September 20, 2018
Author: Jerry E. Shiles
Organization: Parman & Easterday
Estate and Asset Protection, including Medicaid planning, is rife with risks. The danger inherent in such planning became obvious when newspapers in the State of Washington heralded that “Creating a Trust to Protect from Future Unknown Creditors is a Fraudulent Transfer in Washington.”
Section 19.40.041 of the Washington Uniform Fraudulent Transfers Act provides: “(A) A transfer made or obligation incurred by a debtor is fraudulent as to a creditor, whether the creditor’s claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation: (1) with actual intent to hinder, delay, or defraud any creditor of the debtor. . . .” (emphasis added).
The point is that the government is starting to look very closely at all transfers and to look behind the transfers at the motives of the donors and the perceived intent of the attorneys making the recommendations.
Let’s put legislatures aside for a moment and just look at the issues which confront us on a regular, almost daily, basis.
Conflicts of Interest
When one moves into the field of estate planning, especially more advanced estate planning and asset protection, including elder law and Medicaid planning, new and more complex issues arise. The frequency of ethical and legal dilemmas increases dramatically. More money is changing hands than ever before in our history. In addition, medical advances are allowing people to live longer. As a result of greater longevity and of changing cultural values and norms, increasing numbers of clients remarry or form new close relationships following the death of a spouse. Asset and family structures then become much more complicated. Typically, assets become commingled even though the respective families’ younger generations do not become very involved with one another.
Medical advances have increased the risk of conflict in other ways. Modern medical technology can now often prolong life to a point beyond a person’s mental capacity to take care of his or her own affairs. Consequently, issues of diminishing mental capacity that were once rare are now commonplace.
Longer life and economic growth also mean that many elders have substantial assets worth fighting over. On the other hand, as the culture and economy change, children increasingly live far from their parents, lose contact with their lives, and are less familiar (and perhaps less sympathetic) with their desires and decisions.
There is no reason to believe that any of these trends will soon abate. Asset protection and elder law issues are becoming increasingly importantCand they demand increasing sophistication on the part of attorneys who practice in these fields.
Who is the Client?
Probably more so than any other attorney-client relationship, it is the attorney’s relationship with the estate planning client that is most problematic. When there is participation of other family members, there is virtually always a potential conflict of interest or unintended dual representation. The problem is compounded when the client is frail or mentally impaired, and may be reliant on more vigorous family members and vulnerable to pressures exerted by them. Indeed, when the impairment is substantial, the attorney’s ability to form any attorney-client relationship with that person is brought into question.
For these reasons, the most critical question for the estate planning attorney is, Who is the client? Identifying the client is obviously a threshold issue in all cases, but even more so when there are competency or related issues involved. It is also a starting point for avoiding conflicts of interest. Furthermore, a firm understanding of the identity of the client will often clear up, or at least shed light on, other important related ethical issues, such as handling confidentiality and diminished capacity.1
This issue is compounded when you are representing a married couple, and even more complicated if this is second or third marriage with blended family issues. Potential for conflicts of interest exists no matter how agreeable their marital relationship.
Jeffrey N. Pennell, the Richard H. Clark Professor of Law at Emory University, questions your ethical duty regarding confidentiality and conflicts of interest when you counsel multiple family members. He recommends you obtain from your clients a preemptive, written informed consent to mutual representation. A sample from our retainer agreement is at the end of this paper.
Harking back to the married couple scenario, Professor Pennell asks if you suggested a credit shelter trust that maximizes transfer tax exemptions, but denies title to the surviving spouse. Did you explain that the surviving spouse may have a statutory right to an outright share? Did either spouse display interest in collecting that share despite the deceased spouse’s plan? Are there children from this marriage—or other relationships—who are included in the plan to the detriment of the surviving spouse?
Do you do business succession planning? What if the business is owned by the father, one child, and a grandchild and they agree the business should pay for this planning? What if the father wants to include another child, who has no interest in the business, in his estate plan? This might be good for the family overall, but be detrimental to the interests of the involved child.
