New Era of Estate Planning in California: Ethical Challenges in Estate Administration

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July 31, 2018

Ethical rules for practice in California derive from several sources:
(1) State Bar Act (Business & Professions Code §6000, et seq.);
(2) California Rules of Professional Conduct (promulgated by the State Bar);
(3) Various Probate Code sections;
(4) Case law (as per Cal. Rules Prof. Conduct, Rule 1-100(A));
(5) Discipline opinions prepared by the State Bar Court’s Review;
(6) Department and published in the California State Bar Court Reporter ;
(7) Opinions of ethics committees, including the State Bar’s;
(8) Committee on Professional Responsibility and. Conduct and the Los Angeles County Bar Association, among others. These opinions are published in the State Bar’s California Compendium on Professional Responsibility, and are advisory and non-binding.

The California Rules of Professional Conduct were developed by the California State Bar and approved by the California Supreme Court in Business & Professions Code §6073. None of the A.B.A. Model Rules of Professional Conduct, the A.B.A. Model Code of Professional Responsibility, nor the rules and standards of other jurisdictions or bar associations, are binding in California. General Dynamics Corp. v. San Bernardino County Superior Court, (1994) 7 Cal. 4th 1164, 1190 n.6, 32 Cal. Rptr. 2d 1, 876 P.2d 487. However, federal law may impose additional regulations, such as the SarbanesOxley Act of 2002.

Ethical violations generally result in disciplinary actions by the State Bar, which can range from private reproval to disbarment, but are not synonymous with malpractice. The State Bar provides an Ethics Hotline to help lawyers identify and analyze issues related to professional responsibility by assisting a lawyer in finding applicable statues, rules, cases and bar opinions. Additional information is available on the State Bar website at or by calling the Ethics Hotline at 800/238-4427.

A. Determining Who the Client Is
Particularly in probate and trust proceedings, compliance with ethical rules begins with a determination of who the client is. Conversely, to avoid potential ethical violations, it is important to identify who the client is not. When a non-client believes that an attorney is their attorney, there is a risk that the non-client is now owed fiduciary duties by that attorney. If representation of the non-client presents a conflict of interests with the attorney’s current clients, then the attorney may be facing another potential ethical violation in representing conflicting interests without proper disclosure, or alternatively, the attorney is forced to withdraw from representing both clients whose interests conflict. Thus, it is just as important for an attorney identify to whom they owe fiduciary duties as it is for the attorney to identify to whom they do not owe such duties in order to prevent an unintended attorney/client relationship.

An attorney has the following duties, among others, to the client he or she represents: undivided loyalty, avoiding representing adverse interests, keeping the client informed, and maintaining client confidences. Undivided loyalty and avoiding representation of conflicting interests goes hand in hand. A conflict of interest is broadly defined as a situation that interferes with a lawyer’s ability to fulfill basic duties to a client. State Bar Formal Opinion No. 1982-69. Conflicts of interest may arise in probate and trust proceedings because of the interrelatedness of parties and the multiple roles of individual parties and beneficiaries, fiduciaries, or business associates. Consideration of potential conflicts is particularly important, because, as is common, the attorney may have represented the decedent, decedent’s spouse or family members or consulted with decedent in business transactions and these parties may have conflicting interests with regard to decedent’s estate. In probate cases in particular, a conflict of interest may arise after the representation has been accepted, requiring independent counsel for the various interested persons.

Because of the frequency in which conflicts occur in estate administration, it is imperative that the attorney identify the client and communicate clearly the nature of the relationship to the client and to anyone else involved with the estate. The general rule, as stated above, is that a mere potential for conflict between two clients will not disqualify the attorney from representing both clients. Whether an attorney for the personal representative may represent one heir against another in an adversarial proceeding depends on the circumstances and the existence of a conflict. Marales v. Field De Goff Huppert & MacGowan, (1979) 99 Cal. App. 3d 307, 160 Cal.Rptr. 239.

