Ethics in Estate Administration — Tips and Practice Pointers
Estate administration covers a broad range of legal and tax issues and can involve a multitude of different parties with competing interests. Additionally, there are a number of important deadlines, and the personal representative can be held liable for breach of fiduciary duties. To navigate this complex practice area successfully, attorneys should have a thorough understanding of the Florida Rules of Professional Conduct (rules). The purpose of this article is to provide practical advice for complying with the rules in an estate administration.
Due Diligence
It is exciting to be contacted by a referral source or potential new client for an estate administration. However, it is important to resist the urge to begin working right away and instead perform some initial due diligence. Before getting involved in an estate administration, a lawyer should attempt to obtain information about the family of the decedent, assets of the estate, and the parties involved. This information will help the lawyer begin to identify potential issues under the rules.
Although this may not be intuitive for estate planning attorneys, a conflict check should be performed for every potential new matter. While an estate administration is not typically an adversarial proceeding, conflicts can arise. Accordingly, even after clearing the initial conflicts check, a lawyer should continue to evaluate the representation for conflicts that may develop over time during the administration.
Engagement Letter
Although not required, engagement letters are strongly recommended. A well-drafted engagement letter will reduce the likelihood that the lawyer may have an issue under the rules.
• Client Identification — A lawyer should identify his or her client in writing. It is important to note that the lawyer retained by the personal representative does not represent the beneficiaries, the estate, or the creditors of the estate. The attorney-client relationship is established exclusively with the personal representative.[1] Unlike in the business context where a lawyer can represent the company and not the individual shareholders, a lawyer cannot represent the estate as an entity. In identifying the client, a lawyer must be mindful that the same individual can have multiple roles. For example, the same person can be a personal representative, trustee, surviving spouse, beneficiary, and creditor. The lawyer should identify the client and confirm the specific capacity in which the lawyer represents the client.
A lawyer should be clear in communicating with third parties, especially beneficiaries, regarding the identity of the lawyer’s client. Here is sample language a lawyer could use when sending documents to any person who is not the lawyer’s client: “This email serves as notification that I do not represent you. While it is not required for you to have your own attorney, if you have any questions regarding the attached documents or information contained in this email, you should consult with your own attorney.”
• Scope of Representation — It is important to define the scope of the lawyer’s representation in the engagement letter. In an estate administration, there are several matters that may fall outside of that scope. For example, administration of the decedent’s trusts, preparation of tax returns for the estate and the decedent, and assistance with assets located outside of the state of Florida may fall outside of the lawyer’s scope of representation. Fortunately, a lawyer is permitted to limit the scope of his or her representation under Rule 4-1.2, provided such limitations are reasonable under the circumstances and the client provides informed consent. Limiting a lawyer’s scope of representation can reduce the risk of an ethics violation in an estate administration.
Not only will limiting the scope of a lawyer’s representation help a lawyer comply with the rules, but it may help defend against a malpractice claim. Generally speaking, a lawyer will not be held responsible for matters outside the scope of his or her representation. Having a specific and limited scope of representation will also help in the event a lawyer needs to terminate the representation.
To minimize the risk of a misunderstanding of the scope of the lawyer’s representation concerning tax matters, a lawyer who represents a personal representative should communicate with the accountant retained by the personal representative. For example, language along these lines is helpful: “It is our understanding that your firm has been retained to assist Ms. Smith in her capacity as personal representative of the estate with certain tax matters, including the preparation of 1) the decedent’s final individual federal income tax return; 2) federal income tax returns for the decedent’s estate; 3) IRS Form 56 for the estate and decedent (and any termination thereof); 4) IRS Form 5495 for the decedent’s income tax returns; and 5) IRS Form 4810 for the decedent’s income tax returns and any fiduciary returns. If this is not correct, please let me know.”