What if one of the children tells you his marriage is faltering, but he doesn’t want you to let his father know because he is afraid his father won’t complete his estate plan? Can you keep this from the father, yet continue to represent the business, the father, the child and the grandchild? Who is/are the client(s)?
If you do nothing else, become familiar with Model Rule 1.7(a)(1) – representing multiple clients whose interests are directly adverse to each other, Model Rule 1.7(a)(2) – representing multiple clients whose interests are materially limited by each other, Model Rule 1.9 – representing a new client whose interests are materially adverse to those of a prior client, Model Rule 1.8(f) – informing non-paying client when third party is paying the legal fees, and Model Rule 1.6(a) – confidentiality of client communications and information from or about the client whatever the source. While these are just suggestive, they provide some concrete examples of what should and should not be done in this field.
Identifying the Client
It is commonly understood that the attorney-client relationship is created by contract, express or implied, and that the general rules of agency apply.2 Under normal circumstances, the conduct of both the principal and the agent must indicate acceptance of the relationship. Although its formation is informal, the attorney-client relationship does not exist merely because a party believes that an attorney is representing his or her interests.3 Nevertheless, no specific formality, and in particular, no fee or even fee agreement, is a prerequisite to a party becoming a client to whom the attorney owes duties.4
One of the more difficult problems in identifying the client arises when, as is often the case, an adult child or spouse of an elderly client consults the attorney alone, or together with the client, to participate in planning for the client. An attorney has four choices in dealing with this situation: (1) leave the identity of the client ambiguous; (2) represent the family; (3) represent the elderly client; or (4) represent both the elderly client and the family member(s). Leaving the Identity of the Client Ambiguous Leaving the identity of the client ambiguous is often what the elder and the client’s family expect. Usually the family is working informally and in harmony for common goals. Thus, the family members may have little patience or sympathy for complex technical requirements attorneys must satisfy to avoid conflicts of interest and to protect against undue influence. Concerns about individual rights may be seen as overly formal, a distraction from the main purposes at hand, and as an intrusion of alien principles of individual advocacy into their more communal family values. It is therefore tempting for an attorney to ignore the need to confirm the identity of the specific client.
The problem with leaving the identity of the client ambiguous is that each family member may reasonably believe that his or her interests are being advanced. This belief may allow one or more of the parties to become an unintended dual client, to whom the attorney owes duties. Failure to recognize such a party as a client may well lead to professional negligence because actions were not taken on behalf of the unrecognized client. Moreover, failure to recognize the client as such will certainly result in noncompliance with the requirements for dual representation, including the requirement of a written waiver of potential and/or actual conflicts.
Even if the relationship between the attorney and the family members does not amount to dual representation, it is almost inevitable that, by failing to precisely identify who the client is, the attorney will foster the impression that he or she is acting in a disinterested capacity. Finally, aside from any ethics breach, the work itself may become unraveled because conflicting interests may lead to an inference of undue influence over the elder by the other family members.
Representing the Family Some practitioners see themselves as representing the family, rather than any particular individual. This is almost functionally identical to leaving the identity of the client ambiguous and results in the same problems. In addition, this position is morally treacherous because it tends to result in the attorney having the ultimate power to define what the family interest is.
Representing the Elderly Client
Aware of the pitfalls of leaving the identity of the client ambiguous, some attorneys seek safety in representing solely the interests of the elderly client, to the exclusion of all others. Where there are no questions of the client’s mental capacity, the approach has advantages. A major advantage is that it is clear to whom the duty of loyalty is owed. This advantage is lost where the client’s mental capacity is questionable, and the client’s instructions do not appear normal or rational and there is a conflict between the client’s expressed desires and his or her best interests as perceived by other family members or the attorney.
Representing the Client and Family Members
Even if the client is clearly competent and able to meet with the attorney, the client and the family will often expect to meet together. Yet the very presence of the family raises serious questions of confidentiality, undue influence and conflicts of interest. Many attorneys tackle such issues at the front end to avoid any ambiguity: they insist on interviewing the elder alone before involving any family members. This approach can often lead to stress and anxiety for the client. Many clients are very dependent on their families for emotional and intellectual support, and will feel threatened by the unexpected demand of a stranger to meet alone.
