on appeal to Second Circuit(

Most rules not challenged

Some upheld

rules found unconstitutional as protected free speech

New Code upholds challenged rules, but we await Second Circuit holding.

client testimonials are permitted if the client does not have a pending legal matter involving the attorney.

Words or statements required by new rule to appear in an advertisement must be "clearly legible and capable of being read by the average person, if written, and intelligible if spoken aloud."

the use of celebrities, voice-overs and depictions of fictionalized events is permitted so long as the attorney makes a full disclosure.

monikers, nicknames and mottoes are banned -- such as "heavy hitter" or "dream team" -- that imply an ability to obtain results.

advertising "techniques to obtain attention banned that demonstrate a clear and intentional lack of relevance to the selection of counsel, including the portrayal of lawyers exhibiting characteristics clearly unrelated to legal competence."

E.g., advertisements run by a Long Island, N.Y., attorney who permitted herself to be filmed in provocative poses to tout her real estate practice. Cleavage has nothing to do with legal abilities.

"factually supported" descriptions in advertising and web sites are okay, so long as they are accompanied by the following disclaimer: "Prior results do not guarantee a similar outcome."

Email advertising is okay, provided the subject line contains the notation "ATTORNEY ADVERTISING."

Complex Solicitation Rules,

names of clients "regularly represented" are okay, provided that the client has given "prior written consent"

banned: "portrayal of a judge, the portrayal of a fictitious law firm, the use of a fictitious name to refer to lawyers not associated together in a law firm, or otherwise imply that lawyers are associated in a law firm if that is not the case"

complex rules regarding advertising on attorney fees and rates

business cards and announcements okay

"1) legal and nonlegal education, degrees and other scholastic distinctions, dates of admission to any bar; areas of the law in which the lawyer or law firm practices, as authorized by the code of professional responsibility this Part; public offices and teaching positions held; publications of law related matters authored by the lawyer; memberships in bar associations or other professional societies or organizations, including offices and committee assignments therein; foreign language fluency; and bona fide professional ratings"

with many dos and don’ts

Some Dos and Don’ts:

Specific Web Site Rules

Filing requirements and Record Retention

Must be "open to public inspection"

Retain print advertisements for three years

Filing with Departmental Disciplinary Committee of the appropriate judicial department.

"All advertisements of legal services that are mailed, or are distributed other than by radio, television, directory, newspaper, magazine or other periodical, by a lawyer or law firm that practices law in this State"

Retain e-mail and Web Site solicitations for only one year.

Initial version or edits of web site

Initial: "preserved upon the initial publication of the web site"

Changes: "any major web site redesign, or a meaningful and extensive content change

Omnibus: retain no "less frequently than once every 90 days."

"Attorney Advertising":

Domain Names

Address of Lawyer or Law Firm.

Description of Cases/Results Obtained

. A factually-supported description of a lawyer’s or law firm’s accomplishment is okay, so long as it is accompanied by the following disclaimer: "Prior results do not guarantee a similar outcome."

Disclaimer on web site

Home page?

Practice pages?

Lawyer websites must include the street address of the office of the advertising lawyer or law firm: (e) A lawyer or law firm may utilize a domain name for an internet web site that does not include the name of the lawyer or law firm provided: (1) all pages of the web site clearly and conspicuously include the actual name of the lawyer or law firm; (2) the lawyer or law firm in no way attempts to engage in the practice of law using the domain name; (3) the domain name does not imply an ability to obtain results in a matter; and (4) the domain name does not otherwise violate a disciplinary rule. (f) A lawyer or law firm may utilize a telephone number which contains a domain name, nickname, moniker or motto that does not otherwise violate a disciplinary rule.Pop-Up Ads/MetaTags: (g) A lawyer or law firm shall not utilize: (1) a pop-up or pop-under advertisement in connection with computer-accessed communications, other than on the lawyer or law firm’s own web site or other internet presence; or (2) meta tags or other hidden computer codes that, if displayed, would violate a disciplinary rule. You need to have the words "Attorney Advertising" on your home page.

No description of size or type of font

.

Attorney-Client Privilege (No big changes in New Code) (Rule 1.6)

Rule 1.6

(a) A lawyer shall not knowingly reveal confidential information, as defined in this Rule, or use such information to the disadvantage of a client or for the advantage of the lawyer or a third person, unless:

(1) the client gives informed consent, as defined in Rule 1.0(j);

(2) the disclosure is impliedly authorized to advance the best interests of the client and is either reasonable under the circumstances or customary in the professional community; or

(3) the disclosure is permitted by paragraph (b).