The estate itself is not a recognized legal entity, except for tax purposes, and thus cannot be the client. Rather, counsel’s direct relationship is with the estate’s trustee, executor or administrator. Generally, counsel’s duty of professional care ordinarily runs solely to the person with whom he or she is in privity of contract, typically the estate representative. Thus, unless they clearly are intended recipients of counsel’s services, the estate heirs and beneficiaries are not owed professional obligations by probate counsel. Goldberg v. Frye, (1990) 217 Cal. App. 3d 1258, 1267, 266 CR 483, 488. They will usually think differently.

Counsel should thus be cautious when a family approaches the attorney for representation. It should be set forth which member or members of the family will be represented in the course of the administration. Typically, the estate heirs and beneficiaries are not owed professional obligations by probate counsel. Goldberg v. Frye, (1990) 217 Cal.App. 3d 1258, 1268, 266 Cal.Rptr. 483. As a general rule, the attorney should always be cognizant of the role he or she portrays in relation to whom he or she is working with.

The attorney should then prepare a formal retainer agreement for his or her representation of the client. A writing is required where fees are expected to exceed $1,000.00. Cal. Bus. & Prof Code §6148. Failure to obtain a written agreement renders the agreement voidable at the option of the client and the attorney will be limited to recovering only the reasonable value of his or her services. Many probate attorneys enter into formal employment agreements with their clients (i.e., executors or administrators). These agreements should, at a minimum, spell out the method for compensating counsel, the attorney’s responsibilities, the client’s responsibilities, and the nature of the probate process. The agreement should also explain the difference between statutory and extraordinary compensation, as well as the necessity for court approval of such compensation before payment. Not only do these agreement help ensure that the attorney is compensated for his or her services, but it will serve as another reminder of who the client is.

B. Representing an Estate: Avoiding Conflicts of Interest
As discussed above, because of the predominance of potential or actual conflicts of interest in probate and trust proceedings, the California Rules of Professional Conduct, case law and common sense will assist and attorney’s decision as to whether or not to represent a client. The California Rules of Professional Conduct Section 3-3 10 sets forth specific rules directly affecting counsel’s decision to accept or decline employment in an actual or potential conflict of interest situation.

Potential Conflicts: When an attorney represents more than one client in a matter, the attorney client engagement letter must address these potentially conflicting duties in a manner consistent with California Rules of Professional Conduct Section 3- 3 10(C), which provides: A member shall not, without the informed written consent of each client: (1) Accept representation of more than one client in a matter in which the interests of the clients potentially conflict; or (2) Accept or continue representation of more than one client in a matter in which the interests of the client actually conflict. Cal. Rules Prof. Conduct Rule 3- 310(C) “Informed written consent” means the affected clients’ written agreement to the representation after having been informed by counsel of the “relevant circumstances” and the “actual and reasonably foreseeable adverse consequences” to the clients. Cal. Rules Prof. Conduct Rule 3-310(A). Since the Rules of Professional Conduct permit the representation of clients with conflicting interests upon obtaining a written waiver, discretion suggests obtaining such a waiver in all cases where more than one individual is involved, whether or not the attorney perceives an actual conflict.

Actual Conflicts: The attorney’s duty of loyalty to the first client precludes attorney’s simultaneous or dual representation of second client, even in an unrelated matter. Flatt v. Superior Court, (1994) Cal.4th 275, 36 Cal.Rptr.2d 537. Conflicts are especially common for attorneys dealing with estate and trust administration. Where a conflict arises between beneficiaries, the personal representative’s attorney’s duties lies with the personal representative. This means that in such a conflict, the attorney must assist the personal representative while not favoring one group of beneficiaries over another. The personal representative’s attorney may not represent a beneficiary in a conflict with other beneficiaries unless all parties consent in writing and the attorney will not be affected by the conflict. Although dual representation is permitted, the attorney should avoid representing two clients whose interest may be adverse, even with signed consent.