Furthermore, sequestering the family immediately can also cause a negative reaction on the part of the family members, who feel they have a right to be present. As a practical matter, discussion of ethical issues is often better delayed to the end of the meeting, after urgent substantive questions have been discussed and the foundation for a trusting relationship has been laid. If at the end of the first consultation, it becomes clear that the objectives and concerns of some family members are in conflict, one or more referrals may be immediately appropriate. If, however, there appear to be common goals among the family members, the attorney can ask: Who is going to be my client? The question puts some of the burden on the family members and it also creates a convenient opening for a discussion of the issues that need to be considered.
In evaluating the professional conduct of an attorney, the first issue to be examined by a bar association is the attorney’s competence in his or her field. Is the attorney knowledgeable and sufficiently well trained to address the client’s concerns? For example, let’s look at the field of Medicaid or Elder Law Planning. The laws surrounding Medicaid eligibility are extremely complicated, confusing, illogical and extremely difficult to research because many of the policies and procedures are barely understood, not published in any reasonably available form, and subject to regular reinterpretation.
Add to this the changes wrought by the Deficit Reduction Act of 2005 with regard to Medicaid and long-term care planning, and this area of the law becomes a virtual minefield. Any attorney wandering into this field of law without a full understanding of these complexities can find him or herself quickly overwhelmed and potentially committing malpractice.
The same issues arise in many different areas of the law, including bankruptcy practice, social security disability, VA entitlements, and tax planning. It is incumbent upon the attorney to become fully familiar with all the ins and outs of each particular area of practice before venturing into the field.
Next, it is essential for the attorney to explore all of the ramifications of the intended actions before the client actually implements the planning.
In one case, an elderly woman discussed setting up a Family Limited Partnership for tax discount purposes, as her estate would otherwise be subject to state and federal estate taxes. In order to achieve the desired discounts, the client agreed to give limited partnership interests to a niece and a nephew. Subsequently, she had a falling out with them and contacted the attorney to rescind the gifts. When she learned the terms of the FLP did not allow her to unilaterally take this action, she became incensed with the attorney and chose to withdraw all the money from the FLP in violation of its terms. Subsequently, the niece and nephew brought a legal action to collect “their” share of the FLP. Everyone was left with bad tastes in their mouths. And what if one of the “beneficiaries” had the right to buy out the other at the tax discounted value—did you make the beneficiaries or your client aware of this possibility when you discussed setting up the FLP or LLC?
The point of this is that if you are recommending certain actions be taken for a specific reason, such as tax avoidance, you must be careful to fully explore all the other ramifications of the recommended action and, even more importantly, fully document your discussion in case the situation comes back to haunt you later.
The same situation can occur in the Medicaid planning area. In one case, an attorney advised his elderly client to gift all her assets to her son in order to qualify for Medicaid. The attorney did not fully grasp the Medicaid rules, so his advice was incomplete at best. The woman did as he recommended, but her health took a turn for the worse and she was forced to seek institutional care before the look-back period had run. Since she no longer had sufficient resources to pay for her care, but was not yet eligible for Medicaid, she asked her son to pay for her care out of “her” money. The son refused, saying he did not have sufficient funds to do so. The situation was referred to Adult Protective Services, which was able to intervene on her behalf and convince the son to provide for her care, but the relationship between the parent and child was irreparably damaged. Had the funds been placed into a protective trust of some sort, this issue might have been avoided.
It is essential for an attorney to explore all possible issues, discuss fully the pros and the cons of any contemplated actions, explain any formalities to be met or rules with which the client must comply, ensure the client fully understands all the issues, and document your discussions in writing, in detail, so that both the attorney and the client understand everything that was said.