"Confidential information" consists of information gained during or relating to the representation of a client, whatever its source, that is (a) protected by the attorney-client privilege, (b) likely to be embarrassing or detrimental to the client if disclosed, or (c) information that the client has requested be kept confidential. "Confidential information" does not ordinarily include (i) a lawyer’s legal knowledge or legal research or (ii) information that is generally known in the local community or in the trade, field or profession to which the information relates.

(b) A lawyer may reveal or use confidential information to the extent that the lawyer reasonably believes necessary:

(1) to prevent reasonably certain death or substantial bodily harm;

(2) to prevent the client from committing a crime;

(3) to withdraw a written or oral opinion or representation previously given by the lawyer and reasonably believed by the lawyer still to be relied upon by a third person, where the lawyer has discovered that the opinion or representation was based on materially inaccurate information or is being used to further a crime or fraud;

(4) to secure legal advice about compliance with these Rules or other law by the lawyer, another lawyer associated with the lawyer’s firm or the law firm;

(5) (i) to defend the lawyer or the lawyer’s employees and associates against an accusation of wrongful conduct; or

(ii) to establish or collect a fee; or

(6) when permitted or required under these Rules or to comply with other law or court order.

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."

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)

CPLR 4503 (as amended): there is an attorney-client privilege for communications with an executor or trustee in an estate or trust. Prior to the amendment of 4503, there was a fiduciary exception for the attorney-client privilege. That exception was derived from case law

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." Id. at 717. The Court upheld the Appellate Division’s finding of "good cause" and concluded that "the communications are not privileged in any event." Id. But see AMBAC Indemnity Corp. v. Bankers Trust Co., 151 Misc. 2d 204 (Sup. Ct., N.Y. Co. 1991) (good cause not shown for indentured trustee)

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"?

Incestuous nature of trusts and estates practice, with an attorney often representing multiple interests. 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?

Witness Advocacy Rule

(New Code largely unchanged from Old Code)

Act as the sole advocate?

Act as "co-counsel" and use a trial counsel?

Conflict of Interests

(Rule 3.7)

Can you take a case if you will be a witness?

Rule 3.7

(a) A lawyer shall not act as advocate at a trial in which the lawyer is likely to be a necessary witness on a significant issue of fact unless:

(1) the testimony relates solely to an uncontested issue;

(2) the testimony relates solely to the nature and value of legal services rendered in the matter;

(3) disqualification of the lawyer would work substantial hardship on the client;

(4) 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; or

(5) the testimony is authorized by the tribunal.

(b) A lawyer may not act as advocate before a tribunal in a matter if:

(1) another lawyer in the lawyer’s firm is likely to be called as a witness on a significant issue other than on behalf of the client, and it is apparent that the testimony may be prejudicial to the client; or

(2) the lawyer is precluded from doing so by Rule 1.7 or Rule 1.9.

* * * *

Witness Advocacy Rule.

When can a lawyer:

Conflict of Interests – Multiple Clients (Rule 1.7) (New Code does not change Old Code)

Conflict Rules. Existence of Conflict

: Under Rule 1.7, you first determine whether a conflict exists. A conflict exists if either (1) the attorney’s exercise of independent professional judgment on behalf of one client will be or is likely to be adversely affected by representing the other client, or (2) the simultaneous representation of both clients would be likely to involve the lawyer in representing differing interests.

Possible Waiver of Conflict by Clients:

Disclosure before Obtaining Waivers:

If the attorney concludes that, upon waiver, he or she can still adequately represent client, the attorney can obtain waiver from both clients only after full disclosure of the possible effect of the joint representation on the exercise of the lawyer’s independent professional judgment on behalf of each.

Representing multiple clients with potential conflicts of interest is a common theme for many trusts and estates lawyers, particularly since a substantial part of trusts and estates practice is considered to be "nonadversarial." Examples of some problems follow.

Spousal Refusal Technique: A natural conflict with a married person’s duty of support [Domestic Relations Law § 32; Family Court Act § 412.

Can we ethically represent the community spouse on spousal refusal matters even though, as part of the assignment process, the "refusing" spouse is subject to a lawsuit by "your client" – albeit, with the local Department of Social Services acting as "your client’s agent?

Consider financial benefits that community spouse may get and why, as matter of substituted judgment, the institutionalize spouse (a) consents or (b) would consent as a matter of substituted judgment. But . . . how do you protect yourself. What if institutionalized spouse unable to consent because of mental disability?

Lifetime Planning

: Can you represent both clients in these scenarios? Does it matter whether husband and/or wife are on second or third marriages and have children of prior marriages?

Representing Fiduciary in Individual and Representative Capacities.