• Confidentiality — A lawyer has a duty to keep client information confidential under Rule Reg. Fla. Bar 4-1.6. Subject to certain limited exceptions, all information “relating to a client’s representation” is confidential.[2] Under Rule 4-1.6, even the client’s identity and publicly available information (such as public court filings or internet data) are treated as confidential if they relate to the representation.[3] The duty of confidentiality begins at the first meeting and continues indefinitely. An estate administration requires communication with third parties, like banks and financial institutions with respect to the assets of the estate. Under the commentary for Rule 4-1.6, a lawyer is “impliedly authorized to make disclosures about a client when appropriate in carrying out the representation, except to the extent that the client’s instructions or special circumstances limit that authority.”[4] While not necessary, the best practice is to obtain the client’s written authorization regarding the scope of the lawyer’s authority to disclose confidential information. For example, a lawyer may wish to add the following language to the engagement letter: “The Florida Rules of Professional Conduct require us to keep information that you disclose to us confidential and not to disclose it to persons outside our firm without your permission. I will be the lawyer primarily responsible for the estate administration, and you have authorized me to disclose information to other persons in our firm to do your work. If persons outside our firm work with us with your permission (such as your accountant, investment advisor, or another law firm), you agree that we may disclose information to them that they need in order to fulfill their role in assisting with the estate administration.”
In an estate administration, the attorney-client privilege applies to communications between the lawyer and the personal representative of the estate.[5] Potential issues can arise when a client serving as personal representative wishes to involve third parties, such as family members, trustees, or others involved in the estate administration. In these situations, the lawyer should obtain the client’s written authorization to disclose confidential information to the third parties. Furthermore, the client should be advised that if third parties are copied on communications, the attorney-client privilege may not apply, and these communications may be subject to discovery requests.
• Attorneys’ Fees — Any agreement for attorneys’ fees must comply with Rule Reg. Fla. Bar 4-1.5. A lawyer is prohibited from entering into an agreement to charge or collect excessive fees.[6] The factors that will be considered in determining the reasonableness of a attorneys’ fees are set forth in Rule 4-1.5(b). In an estate administration, a lawyer has a duty to communicate the basis on which the lawyer will charge for legal services to the personal representative of the estate. This communication should be made in writing at the beginning of the representation.
If the lawyer’s fees is based on F.S. §733.6171, §733.6171(1)(b) requires that certain disclosures be made to the client in writing. A lawyer must obtain the personal representative’s “timely signature acknowledging disclosures.”[7] Given the requirement that disclosures be made timely, the lawyer should obtain the personal representative’s signature at the beginning of the representation. If the required disclosures are not made, “the attorney may not be paid for legal services without prior court approval of the fees or the written consent of all interested persons.”[8] There is a similar rule applicable with respect to legal fees in a trust administration.[9] Regardless of the agreement reached between the lawyer and the personal representative, the attorneys’ fees are subject to review by the court upon petition by interested persons.[10]
A lawyer has a duty under the rules to ensure the client knows who is responsible for the payment of the attorneys’ fees. For example, if the lawyer represents the client as both personal representative and as a beneficiary of the estate, only legal fees for time spent representing the client as personal representative should be paid from estate funds.
• Conflicts of Interest — Some of the most common and difficult issues to navigate under the rules are conflicts of interest. Whenever possible, a lawyer should only represent one client acting in one capacity. Application of the rules is fairly straightforward when representing a single client in one capacity; however, compliance becomes more involved when representing multiple clients in multiple capacities. In an estate administration in which a lawyer represents multiple parties, the lawyer should identify and disclose potential conflicts of interest at the beginning of the representation in an engagement letter.