Yet another area of the law that is currently undergoing change is that dealing with qualified retirement plans and individual retirement accounts. There is a wealth of information available, but it requires the attorney to either research in depth or attend a comprehensive training program to be sure he or she understands how these rules impact the client. If the attorney fails to meet all the requirements, the client’s beneficiaries may find they do not qualify for stretch planning or are otherwise economically disadvantaged.
Ethical Issues in Transferring Assets
As noted above, there are many reasons for transferring assets. One may be to remove them from the client’s taxable estate. Another may be to qualify for Medicaid or VA benefits. Yet another may be to attempt to qualify for tax discounts for gift or estate tax purposes. Yet another may be to start the client’s child down the road to financial security by teaching him how to handle his own investments or, in a larger sense, perhaps to manage the affairs of a private family foundation.
The attorney must be able to articulate these approved reasons for transferring assets to overcome the presumption that the transfers were to avoid creditors’ claims.
Often clients will meet with me and tell me they have already begun planning their estate by giving everything away to their children. One woman had transferred her home, four farms, three life insurance policies, two investment accounts, and six bank accounts to her three children. When she told me this, she was completely satisfied with the actions she had taken. Once I explained these assets could be lost if any of her children were sued, that her estranged daughter-in-law might be entitled to claim a partial ownership interest in the gifted property, that her children would have to pay capital gains if they sold the property during their lifetimes, and pointed out a number of other problems with the actions she had taken, she quickly realized her “self-help” remedy was worse than the cure. Then I told her she would have to file a Form 709 to report the value of these gifts, and if her children transferred the assets back to her, they would have to do the same thing. We eventually resolved the issues to everyone’s satisfaction, but not without a great deal of expense.
Often clients confer with their accountants or financial advisors, rather than their attorneys, and find themselves in unforeseen predicaments. One example is the mistaken belief that a client can gift $14,000.00 per year to each individual without incurring any penalty. While this is true in terms of the federal gift tax, it is erroneous in terms of Medicaid planning, where such a gift would incur a period of post-qualification ineligibility.
If you are preparing an estate planning trust, have you granted Medicaid planning authority to the Successor Trustee and POA Agent? If not and the client becomes in need of long-term care, have you tied the hands of the fiduciaries so they cannot take advantage of the Medicaid rules. For example, does the power of attorney specifically address the power of the agent to transfer assets in excess of the annual exclusion amount in order to shelter them and qualify the grantor for Medicaid or VA benefits? Have you opened yourself up to a potential claim from the client or family representative for failing to have foreseen this possibility?
There are ways to make gifts under the Medicaid and VA rules and for tax planning purposes that do not incur penalties, undue tax or the specter of fraudulent transfer, but the attorney and the client need to be able to articulate the reasons and legal justification for the actions taken.
Qualified Personal Residence Trust
It is important to explore all available options with your clients, and you can only do so if you are thoroughly versed in this field of law.
For example, one option for transferring a high dollar asset out of the client’s estate is to establish a Qualified Personal Residence Trust or QPRT. This allows your client to pass a home or vacation home to the children while potentially saving significant estate taxes. Before you recommend such an option, you need to be sure there aren’t any ethical concerns in doing so. For example, if the home is to go to “her” children, is this fair to “his” children and has he thoroughly thought through the consequences of his actions.
The key here is to be sure the decision is made for the right reason. Saving estate tax is a viable one, but it needs to be considered by and a discussion had with your client with regard to all the issues that might arise.
In a QPRT, the client places the home in trust for a term of years during which the client retains the right to use the property. After the term of years, the home is transferred to the designated beneficiaries. Thus, the beneficiaries become the new owners of the property and the clients can rent the property from them or make whatever other arrangements suit them. If the home is worth $500,000.00 and it is transferred into a QPRT, the client will be deemed to have made a gift of a percentage of the property’s fair market value. With a 10-year term of years, the value of the gift would be approximately $170,000 or 34% of the value of the home. The client would file a gift tax return reporting the use of $170,000 of his or her lifetime exemption.