Can a lawyer represent a fiduciary both in his or her capacity as a fiduciary and his or her capacity as a beneficiary. Yes, and it happens all the time. But, what if the fiduciary/beneficiary has offered a will for probate and substantial litigation and/or controversies take place in the estate, such as a will contest and other similar problems for which your client is the target? The answer is still yes, but the lawyer needs to evaluate all of the consequences in these difficult scenarios.

Consider:

Representing Multiple Objectants in Will Contest with Different Interests.

multiple classes of distributees/beneficiaries (distributees, with no interest in prior will; distributees with interest in prior will;

clients with differing goals in will contest (distributees with interest in challenging will; distributees with interest in sustaining a claim against the estate for debt.

Can you represent multiple objectants in will contest even though their interest are different? Examples:

Almost needs no introduction: It started with an attorney, in which, in 1931, the Court of Appeals held that, in the absence of an acceptable explanation, a jury would be justified in drawing an inference of undue influence as to a bequest drafted by the drafting attorney to the drafting attorney. Court advised: have someone else draw the Will under these circumstances.

Hearing v. Affidavit

Even when attorney did not draft, court can hold hearing

Bare minimum Court will require an affidavit explaining circumstances of the bequest to attorney

Usually Court renders decision

Putnam

rule has been widely expanded to apply to just about anyone with a confidential relationship able to exercise influence.

Examples: doctors, dentists, nurses, clergyman, accountants, secretary and relatives of attorney, charity created by attorney

Ethical Considerations

Do not influence a client to name you as fiduciary; avoid the appearance of impropriety.

See NYSBA Opinion #481 (3/28/78): Opinion holds that a lawyer offering to serve as executor is not improper, per se, but you must exercise great caution. Initially, the opinion stresses the propriety of the drafter using his or her influence in being named as an executor. However, the opinion found a substantial exception as follows:

There may be circumstances which can justify a lawyer’s conduct in offering his services as executor. Principally, those circumstances must be such as support a firm conviction that the client would request his lawyer to serve in that capacity if he were aware of the lawyer’s willingness to accept the responsibility. Not only should the lawyer have enjoyed a long-standing relationship with the client, but it must also appear that the client is experiencing difficulty in selecting other persons qualified and competent to serve as executor.
(Emphasis Supplied)

What if you don’t have the relationship? Can you still accept an appointment? Yes, in my judgment, if the client wants you, an independent lawyer (who was well recommended to him/her) to handle the estate or planning

Sanctions can be applied if you are not careful and follow the letter and spirit of the ethical considerations

Weinstock

case: attorney fiduciary is denied letters in probate proceeding

Harris

permits Weinstock objection in accounting proceeding

Courts take action

Denial of letters

Denial of commissions

Limitation to one commission where multiple fiduciaries

Possible disciplinary ruling

Relationship between attorney fees and commissions

SCPA 2307-a: Absence compliance with the statute’s disclosure forms to be executed by client - client agrees that you are entitled to full commissions and full fees - then commission is one-half of statutory commission

If, however, will is made prior to statute - 12/31/95, Court will examine on a case-by-case basis. However, as time passes, the window is virtually completely shut by the Court.

Consider attorney-trustee: Advice: broaden disclosure form for trustee, whether attorney serves as primary or ultimate alternate fiduciary

New amendment: 2307-a

form language in Will does not do the trick; need separate form.

Language in form that makes clear that, absent disclosure, attorney gets "one-half" of commissions

Attorney fiduciary can act as witness to will, but beware: if there is will contest, perhaps the attorney fiduciary appointment may prove to be fodder for objectant

Query: whose will is it?!?!

(The paragraphs below are reprinted with permission from McQuaid, Streng and LaPiana, NEW YORK WILLS AND TRUSTS (3rd Ed. Lexis, 1998))

Persons who are in a confidential relationship to a testator, and who receive legacies or other benefits under a will, have a special burden to explain the circumstances leading to such benefit. The principle leading to this rule was enunciated by the Court of Appeals in 1931 in Matter of Putnam,²¹in which the Court said: "Attorneys for clients who intend to leave them or their families a bequest would do well to have the will drawn by some other lawyer. Any suspicion which may arise of improper influence used under the cover of the confidential relationship may thus be avoided."²²

Under the Putnam Rule, a legacy in favor of a person who is in a confidential relationship to the testator may be excised from a will if the Surrogate finds that the legacy was the product of undue influence. While the Putnam Rule is an offspring of the objection of undue influence,²³the Surrogate can allow the probate of the will but expunge the legacy.²⁴In applying the rule, the court either requires the submission of an affidavit or schedules a hearing to explore the circumstances that led to the legacy.