Even if there are no initial conflicts, conflicts can develop over time. The Bar rules applicable to conflicts are Rules 4-1.7, 4-1.8, 4-1.9, and 4-1.10. Although conflicts of interest should be avoided, in some cases the representation may proceed despite conflicts of interest, provided the clients give their informed consent and provided the lawyer reasonably believes the representation will not adversely affect the lawyer’s duties to another client.[11]
Nonetheless, not all conflicts can be waived. Under Rule 4-1.7, the lawyer must reasonably believe “that the lawyer will be able to provide competent and diligent representation to each affected client.”[12] For example, a lawyer may not represent both sides of a business sale transaction when the material terms of the contract have not been agreed to.[13] Florida Bar Ethics Opinion 97-2 noted that “the sale of a business, even in the friendliest of circumstances, is by its very nature an adversarial process” and cited different cases in which a court determined that the parties were “fundamentally antagonistic” and that a joint representation was not permitted under the rules.[14]
Below is a more detailed discussion regarding potential conflicts of interest that may arise in certain common scenarios and how to analyze them.
Case Study 1: Multiple Personal Representatives
It is common for a client to nominate two (or more) individuals to act as co-personal representatives. If there are two personal representatives and the lawyer represents both of them, the lawyer has two current clients under the rules and owes duties to each of them. For example, a lawyer has a duty of loyalty and independence to both clients. In addition, a lawyer is required to keep both clients informed, communicate with both clients, and keep all information relating to the representation confidential.
When representing two personal representatives in an estate administration, a lawyer must comply with Rule 4-1.7, which governs conflicts of interest between current clients. First, the lawyer will need to determine if there is a conflict of interest or potential conflict of interest under Rule 4-1.7(a). In many cases, the interests of both personal representatives will be aligned. However, in some cases the interests of the personal representatives will conflict or the lawyer’s representation of one of the personal representatives will be limited by the lawyer’s responsibilities to the other personal representative. For example, suppose one of the personal representatives is the surviving spouse and the other is a child from the decedent’s prior marriage and they do not get along, or one is accused of undue influence, or the surviving spouse makes a claim for an elective share. In these scenarios, it is possible that a conflict will arise, so the lawyer should address the possibility of a conflict of interest before accepting the representation.
In many cases, actual or potential conflicts of interest can be waived by the co-personal representatives under the rules. The requirements for an effective waiver of an actual or a potential conflict are set forth in Rule 4-1.7(b). Note that a waiver requires each personal representative to give “informed consent, confirmed in writing.”[15] In addition, Rule 4-1.7(c) requires that the lawyer “include an explanation of the implications of the common representation and the advantages and risks involved.”[16] In addition, the lawyer must “reasonably believe that the lawyer will be able to provide competent and diligent representation to each affected client.”[17] If the lawyer believes there is an impermissible conflict, the lawyer should decline the representation.[18]
In addition to explaining the pros and cons of the joint representation, making all of the required disclosures, and obtaining a waiver of conflicts with informed consent, the lawyer should anticipate the possibility that a conflict may arise. For example, if the personal representatives do not agree on an important issue or decision, the lawyer may need to withdraw from the representation. The lawyer’s engagement letter should explain the process for withdrawing from representation of both clients if a conflict of interest arises, including the fact that the lawyer will need court approval to terminate the lawyer’s representation of the personal representative in a probate proceeding.[19]
The same practices and strategies a lawyer utilizes in representing married couples with their estate planning will be helpful when representing multiple personal representatives. For example, a lawyer should have a provision in the engagement letter explaining how the lawyer will deal with his or her duty of confidentiality to each respective client. If the engagement letter authorizes the lawyer to share all information with both clients (which is typical), and then later in the representation one of the clients terminates the lawyer’s authorization to share information with the other client, there will be an issue under the rules. In this situation, the lawyer may be required to withdraw from representing both clients.
When representing two personal representatives, the best practice is to keep both clients equally informed. A lawyer should copy both clients on all correspondences and hold calls and meetings with both clients. When a lawyer is meeting with only one client, the lawyer should remind the client of the lawyer’s obligations under the rules and share the meeting notes with both clients.