Now let’s assume the client held the property until his death in 2014 when the home was worth $740,000.00. By using the QPRT, the client could have saved estate taxes on $570,000.00 of the home’s total value or around $250,000.00-$300,000.
The disadvantage of a QPRT is that your client’s children did not receive the benefit of a stepped-up tax basis on the property at the client’s death, so they might have saved estate taxes, but incurred capital gains taxes. Was this discussed with everyone in advance and did they acknowledge the benefit of the planning? Let’s say the home increased in value by $450,000.00. If the children had inherited it at its new fair market value, they could have sold it without paying capital gains tax. Using the QPRT, unless the children were able to convert the home to their own personal residence before it was sold, the sale would have incurred capital gains taxes.
With the estate tax at around 48% and the capital gains tax at 15-20%, this is a no brainer and the clients will not complain—but could they have, and what could or should you have done to be sure the problem was foreclosed before it ever arose?
From an ethical standpoint, you want to be able to articulate what occurred and why, preferably in writing, so it is clear you have kept the client’s best interests in mind.
A Children’s Trust
Another discussion you might want to have with a client is the ability to place assets beyond the reach of potential plaintiffs if the client transfers property to the children. Again, who is the client and why is he or she taking this action? Has it been completely thought out? Is
anyone disadvantaged by this planning?
Your clients probably have been acquiring an estate not only for their own benefit while they are alive, but also to help their children and grandchildren. The IRS will allow them to give up to $14,000 per person per year free of gift tax. If both spouses join in the gift, they can give up to $28,000 a year, gift tax free. You should have this discussion with them, especially if they are likely to have a taxable estate at their deaths.
By giving property to a Children’s Trust each year, your clients can shift the income from their high tax bracket to the lower tax bracket of their children or grandchildren. Once the Children’s Trust is sufficiently funded, it can pay the cost of a child’s education. That way the expenses are paid with discounted tax dollars. (However, remember that parents or grandparents can pay tuition costs directly as a tax-free gift.)
If your clients own a business, they can gift its equipment and furniture to the Children’s Trust and have the Trust lease it back to the business. Under this plan, the business gets a legitimate tax deduction and the rental income is earned by the trust, potentially at lower tax rates. Plus, the benefit of the depreciation is given to the trust.
Having a Children’s Trust or a Family Limited Partnership also promotes family investment values. The children now have an identifiable stake in the family’s financial success. It goes a long way toward helping them understand the value of money and wise investments.
Before creating a Children’s Trust as part of an asset protection or even Medicaid/VA program, your clients need to ask themselves whether they can permanently do without the benefits of the property. Once title is transferred into the Trust, there is no going back. This Trust cannot be revoked or amended, so they should only transfer assets they won’t need to meet their personal expenses.
The Irrevocable Life Insurance Trust
Your clients probably already know several reasons why life insurance is important. Young families need it to replace part of a breadwinner’s income. Mature Americans find it provides their heirs with a source of funds to pay estate taxes.
Is this a discussion you should be having with your clients? After all, you’re not an insurance agent. Why is this important? And if they are leaning this way, is it for the right reasons? Recently I met with a family and one of their sons, who was a financial planner and insurance agent. He wanted his parents to purchase a $1 million life insurance policy inside of an Irrevocable Life Insurance Trust (ILIT). The parents could clearly afford the insurance, but the question was, did they need it?
With the planning we had already done, the parents would not have a taxable estate, so what was the purpose of the life insurance? Hmmm—let me think. The insurance selling son would receive a very large commission on the sale—I wonder if that had anything to do with his recommendation?
When the parents die, their children would receive the $1 million life insurance proceeds (which they would not need to pay for estate expenses) free of tax. That’s a good thing. But since the estate would not have been taxable anyway, was this worth the cost? And was this what the parents’ intended or had they been mislead into thinking they needed the insurance to prevent the sale of the farm when they died?
The son would receive an immediate benefit (the insurance commission) and he and his siblings a later one (the insurance proceeds), but where is the benefit to the parents.