The Putnam Rule has its most obvious application to an attorney- drafter, but it has been applied to individuals who share different confidential relationships with the testator, including, but not limited to, relatives of the attorney-drafter,²⁵doctors,²⁶nurses,²⁷nursing home personnel,²⁸accountants and financial advisors,²⁹and clergy.³⁰If another attorney is selected to prepare a will in which the testator's primary attorney, or a member of his or her family, is a beneficiary, the attorney who is selected must be independent of the control or interest of the initial attorney.³¹

In a developing area of the law, the Putnam Rule has been used by Surrogates to review the propriety of the designation of an attorney- drafter as an executor or trustee under the will. In Matter of Weinstock,³²the Court of Appeals reinstated a Surrogate's decree in which letters testamentary had been denied to attorneys, a father and a son, who were named as executors in a will prepared by the father, but who had had no previous professional relationship with the testator. Noting that the attorneys were aware of the testator's intention to avoid executor's commissions, the Court held that the testator's confidential relationship with the attorneys required that the attorneys disclose the effect of a joint designation to the testator.³³

The designation of attorneys as fiduciaries, which is illustrated by Weinstock , has led to close supervision by Surrogate's Courts over compensation to the attorney-fiduciary for both legal services and statutory commissions. In Matter of Laflin ,³⁴the Appellate Division, Second Department, held that objections to multiple executors' commissions may be made by the beneficiaries in the final accounting proceeding. And in view of the "fact that an attorney draftsman of a will is uniquely situated to selfishly gain additional employment"³⁵as counsel for a testator's estate, Surrogates generally are giving strict scrutiny to attorney fees for the attorney-fiduciary.³⁶

Competent Representation of Client (Rule 1.1)

Rule 1.1

(a) A lawyer should provide competent representation to a client. Competent representation requires the legal knowledge, skill, thoroughness and preparation reasonably necessary for the representation.

(b) A lawyer shall not handle a legal matter that the lawyer knows or should know that the lawyer is not competent to handle, without associating with a lawyer who is competent to handle it.

(c) A lawyer shall not intentionally:

(1) fail to seek the objectives of the client through reasonably available means permitted by law and these Rules; or

(2) prejudice or damage the client during the course of the representation except as permitted or required by these Rules.

If a lawyer does not have prior experience in a particular legal matter, he or she can still be engaged. For example, a lawyer who has no experience even in litigation in the Surrogate’s Court involving sophisticated tax issues can be engaged, provided that lawyer commits himself or herself in becoming competent or associates with a lawyer who is competent on the tax issues.

For lawyers with insufficient experience in this area, consult and pay out of your own pocket someone who is. Ethically, professionally and economically required. The alternative: your very sophisticated client sees your lack of experience in working on the tax aspect of the litigation; and your client either gets bum work or fires you.

The use of legal assistants by trusts and estates lawyers brings on ethical obligations. Assuring proper oversight and training is necessary to assure that competent legal work is carried out in behalf of a client.

Performing legal work effectively, and expeditiously, is an important component of carrying out competent legal work.

Communicate, Communicate, Communicate!!!!

Representing a Client with Diminished Capacity (Rule 1.14)

Rule 1.14

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

(b) When the lawyer reasonably believes that the client has diminished capacity, is at risk of substantial physical, financial or other harm unless action is taken and cannot adequately act in the 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 is 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 reasonably necessary to protect the client’s interests.

Power of Attorney issues

Who’s the client?

Representing principal on power of attorney

Representing agent on power of attorney

Representing done of gifts on power of attorney

Advice to client on creating power of attorney re options on gift giving, Medicaid

Advice on "best interest" of client, considering language Court of Appeals in Ferrari

Preparing Wills for a potentially incapacitated client or dying client

Be Very Careful!!!

Engagement by client

What if referred by

potential beneficiary

current client

consider built-in claim of undue influence

cannot reverse undue influence problem once you have permitted it to happen

engagement letter

Initial client interview

Attorney-client privilege

Preserving confidentiality of communications

Obtaining information/documents from client

Transmittal of drafts of wills with explanations

Communication with client alone concerning draft

Your role: "scrivener" v. "estate planner"

Execution of documents

Can you represent a third party in bringing a guardianship proceeding to appoint a guardian for your client?