The Florida Probate Code provides guidance regarding fiduciary compensation in the case of two personal representatives.[20] However, there is no similar guidance in the case of two lawyers for two personal representatives.[21] Even if the personal representatives and their attorneys agree on the amount of compensation, compensation for the attorneys for the personal representatives is always subject to review by the court.[22] In addition, it is possible that the total attorneys’ fees received will be limited to the fees that would have been payable if the co-personal representatives had hired the same lawyer.[23]
Case Study 2: Personal Representative Is Also a Beneficiary
In many cases, the personal representative will also be a beneficiary of the estate. In this situation, the lawyer must distinguish between these two separate legal capacities held by the same individual. The lawyer will need to determine whether the lawyer will be representing the client only in the client’s capacity as personal representative of the estate, only in the client’s capacity as a beneficiary of the estate, or both. To avoid any potential conflict, in almost all cases, the lawyer should decide to represent the individual appointed as personal representative only in his or her capacity as personal representative, and not also as a beneficiary. In that instance, the lawyer should encourage the individual to obtain separate, independent counsel in his or her capacity as a beneficiary.
That said, a lawyer is not prohibited from representing the same individual as personal representative and beneficiary. However, this dual representation will increase the risk of an issue under the rules for the lawyer, especially when there are other beneficiaries in the estate. As noted above, the identity of the lawyer’s client should be established at the outset of the representation in the engagement letter. In cases in which the same individual is the personal representative and a beneficiary, it is important to confirm in writing that the personal representative fully understands his or her fiduciary duties, including the duty of loyalty to and the duty of impartiality among the beneficiaries. The client may not be aware of the lofty standards applied to fiduciaries or the potential for personal liability for failing to comply with his or her fiduciary duties.[24]
There are situations in which the individual serving as personal representative who is also a beneficiary of the estate may have a conflict of interest in his or her role as personal representative. For example, if the individual in his or her capacity as a beneficiary has a disputed claim against the decedent’s estate, the individual will not be able to litigate the claim against the estate and at the same time defend the claim as personal representative. However, in the case of an individual who is both the personal representative and the surviving spouse of the decedent, the rules provide that the mere filing of an undisputed elective share claim will not, by itself, establish an impermissible conflict of interest.[25]
A lawyer should advise the client that fees for time spent representing the client’s personal interests as a beneficiary must be paid by the client personally and not paid from the estate. It is difficult to determine when the lawyer is representing a client as personal representative of the estate and when the lawyer is representing the client as a beneficiary of the estate. For this reason, a lawyer must keep separate records regarding the services rendered to the client in the client’s separate capacities and bill separately for each matter.
Case Study 3: Representing a Personal Representative When the Surviving Spouse Is a Current Estate Planning Client
Estate planning lawyers are regularly asked to represent the personal representative upon the death of the first spouse when the surviving spouse is an estate planning client. For example, a lawyer represents a married couple and the couple appoints a bank as personal representative of the estate. On the death of the first spouse, the lawyer may be asked to represent the bank as personal representative in the estate administration of the first spouse to die. Can the lawyer represent the bank in connection with the estate administration and at the same time continue to represent the surviving spouse for his or her estate planning?
If the lawyer agrees to represent both clients, it is possible that the lawyer’s representation of each client will be limited because of the lawyer’s responsibilities to the other client. For example, the lawyer has an obligation to assist the surviving spouse with the enforcement of his or her rights (including homestead, elective share, and community property). The enforcement of a surviving spouse’s rights may mean that the surviving spouse will be adverse to the personal representative.[26] Additionally, disputes can arise if there is a difference of opinion regarding the management of estate assets during the administration, fees charged by the personal representative, timing for distributions to the spouse, and whether to make certain tax elections. In cases in which filing a federal estate tax return is not required and would be expensive to prepare, but the filing of a return would benefit the surviving spouse by transferring the decedent’s unused federal estate tax exemption to the surviving spouse, there could be a conflict between the surviving spouse and the personal representative.