The Unknown Conflict: A practitioner may not even be aware of the representation of a client, and consequently the conflict may pass unobserved. In Ishmael v. Millingion, 241 Cal.App.2d 520, 50 Cal.Rptr. 592 (1966), an attorney was retained by a husband to obtain a divorce. When it was later determined that procedurally the wife should be the petitioner, that attorney agreed at the husband’s request to prepare the documents for the wife. The attorney never believed that he represented the wife. However, when the wife discovered that she had been mislead in the settlement to her loss, she sued the attorney for malpractice. The court held that a duty existed to the wife. Compare the duty described in Ishmael with the preparation of wills for two parties at the request of only one, such as for a spouse or child, or the preparation of a premarital agreement or various probate documents for numerous beneficiaries (such as disclaimers, waivers of account, creditor’s claims, or fee documents) at the request of only one party.

Avoiding Potential Conflicts Involving Clients and Beneficiaries: If you perceive a possible dispute on the horizon between family members, make sure they understand whom you represent. Whenever possible, avoid getting involved in entanglements among the heirs and beneficiaries and advise them in writing to seek independent counsel.

If you have represented any of the potential claimants against the estate in the past and nevertheless decide to go ahead with the probate representation, make sure there are adequate written disclosures that fully reveal all matters you handled for the former clients. Point out the possibility of a conflict of interest; and again, urge consultation with independent counsel.

Estate Planning Attorney Acting as Attorney for Trustee: Frequently, counsel who drafted the testamentary instrument is also asked to serve as the attorney for the Trustee. In most cases, this practice is desirable, since the attorney, by reasons of his or her own professional relationship with the now-deceased client, is privy to information about decedent’s assets and intentions unknown to others. No conflict of interest limitation per se disqualifies the estate planning attorney from acting as trustee’s counsel. However, later developments may require the attorney to withdraw from representation and the client to secure independent counsel, particularly where there are challenges to the trust and/or will or adverse claims against the estate.

Estate Planning Attorney Acting as Trustee and Probate Counsel: Sometimes the attorney who drafts decedent’s trust and will is also named as Trustee, and may even be authorized to act (personally or through his or her law firm) as counsel for the estate. Attorneys who perform such a “dual capacity” must comply with the Rules of Professional Conduct, even when acting strictly in a non-attorney executor role. If an attorney does act as personal representative, it is important to ensure that the malpractice insurance covers attorney’s actions.

Attorneys acting as Trustee, Executor or Administrator: Although there is no legal restriction on an attorney acting as the Trustee or administrator of an estate in addition to performing legal services, the legislature discourages this practice by limiting the compensation an attorney is entitled to when acting in a dual capacity. “Notwithstanding any provision in the decedent’s will, a personal representative who is an attorney shall be entitled to receive the personal representative’s compensation as provided in this part, but shall not receive compensation for services as the attorney for the personal representative unless the court specifically approves the right to the compensation in advance and finds that the arrangement is to the advantage, benefit, and best interests of the decedent’s estate.” Cal. Probate Code § 10804.

Unless specific circumstances apply, attorneys may not act in a dual capacity and are held to forfeit their claim for legal fees from the estate when they act as Trustee, executor or as administrator. Estate of Parker, (1926) 200 Cal. 132, 251 P. 907. The theory is that the executor, in selecting himself or herself to perform the duties of an attorney for the personal representative would become his or her own employer and thus be under the temptation of self-interest to defraud the estate. Denial of legal fees in this case serves to curb such temptation and encourage the hiring of independent counsel. Estate of Lankershim, (1936) 6 Cal.2d 568, 572, 58 P.2d 1282, 1284. Therefore, unless an attorney serving in this dual capacity obtains court approval in advance, the attorney may only receive personal representative compensation. To grant such authority, the court must find that the arrangement is to the advantage of the estate. There is no exception for blood relatives as there is in matters concerning trustees, guardianships or conservatorships.