Probably not, but there appears to be very little precedent:

As a general rule, I agree that an attorney who has previously represented an "alleged incapacitated person" should not participate in a guardianship proceeding, either by petitioning the Court or representing a petitioner

Consider duty of advocacy to AIP

Consider attorney-client privilege

Nassau County Bar Association 1990 opinion [can’t disclose information to third parties regarding client’s lack of decision-making capacity]

Ass. of Bar of City of NY [1987-7] (can disclose confidential information if necessary to protect client’s interest, and disclosure made in camera

But, what if client "consents" to appointment

And what if there a consensual joint representation

NYS Bar Opinion 746:

"A lawyer serving as a client’s attorney-in-fact may not petition for the appointment of a guardian without the client’s consent unless the lawyer determines that the client is incapacitated; there is not practical alternative, through the use of the power of attorney or otherwise, to protect the client’s best interests; and there is no one else available to serve as petitioner. Subject to conflict of interest restrictions, if the lawyer petitions for the appointment of a guardian, the client does not oppose the petition, and the lawyer will not be a witness in a contested hearing, the lawyer may represent him-or herself in the proceeding."

Ethical dilemmas for advocates: When does your duty of advocacy end and your relationship to the Surrogate’s Court and its personnel begin?

Handling Client and Third-Party Property (Escrow Accounts) (Rule 1.15)

Proper record keeping is the key.

What are the stakes in proper management of escrow accounts: Westchester lawyers had their license suspended (later modified by the Second Department), in following circumstances.

Balances fell below 0, through inadvertence

Obligation of bank to inform Central Registry at the Lawyers’ Fund for Client Protection within 5 days when negative balance takes place

Bookkeeping errors

Failed efforts in curing bookkeeping problem

Lessons from such cases:

Control your bookkeeper

Instruct your bookkeeper

Exercise control over your bookkeeper

Develop strict procedures to assure that, under no circumstances, are escrow accounts over drafted

What about check fees, for example, certified check fees? Either know, with certainty, what they are if you permit them to be charged against the escrow account. Or, do what my firm does, and have such charges assessed against our firm’s business account.

Rule 1.15 goes beyond the management of escrow accounts; it goes to the core of the lawyer’s business records. Rule 1.15 requires retention for 7 years many business records, including, but not limited to, all escrow account records, special account records, retainer and compensation agreements, client disbursement records and bills.

Should you use escrow accounts in the management of estates and trusts?

Rule 1.15

(a) Prohibition Against Commingling and Misappropriation of Client Funds or Property.

A lawyer in possession of any funds or other property belonging to another person, where such possession is incident to his or her practice of law, is a fiduciary, and must not misappropriate such funds or property or commingle such funds or property with his or her own.

(b) Separate Accounts.

(1) A lawyer who is in possession of funds belonging to another person incident to the lawyer’s practice of law shall maintain such funds in a banking institution within New York State that agrees to provide dishonored check reports in accordance with the provisions of 22 N.Y.C.R.R. Part 1300. "Banking institution" means a state or national bank, trust company, savings bank, savings and loan association or credit union. Such funds shall be maintained, in the lawyer’s own name, or in the name of a firm of lawyers of which the lawyer is a member, or in the name of the lawyer or firm of lawyers by whom the lawyer is employed, in a special account or accounts, separate from any business or personal accounts of the lawyer or lawyer’s firm, and separate from any accounts that the lawyer may maintain as executor, guardian, trustee or receiver, or in any other fiduciary capacity; into such special account or accounts all funds held in escrow or otherwise entrusted to the lawyer or firm shall be deposited; provided, however, that such funds may be maintained in a banking institution located outside New York State if such banking institution complies with 22 N.Y.C.R.R. Part 1300 and the lawyer has obtained the prior written approval of the person to whom such funds belong specifying the name and address of the office or branch of the banking institution where such funds are to be maintained.

(2) A lawyer or the lawyer’s firm shall identify the special bank account or accounts required by Rule 1.15(b)(1) as an "Attorney Special Account," or "Attorney Trust Account," or "Attorney Escrow Account," and shall obtain checks and deposit slips that bear such title. Such title may be accompanied by such other descriptive language as the lawyer may deem appropriate, provided that such additional language distinguishes such special account or accounts from other bank accounts that are maintained by the lawyer or the lawyer’s firm.

(3) Funds reasonably sufficient to maintain the account or to pay account charges may be deposited therein.

(4) Funds belonging in part to a client or third person and in part currently or potentially to the lawyer or law firm shall be kept in such special account or accounts, but the portion belonging to the lawyer or law firm may be withdrawn when due unless the right of the lawyer or law firm to receive it is disputed by the client or third person, in which event the disputed portion shall not be withdrawn until the dispute is finally resolved.

(c) Notification of Receipt of Property; Safekeeping; Rendering Accounts; Payment or Delivery of Property.

A lawyer shall:

(1) promptly notify a client or third person of the receipt of funds, securities, or other properties in which the client or third person has an interest;

(2) identify and label securities and properties of a client or third person promptly upon receipt and place them in a safe deposit box or other place of safekeeping as soon as practicable;

(3) maintain complete records of all funds, securities, and other properties of a client or third person coming into the possession of the lawyer and render appropriate accounts to the client or third person regarding them; and

(4) promptly pay or deliver to the client or third person as requested by the client or third person the funds, securities, or other properties in the possession of the lawyer that the client or third person is entitled to receive.