Ethically, my responsibility was to raise these issues with the parents and recommend against purchasing the unneeded life insurance and setting up an ILIT. Of course, the son was furious and he convinced his parents to go elsewhere for their estate planning.
I’m not saying there aren’t times when life insurance is important—it can do everything outlined in paragraph one above and shield assets from litigation at the same time. An ILIT may be a good idea even if your clients don’t worry about suits or creditors, because it allows the full value of their life insurance to pass tax-free to heirs and it is effectively removed from their estate for Medicaid and VA calculations. Without an ILIT, the government will count the accrued cash value in determining eligibility for government programs and will count the full face value of an insurance policy in calculating the taxable estate. Anything over the estate tax exclusion of $5.34 million in 2014 is subject to “death tax”. I’m just saying you need to look at the reasons behind the decision to take this action and be sure you can ethically support it.
In the example above, if the parents had said “we want to compensate our son and help his financial planning career” or “we want to leave this cash legacy to our children, free of tax”, it would have been fine. This was not what they said. Rather, they said their son wanted the insurance to “protect the farm from the payment of estate taxes” and this to me was disingenuous and inaccurate at a minimum.
There are times when an ILIT may be appropriate. The ILIT can give your clients important asset protection benefit. Over the years, their premiums and interest earnings can accumulate to considerable sums, making cash value policies a tantalizing target for creditors. When the policy is owned by the ILIT, however, it is out of the reach of creditors.
Family Limited Partnership or Limited Liability Company
You may want to discuss the use of a Family Limited Partnership (FLP) or Limited Liability Company (LLC) with your client. These are some of the most popular estate tax and asset protection planning devices. The question is whether they are of benefit to the client, rather than just to the beneficiaries.
Intentional vs. Constructive Fraud
We have already discussed constructive fraud. Intentional fraud is clear from its definition. Suffice it to say that no attorney should ever be placed in the position of approving intentional, deliberate fraud. Not only is it unethical and illegal, but it could possibly result in the suspension or revocation of the attorney’s license to practice law.
Several years back an attorney realized a client had failed to sign a critical legal document, even though it was something both of them intended for him to do. Unfortunately the client had died in the meantime. The attorney, in an attempt to help the late client’s family, forged the client’s signature on the document and had it notarized. When the attorney’s actions came to light, the attorney was barred from ever practicing law again. Her promising career was at an end because she tried too hard to help a client and stepped over the line.
An attorney’s word is his or her bond and one deliberate unethical act can cause all of his or her training and experience to be for naught. Never put yourself in a position where your integrity can be challenged.
Affidavit from Client Regarding Financial Condition
Whenever you consult with a client about complex asset protection, advanced Estate Planning, or Medicaid type issues, it is imperative that you obtain an accurate and complete financial picture. Our firm uses a multi-page questionnaire to gather this information. We also require the client to provide us with a copy of the most recent bank statements, investment statements, tax assessor’s valuations, titles to automobiles, and so forth. The reason for this is so we can verify the information provided by the client. If we have any questions, we can always contact the institutions directly to verify what funds are available.
If you are working in the bankruptcy field, this has taken on a much higher level of importance because you, as the attorney, must certify to the accuracy of the information provided by your client. We in the Estate Planning field have not been held to quite as high a standard, but the need is still present.
On our form, we have the client sign an affidavit at the end which says the information, provided is complete and accurate to the best of the client’s knowledge and belief. This way, we feel we can safely rely on the information presented when we initiate our planning. The importance of this was recently brought home to me in three different cases. In the first case, one of the beneficiaries of a deceased client’s estate called me to say we had “failed to transfer a farm” into the trust and we needed to “take care of this.” We reviewed our file and determined that the client had failed to notify us that she owned the farm, so we weren’t responsible for the problem. A probate was needed, but at the expense of the estate and not ours.