However, a personal representative may authorize his or her attorney to perform acts that are normally the responsibility of the representative and agree to compensate the attorney separately therefor. The fee for these services is not chargeable against the estate, and such an arrangement must conform to specific ethical and technical guidelines. Estate of Parker, supra; Los Angeles County Bar Association Formal Opinion Number 347 (April 24, 1975); Los Angeles Superior Court Guidelines on Attorney’s Fees in Decedents’ Estates, Section 1.1.3. In order to qualify for executor duty fees, a written agreement following the Los Angeles Superior Court form is advised. Such agreement should set forth an advisement in writing that the client should seek independent counsel prior to signing the agreement. The client should be afforded the opportunity to do so if he or she desires. The agreement must be reasonable and fair. In no event may an attorney duplicate charges. Therefore, the services rendered on behalf of the personal representative should be distinct from legal services rendered in connection with extraordinary or ordinary fees.

Problems Where Attorney May Be a Percipient Witness - Finally, Rule 5-210 prohibits an attorney from becoming an advocate in contested matters where he or she may also be a witness except in very limited circumstances. This restriction applies only to circumstances that may result in a trial before a jury, which does not occur in probate and trust disputes, but may occur in contested conservatorship matters. However, even where there is no jury, attorneys who also testify as percipient witnesses may not provide the best representation to their clients.

Another matter an attorney should consider when he or she is faced with representing a new client is whether that representation would interfere with the attorney’s ability to fulfill his or her ethical duties to the client. Essentially, when representing an estate, the attorney is promising to perform his or her duties with competency and diligence. Not only does the California Rules of Professional Conduct and case law prove guidance, but because of the increasing complexity of estate planning and administration, the attorney must be able to ask himself or herself if they are really “up for the job.”

Several cases involving probate and estate planning matters hold that a lawyer may be disciplined for failure to act competently. See Lewis v. State Bar, (1981) 28 Cal.3d 683, 170 Cal. Rptr. 634; Bucquet v. Livingston, (1976) 57 Cal.App.3d 914, 129 Cal.Rptr. 514.

Competency: Attorneys have a responsibility to maintain professional competency in their field of practice. An attorney “shall not intentionally, recklessly, or repeatedly fail to perform services with competence.” Cal. Rules of Prof. Conduct Rule 3-110 (A). Competence in any legal service shall mean to apply to the diligence, learning and skill, and mental, emotional, and physical ability reasonably necessary for the performance of such service. Cal. Rules of Prof. Conduct Rule 3-110 (B). Finally, if an attorney does not have the necessary learning and skill when the legal services are undertaken, the attorney may be considered to perform competently if the attorney either acquires the necessary learning and skill or by associating or consulting with another attorney believed to be competent. Cal. Rules of Prof. Conduct Rule 3-1 10 (C).

Acting with Diligence: When an attorney accepts employment to give legal advice or to render other legal services, the attorney impliedly agrees to use such skill, prudence, and diligence as attorneys of ordinary skill and capacity commonly possess and exercise in the performance of the tasks they undertake. Kirsch v. Kuryea, (1978) 21 Cal.3d 3Q3, 308, 146 Cal.Rptr. 218, 578 P.2d 935; Cal. Bus. & Prof. Code §6067. An attorney must meet all filing deadlines and use reasonable efforts to move a client’s matter to completion. Attorneys face client complaints, disciplinary action, and even court sanctions for failing to handle and close an estate in a timely manner. See Layton v. State Bar, (1990) 50 Cal.3d 889, 268 Cal.Rptr. 845 (attorney suspended for failing to diligently manage an estate); Weber v. State Bar, (1988) 47 Cal.3d 492, 253 Cal. Rptr. 573 (attorney disbarred for misconduct in handling probate matter); and Butler v. State Bar, (1986) 42 Cal. 3d 323 (attorney disciplined for failure to communicate or cooperate with executor and executor’s attorney).

Acting as a Supervisory Attorney: The duty to competently perform legal services includes supervising subordinate attorneys and employees. Gadda v. State Bar, (1990) 50 Cal. 3d 344, 353-354, 267 Cal.Rptr. 114 (supervising attorney can be more blameworthy than associate being supervised); Trousil v. State Bar, (1985) 38 Cal.3d 337, 342, 211 Cal. Rptr. 525 (failure to supervise office staff).

