Estate planning, a niche area of law, requires special skill and knowledge—not only legal knowledge, but also financial, tax, and accounting knowledge. The creation and administration of estate plans can be complex.
So, too, can family dynamics.
And with complicated family dynamics comes the potential for, and actual existence of, conflicts of interest. Conflicts of interest tend to arise more in blended families with children from previous marriages. But conflicts of interest surface in nuclear families, too. A prenuptial agreement, gift, or inheritance may be a catalyst. The reality, though, is that conflicts may emerge even in the most innocent and unsuspecting situations.
Undertaking joint representation of spouses requires you to be mindful of your ethical obligations under the Michigan Rules of Professional Conduct, a number of which are at play in the estate-planning context.
Rule 1.4(b) requires you to explain matters to the extent reasonably necessary to permit your clients to make informed decisions about the representation. Rule 1.6(b) prohibits you from knowingly revealing confidences of your clients. When you undertake joint representation of spouses, honoring your duty to keep them adequately informed and protect their confidences requires a delicate balance.
Rule 1.7(a) requires you to decline or withdraw from representation of a client if the representation will be directly adverse to another client, unless (1) you reasonably believe that the representation won’t adversely affect your other client, and (2) each client consents to the representation after consultation. Rule 1.7(b) requires you to decline or withdraw from representation of a client if your responsibilities to another client may materially limit the representation, unless (1) you reasonably believe that the representation won’t adversely affect your other client, and (2) each client consents to the representation after consultation regarding the risks, benefits, and implications of the common representation. The comment to Rule 1.7 expressly identifies estate planning as an engagement in which conflicts of interest may arise. The comment to Rule 1.7 also recognizes that conflicts of interest “may be difficult to assess” in estate planning and other non-litigation contexts.
There’s some debate over whether Rule 2.2, which outlines the circumstances in which you may act as an “intermediary between clients,” is applicable. On the one hand, the focus of joint representation in the realm of estate planning is not necessarily on the relationship between spouses, but rather on the relationship between spouses and third parties (such as tax authorities and beneficiaries). On the other hand, you may find yourself in an intermediary role when spouses express differences of opinions on important decisions. Indeed, the comment to Rule 2.2 indicates that you act as an intermediary when you represent “two or more parties with potentially conflicting interests.”
Assuming applicability, Rule 2.2 allows you to act as an intermediary between spouses if you (i) consult with them concerning the implications of the common representation—such as the advantages, risks, and effects on the attorney-client privilege—and obtain consent from them, (ii) reasonably believe that you can resolve the matter on terms compatible with both of their interests, (iii) reasonably believe that there’s little risk of material prejudice to either of their interests if your efforts to resolve the matter are unsuccessful, (iv) reasonably believe that they’ll be able to make informed decisions, and (v) reasonably believe that you can undertake the common representation “impartially and without improper effect” on other obligations to them.
The view of many commentators, including the American College of Trust and Estate Counsel, is that estate planning is generally non-adversarial in nature and joint representation of spouses is generally acceptable, if not beneficial. After all, spouses usually come to you with comparable, harmonious interests—providing for the support and education of their children, as but one example—and want you to create synchronized estate plans. Joint representation is an advantageous and cost-efficient method of accomplishing their shared objectives.
But circumstances change. Joint representation may start out cordial but ultimately leave you in an unenviable, if not impossible, position. Consider a scenario in which one of the spouses approaches you, alone, and expresses a desire to change the estate plan. You have a duty to keep the confidence of the spouse. But you also have a duty to keep the other spouse informed. And in the end, you may have a duty to withdraw from the representation.
Address the potential for conflicts of interest between the spouses at the outset. A candid discussion and a retainer agreement are the best practices.
At your initial meeting with the spouses, fully explain the scope and nature of the representation. Advise the spouses that if they want you to create separate estate plans, there may be occasions in which you want to consult with them separately. Discuss your ethical obligations and inquire of their willingness to waive the duty of confidentiality. If obtained, memorialize the waiver in the retainer agreement.
Be sure the spouses understand that if either wants to change the estate plan in a way that adversely affects the other spouse, you’ll need to consult with and obtain consent from the other spouse before you can ethically change the estate plan. You may consider including a provision in the retainer agreement in which the spouses acknowledge that (1) they’re unaware of any existing conflict of interest, and (2) if any conflict of interest arises in the future, they’re duty-bound to promptly bring the conflict of interest to your attention.
Set out the parameters of the representation. If the spouses engaged you to create estate plans, make sure they know and the retainer agreement reflects that the attorney-client relationship ends upon execution of the estate plans. Advise that any changes to the estate plans in the future will require new engagements and new retainer agreements.
That segues to another ethical obligation of which you should be mindful. If the retainer agreement provides that the attorney-client relationship terminates upon execution of the estate plans, the spouses become “former clients” after execution of the estate plans. Rule 1.9(a) outlines your ethical obligations if one of the spouses returns to you and seeks to engage you “in the same or a substantially related matter.” There may be circumstances in which Rule 1.9(a) doesn’t apply. For example, you may have created separate trusts that contain different provisions or beneficiaries and operate independently of one another. Thus, an engagement to change one of the trusts may not cause a conflict of interest or require a waiver.
When the engagement does concern the same or a substantially related matter, Rule 1.9(a) requires you to decline the engagement if the spouse’s interests are “materially adverse” to the other spouse’s interests, unless the other spouse consents after consultation. Unlike Rule 1.7, which provides that some conflicts of interest cannot be waived, conflicts of interest that implicate Rule 1.9 can always be waived. Even when you obtain a waiver from the other spouse, you need to remain cognizant of Rule 1.9(c), which imposes obligations on you with respect to information related to the prior representation. You cannot reveal such information unless otherwise authorized by the Michigan Rules of Professional Conduct, or use such information to the disadvantage of the other spouse.
On a related note, if one of the spouses seeks to engage you to make changes to the estate plans during the pendency of a divorce, make sure you ascertain whether there’s an order prohibiting changes to the estate plans. You don’t want to be the subject of a contempt proceeding.
In sum, joint representation of spouses in estate planning is generally acceptable, beneficial, and cost-effective. But proceed with caution because conflicts of interest can and do arise.