(d) Required Bookkeeping Records.

(1) A lawyer shall maintain for seven years after the events that they record:

(i) the records of all deposits in and withdrawals from the accounts specified in Rule 1.15(b) and of any other bank account that concerns or affects the lawyer’s practice of law; these records shall specifically identify the date, source and description of each item deposited, as well as the date, payee and purpose of each withdrawal or disbursement;

(ii) a record for special accounts, showing the source of all funds deposited in such accounts, the names of all persons for whom the funds are or were held, the amount of such funds, the description and amounts, and the names of all persons to whom such funds were disbursed;

(iii) copies of all retainer and compensation agreements with clients;

(iv) copies of all statements to clients or other persons showing the disbursement of funds to them or on their behalf;

(v) copies of all bills rendered to clients;

(vi) copies of all records showing payments to lawyers, investigators or other persons, not in the lawyer’s regular employ, for services rendered or performed;

(vii) copies of all retainer and closing statements filed with the Office of Court Administration; and

(viii) all checkbooks and check stubs, bank statements, prenumbered canceled checks and duplicate deposit slips.

(2) Lawyers shall make accurate entries of all financial transactions in their records of receipts and disbursements, in their special accounts, in their ledger books or similar records, and in any other books of account kept by them in the regular course of their practice, which entries shall be made at or near the time of the act, condition or event recorded.

(3) For purposes of Rule 1.15(d), a lawyer may satisfy the requirements of maintaining "copies" by maintaining any of the following items: original records, photocopies, microfilm, optical imaging, and any other medium that preserves an image of the document that cannot be altered without detection.

(e) Authorized Signatories.

All special account withdrawals shall be made only to a named payee and not to cash. Such withdrawals shall be made by check or, with the prior written approval of the party entitled to the proceeds, by bank transfer. Only a lawyer admitted to practice law in New York State shall be an authorized signatory of a special account.

(f) Missing Clients.

Whenever any sum of money is payable to a client and the lawyer is unable to locate the client, the lawyer shall apply to the court in which the action was brought if in the unified court system, or, if no action was commenced in the unified court system, to the Supreme Court in the county in which the lawyer maintains an office for the practice of law, for an order directing payment to the lawyer of any fees and disbursements that are owed by the client and the balance, if any, to the Lawyers’ Fund for Client Protection for safeguarding and disbursement to persons who are entitled thereto.

(g) Designation of Successor Signatories.

(1) Upon the death of a lawyer who was the sole signatory on an attorney trust, escrow or special account, an application may be made to the Supreme Court for an order designating a successor signatory for such trust, escrow or special account, who shall be a member of the bar in good standing and admitted to the practice of law in New York State.

(2) An application to designate a successor signatory shall be made to the Supreme Court in the judicial district in which the deceased lawyer maintained an office for the practice of law. The application may be made by the legal representative of the deceased lawyer’s estate; a lawyer who was affiliated with the deceased lawyer in the practice of law; any person who has a beneficial interest in such trust, escrow or special account; an officer of a city or county bar association; or counsel for an attorney disciplinary committee. No lawyer may charge a legal fee for assisting with an application to designate a successor signatory pursuant to this Rule.

(3) The Supreme Court may designate a successor signatory and may direct the safeguarding of funds from such trust, escrow or special account, and the disbursement of such funds to persons who are entitled thereto, and may order that funds in such account be deposited with the Lawyers’ Fund for Client Protection for safeguarding and disbursement to persons who are entitled thereto.

(h) Dissolution of a Firm.

Upon the dissolution of any firm of lawyers, the former partners or members shall make appropriate arrangements for the maintenance, by one of them or by a successor firm, of the records specified in Rule 1.15(d).

(i) Availability of Bookkeeping Records: Records Subject to Production in Disciplinary Investigations and Proceedings.

The financial records required by this Rule shall be located, or made available, at the principal New York State office of the lawyers subject hereto, and any such records shall be produced in response to a notice or subpoena duces tecum issued in connection with a complaint before or any investigation by the appropriate grievance or departmental disciplinary committee, or shall be produced at the direction of the appropriate Appellate Division before any person designated by it. All books and records produced pursuant to this Rule shall be kept confidential, except for the purpose of the particular proceeding, and their contents shall not be disclosed by anyone in violation of the attorney-client privilege.

(j) Disciplinary Action.

A lawyer who does not maintain and keep the accounts and records as specified and required by this Rule, or who does not produce any such records pursuant to this Rule, shall be deemed in violation of these Rules and shall be subject to disciplinary proceedings.