The second case was quite similar. The children were emptying out the chest of drawers in their late mother’s bedroom and when they pulled the liner paper out of the bottom drawer, they found a deed for a small parcel of land that was not in the trust—the deed had apparently slipped down to the bottom from an upper drawer and Mom had forgotten all about it. The third case also involved property, but a slightly different issue. Dad bought his home in 1955 and then some 10 years later bought the parcel behind it and fenced the whole area. When he set up his trust, he brought in the deed for what he thought was his home. Actually, it was for the parcel behind. He had considered them one piece of property for so long, he forgot they had been bought separately. Again, he signed our form saying this was all he owned and all we were to transfer into his trust. When the mistake was discovered, he had been dead for several years and another “unnecessary” probate was required.
We lawyers are paid for what we know and the actions we take, not for the documents or forms we prepare. It is imperative that lawyers limit their practices to those areas in which they feel completely competent and confident in handling their client’s affairs. A divorce lawyer must not only consider the normal child support, alimony and property division issues, but must also look at income tax consequences, estate planning needs, possibly unique military issues, issues with the transfer of real estate, enforcement of QDROs, and a myriad of other issues. The same is true of an estate planner. We cannot focus on one issue to the exclusion of all others. Any advice we provide must encompass all reasonably foreseeable legal consequences. The client must receive a full and complete explanation, preferably documented in writing and provided to the client, as well as retained in the attorney’s files. Failure to document the advice given and the actions taken, and the possible consequences, can leave the attorney vulnerable to allegations of incompetence and malpractice. Especially when working with clients who have advanced Estate Planning or asset protection needs, this requirement is paramount.
Estate and Elder Law Planning is an exciting field of law that can bring an attorney a great deal of satisfaction. The attorney is helping clients achieve financial and personal security. By the same token, failure to provide accurate, complete and competent advice can have a devastating affect on a client’s estate, and can place the attorney in a very vulnerable position. Only by careful attention to your craft and continuous study and self-improvement can you provide the quality of service your client is entitled to receive.
SAMPLE SPOUSAL CONFIDENTIALITY LANGUAGE
Notice of Waiver of Conflict
Under the Oklahoma Bar Association Rules of Professional Responsibility, Clients must be informed of the following:
A Husband and Wife may have conflicting interests when estate planning is being done that concerns their property. If, as Clients request, the Law Firm acts for both spouses, it must try to balance all factors, and cannot, therefore, be an advocate for either spouse. That balance could end up favoring one spouse to the detriment of the other. The Law Firm must necessarily obtain confidential information from each spouse. However, as between spouses, the Law Firm cannot keep this information confidential since it will be representing both parties.
The Law Firm may make recommendations that affect each spouse's interest in property, both during lifetime and after death. There may be a strong conflict in the determination of what is joint property, quasi-joint property, and separate property. The determinations may be more helpful for one spouse than the other. The chance of the dissolution of their marriage or death must always be recognized. The current recommendations could affect the income, property and support provisions in such dissolution of marriage or after the death of one or both spouses.
One spouse may desire property to go in a way different than the other desires. The Law Firm will work for both of them, and it cannot assert one of their positions over the other.
Under cases in the local courts, Clients must be fully informed in writing as to these conflicts. After they have been informed in writing about the facts of these conflicts, they may decide if they want the Law Firm to represent both of them in their estate planning.
Each spouse is, of course, welcome to hire his or her own completely independent attorney for any part or all of the matters in which the Law Firm is dealing. Either spouse may also forbid the Law Firm from being involved in any way on behalf of the other.
Husband and Wife have read the foregoing and understand there are many potential and actual conflicts of interest between them in the estate planning process. If either Client desires to have a separate attorney or desires that the Law Firm not be involved at all, the party with such desire will notify the Law Firm in writing. Clients consent to having the Law Firm represent both of them in the estate planning for which the Law Firm was engaged. Clients understand that as between themselves and the Law Firm there are no confidential communications since the Law Firm represents both of them.
CAVEAT – Tax, Estate Planning, Medicaid and Ethical rules and interpretations are constantly changing. These materials are for discussion purposes only. Be sure to consult the governing laws, regulations and court decisions for the current state of these laws.