Obligation to Associate with Competent Counsel: When the complexity of a particular client’s estate exceeds the attorney’s level of competency, the practitioner should consult with, or refer the client to, a more experienced lawyer or a specialist. If an attorney undertakes to handle a matter requiring the skill of a specialist, the attorney will be held to the standard of a specialist. Lewis v. State Bar, (1981) 28 Cal.3d 683, 170 Cal. Rptr. 634. Rule 3-1 10(C) states that when a member of the Bar does not have sufficient learning and skills when the employment or representation is undertaken, he or she must acquire the learning and skills necessary or associated with or consult with another member reasonably believed to be competent. When referring a matter or associating with other counsel on a matter, it is advisable to prepare a referral agreement detailing the issues to be handled by each attorney, the handling of confidences and establishing terms for payment, insurance coverage and indemnification.

Emergency Situations: In an emergency, an attorney may give advice or assistance in a matter in which the attorney does not have the skill ordinarily required where referral to or consultation with another lawyer would be impractical. Even in such emergency however, assistance should be limited to that reasonably necessary under the circumstances.

C. Informing the Client of the Status of the Estate
Normally, communications between an attorney and his or her client are privileged, and that privilege is statutorily set forth in Evidence Code § 952 through 954. Section 952 defines the attorney-client communication. Section 953 makes clear that the client is the holder of the privilege. Section 954 permits the holder of the privilege to refuse to disclose, and prevent others from disclosing, any confidential communications.

The holder of that privilege is the personal representative of the estate. The estate as an entity does not hold the privilege, nor do the beneficiaries.

In Moeller v. Superior Court, 16 Cal. 1124 (1997) a dispute arose between a corporate successor trustee and a beneficiary. When the corporate fiduciary resigned and the beneficiary succeeded as trustee, the court held that the beneficiary as successor corporate trustee succeeded to the privilege, rejecting the corporate trustee’s claim that all of its correspondence with its attorney was privileged, effectively holding that the privilege followed the office of fiduciary. The ruling in Moeller caused enormous consternation in the legal community, commentators arguing that the holding undermined the relationship between attorney and client. The court was not sympathetic to the claims that each fiduciary should be able to hire an attorney and communicate with them in confidence. The court held:

“In a trust relationship, then, the benefits belong to the beneficiaries and the burdens to the trustee. The office of trustee is thus by nature an onerous one, and the proper discharge of its duties necessitates great circumspection. Liability to beneficiaries for mismanagement of trust assets is merely one of the burdens professional trustees take on — for, presumably an appropriate fee.” The court suggested that trustees hire a second attorney and pay for that attorney out of their own pocket to preserve any privilege they feel is necessary.

In Wells Fargo Bank v. Superior Court, 22 Cal. 4th 201 (2000) Wells Fargo Banks successor trustee petitioned the court to settle its accounts and approve its resignation. Beneficiaries objected and sought to discover documents. Wells Fargo produced all documents relating to trust administration, but asserted its privilege as to communications with its attorney related to claims of misconduct. The court held that the attorney-client privilege applied, distinguishing Moeller. In Moeller, the action was between a successor trustee who now held the privilege. In Wells Fargo, the action was between beneficiaries of a trust and the trustee, and the court held that the rationale of Moeller would not extent to beneficiaries. For additional cases dealing with the attorney-client privilege of fiduciaries, see Fletcher v. Superior Court, 44 Cal.App. 4th 773 (1996); Lasky, Haas, et at. v. Superior Court, 172 Cal.App. 3d 264 (1985).

Speaking with beneficiaries is less productive. While it is important to treat beneficiaries courteously, counsel must remember that the beneficiaries are not their clients. Beneficiaries who call frequently will develop a sense of entitlement and will expect much from the attorney which he or she should not provide, and will not be compensated for. Further, conversations with beneficiaries may breach the confidentiality due to the client, create conflicts, and cause beneficiaries to be lulled into a perception that they are being serviced directly by the attorney. It is a better practice to advise the personal representative that they should keep beneficiaries informed. Attorneys can with the consent of their client send out status letters addressed to all beneficiaries as a class, reminding them that the attorney does not represent them and encouraging them to retain other counsel for their benefit.

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