Full compliance with Rule 1.15 in dealing with client escrow accounts is essential to assure that a lawyer maintains his or her license to practice.

How to protect yourself

:

Refer matters to a specialist

Be careful on out of state law – e.g., Florida or CT

Consider there is no privity problem in these 2 states

Keep current on law

establish routines

print and proofread documents

document the file

ask about unusual assets or a relationship

consider problems with multiple estate planning documents

NY matters

Non NY matters

What exactly is a non NY matter?

Ethics Rules and Malpractice Claims

Privity v. nonprivity

The single biggest criticism of lawyers is their failure to return phone calls or otherwise communicate with their clients.

Before mandatory CLE, maintaining your skills and ability, through CLE, permitted us lawyers to satisfying our ethical obligations.

Gifts from Clients (Rule

1.8(c) – Solicitation of Gifts from Clients)
A lawyer may accept a gift from a client if the transaction meets general standards of fairness. If a client offers the lawyer a gift, paragraph (c) does not prohibit the lawyer from accepting it, although such a gift may be voidable by the client. Before accepting a gift offered by a client, a lawyer should urge the client to secure disinterested advice from an independent, competent person who is cognizant of all of the circumstances. In any event, due to concerns about overreaching and imposition on clients, a lawyer may not suggest that a gift be made to the lawyer or for the lawyer’s benefit.

The Putnam rule:

Retainer agreement. Who do you represent and who pays the bill?

Communications with Beneficiaries.

Can a lawyer represent one or more of the beneficiaries of the estate and the fiduciary of the estate? No, not in the proper sense, and the beneficiaries would need to engage separate counsel to represent their interest. But, to the extent that the fiduciary of the estate is considered to be acting in a representative capacity (as the representative of the residuary beneficiaries of the estate), then the lawyer for the fiduciary arguably has a duty to such beneficiaries (see Matter of Clarke, 12 N.Y.2d 183, 187 (1962) ("An attorney for the fiduciary has the same duty of undivided loyalty to the cestui as the fiduciary himself"). That duty is sometimes discharged by the lawyer having necessary communications with such beneficiaries in the proper representation of the fiduciary as the client. See discussion above for issues arising out of attorney-client privilege. Indeed, pursuant to SCPA 2102(1), a fiduciary has a duty to respond to written requests for information concerning an estate, and the attorney for the fiduciary will frequently provide to such beneficiaries copies of important documents in the estate, such as Federal and New York estate tax returns and related papers, even prior to an accounting.

Fiduciary and Surviving Spouse in Will with Q

-Tip trust with issues as to Whether Spouse Files Elective Share. Husband and Wife make reciprocal wills creating Credit Shelter outright bequests and Q-Tip trusts. Husband predeceases and an issue exists as to whether the wife will get "more money" by an elective share. Must there be independent representation for the wife?

Multiple Fiduciaries

. Inform fiduciaries of the consequences of representing all of them. In the event of a conflict, you may continue to represent one of them, with the consent of the other fiduciary. See discussion below on representing fiduciaries and beneficiaries.

Husband and Wife in preparation of Wills and Trust Agreements and Related Estate Planning.

Husband and Wife in Execution of Spousal Waivers of Elective Share.

Husband and Wife in Husband’s or Wife’s creation of Irrevocable Life Insurance Trust

Husband and Wife in Husband’s or Wife’s execution of spousal waiver of Qualified Plan accounts.

Husband and Wife who cannot agree on who the "ultimate" beneficiaries of estate will be.

Both fiancées in prospective marriage in the preparation and execution of prenuptial agreements

.. Bad Idea

Medicaid Eligibility for Institutionalized Spouse f/b/o Community Spouse

. Is all fair in love and Medicaid eligibility? If there is a conflict, the attorney must determine whether the conflict may be waived by both clients. Specifically, both clients can waive the conflict, provided it is obvious that the lawyer can adequately represent the interests of each client.
Rule 1.7

(a) Except as provided in paragraph (b), a lawyer shall not represent a client if a reasonable lawyer would conclude that either:

(1) the representation will involve the lawyer in representing differing interests; or

(2) there is a significant risk that the lawyer’s professional judgment on behalf of a client will be adversely affected by the lawyer’s own financial, business, property or other personal interests.

(b) Notwithstanding the existence of a concurrent conflict of interest under paragraph (a), a lawyer may represent a client if:

(1) the lawyer reasonably believes that the lawyer will be able to provide competent and diligent representation to each affected client;

(2) the representation is not prohibited by law;

(3) the representation does not involve the assertion of a claim by one client against another client represented by the lawyer in the same litigation or other proceeding before a tribunal; and

(4) each affected client gives informed consent, confirmed in writing.

Examples:

Will contest on your Will.

Estate Litigation seeking surcharges.

Estate Litigation dealing with nonprobate assets payable to fiduciary.

Keep in mind who you represent.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 Answer: Get trial counsel for probate proceeding; and represent the fiduciary of the estate on administration issues. In many instances, it might be advisable to have a different lawyer acting as counsel of record; and not simply as a trial counsel.

Waiver of attorney-client privilege in fee disputes. But is there a 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"?

The answer, prior to the amendment to CPLR 4503, 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

This court is of the opinion that a fiduciary has an obligation to disclose the advice of counsel with respect to matters affecting the administration of the estate (2A Scott, Trusts § 173 [4^th ed]). This is subject to the limitation that the fiduciary should have the protection of the privilege when litigation has commenced or is anticipated (2A Scott, Trusts § 173 [4^th ed]); see, In re LTV Sec. Litig., 89 FRD 595). Certainly, the fiduciary is entitled to the benefit of counsel in the preparation of his defense in a contested accounting or other proceeding.

Id. at 577 (Emphasis Supplied)

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:

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.

"Advertisement"

"Computer-accessed communication"

defined

(l) "Computer-accessed communication" means any communication made by or on behalf of a lawyer or law firm that is disseminated through the use of a computer or related electronic device, including, but not limited to, web sites, weblogs, search engines, electronic mail, banner advertisements, pop-up and pop-under advertisements, chat rooms, list servers, instant messaging, or other internet presences, and any attachments or links related thereto. (22 NYCRR 1200.1)

defined:

communication aimed primarily at securing business.

(k) "Advertisement" means any public or private communication made by or on behalf of a lawyer or law firm about that lawyer or law firm’s services, the primary purpose of which is for the retention of the lawyer or law firm. It does not include communications to existing clients or other lawyers. (emphasis added). (22 NYCRR 1200.1)

Caution

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.

Application for Attorney Fees under SCPA 2110

Matter of Potts,

213 A.D. 59, 62 (4^th Dep’t 1925), aff’d, 241 N.Y. 593, where the Appellate Division said:

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

Structure of Outline

: Take us through the New Code and ethical rules and cases relevant to Surrogate’s Court practice

Public Service (The 6 Series)

Voluntary Pro Bono Service (Rule 6.1)

Membership in a Legal Services Organization (Rule 6.3)

Law Reform Activities Affecting Client interests (Rule 6.4)

Participation in Limited Pro Bono Legal Service Programs (Rule 6.5)

Law Firms and Associations (The 5 Series)

Responsibilities of Law Firms, Partners, Managers and Supervisory Lawyers (Rule 5.1)

Responsibilities of a Subordinate Lawyer (Rule 5.2)

Lawyer’s Responsibility for Conduct of Non-lawyers (Rule 5.3)

Professional Independence of a Lawyer (fee sharing with nonlawyers) (Rule 5.4)

Unauthorized Practice of Law (Rule 5.5)

Restrictions on Right to Practice (Rule 5.6)

Responsibilities Regarding Nonlegal Services (Rule 5.7)

Contractual Relationships Between Lawyers and Nonlegal Professionals (Rule 5.8)

Counselor (The 2 Series)

Lawyer as advisor, including nonlegal considerations (Rule 2.1)

Evaluation by lawyers for Use by Third Persons (Rule 2.3)

Lawyer Serving as Third-Party Neutral (Rule 2.4)

Advocate (The 3 Series)

Transactions with Persons Other than Clients (The 4 Series)

Truthfulness in Statements to Others (Rule 4.1)

Communication with Person Represented by Counsel (Rule 4.2)

Communicating with Unrepresented Persons (Rule 4.3)

Respect for Rights of Third Persons (Rule 4.4)

Communication after Incidents Involving Personal Injury or Wrongful Death (Rule 4.5)

Non-Meritorious Claims and Contentions (Rule 3.1)

Delay of Litigation (Rule 3.2)

Conduct Before a Tribunal (Rule 3.3)

Fairness to Opposing Party and Counsel (Rule 3.4)

Maintaining and Preserving the Impartiality of Tribunals and Jurors (Rule 3.5)

Trial Publicity (Rule 3.6)

Lawyer as Witness (witness advocacy) (Rule 3.7)

Special Responsibilities of Prosecutors and Other Government Lawyers (Rule 3.8)

Advocate in Non-Adjudicative Matters (Rule 3.9)

Frank W. Streng

Practice Areas

Frank W. Streng, White Plains lawyer, Estate Litigation, Ethical Isssues in Estates and Trusts Litigation