Even if there are no current conflicts, potential conflicts can arise. As addressed previously, in many cases actual or potential conflicts of interest can be waived by the personal representative and the surviving spouse under Rule 4-1.7(b). A waiver requires each client (the personal representative and surviving spouse) to give “informed consent, confirmed in writing.”[27] In addition, Rule 4-1.7(c) requires that the lawyer “include an explanation of the implications of the common representation and the advantages and risks involved.”[28] The lawyer must “reasonably believe that the lawyer will be able to provide competent and diligent representation to each affected client.”[29] If the lawyer believes there is an impermissible conflict, the lawyer should decline the representation.
The lawyer will have duties of confidentiality and communication to the personal representative and the surviving spouse. Because of these potentially conflicting duties, the lawyer will need to analyze the facts of the case to determine if the lawyer can comply with Rule 4-1.7. In addition, the engagement letter should explain how the lawyer will deal with the lawyer’s duty of confidentiality to the surviving spouse and personal representative. If the engagement letter requires the lawyer to keep all information confidential with respect to each separate client, and then later in the representation one client provides the lawyer with information that is important to the other client but cannot be disclosed by the lawyer to the other client, the lawyer may have an issue under the rules. For example, suppose the surviving spouse confidentially tells the lawyer that the surviving spouse plans to change investment advisors and has signed documents removing the bank as trustee of the surviving spouse’s trusts. In this situation, the lawyer may be placed in a difficult situation with respect to the lawyer’s duties under the rules and contractual duties under the engagement letter.
Case Study 4: Representing the Personal Representative and the Trustee of the Decedent’s Revocable Trust
Revocable trusts are used routinely in Florida to minimize the assets subject to probate to increase privacy, and to provide more efficient management and distribution of assets. It is common for a client’s will to direct that the client’s estate assets be distributed to the client’s revocable trust. It is important to keep in mind that the representation of the personal representative is separate and apart from the representation of the trustee of a revocable trust. Even though there are overlapping roles and responsibilities, these are separate representations under the rules. In many cases, the same person is designated as both the personal representative and the trustee of the revocable trust, and the interests of the personal representative will be aligned with the interests of the trustee. In those cases, there are no conflicts that need to be addressed. However, if different persons are appointed to each position, there can be conflicts of interest.
A lawyer seeking to represent the personal representative and trustee simultaneously will need to address his or her duty of confidentiality to both clients. In cases in which the decedent had a standard pour-over will and revocable trust, the interests of the personal representative and the trustee may be aligned, and a lawyer’s duties of confidentiality and communication to both clients will not result in an issue under the rules. In those cases, the representation of both clients by one lawyer will reduce fees and facilitate the efficient administration of the estate and revocable trust.
Conclusion
Estate administration is a practice area in which challenging scenarios can arise under the rules. Fortunately, many of the issues that come up during an estate administration can be prevented or resolved. Using a comprehensive engagement letter, thoughtful and timely communications with clients and beneficiaries, and addressing (not ignoring) potential conflicts of interest, attorneys can navigate estate administrations for themselves and their clients successfully.
[1] See In re Estate of Gory, 570 So. 2d 1381, 1383 (Fla. 4th DCA 1990).
[2] Rul. Reg. Fla. Bar 4-1.6.
[3] Id.
[4] Id.
[5] See Fla. Stat. §§90.5021, 733.212(2)(b).
[6] See Fla. Bar v. Della Donna, 583 So. 2d 307, 309 (Fla. 1989).
[7] Fla. Stat. §733.6171(2)(c).
[8] Fla. Stat. §733.6171(2)(d).
[9] Fla. Stat. §736.1007(1)(b).
[10] See Fla. Stat. §733.6175.
[11] See Rul. Reg. Fla. Bar 4-1.7(b)(1).
[12] Id.
[13] See Fla. Bar Prof’l Ethics Comm., Op. 97-2 (1997); see also Fla. Bar v. Reed, 644 So. 2d 1355 (Fla. 1994) (holding the lawyer could not represent the buyer and the seller in the same transaction).
[14] Fla. Bar Prof’l Ethics Comm., Op. 97-2 (1997).
[15] Rul. Reg. Fla. Bar 4-1.7(b)(4).
[16] Rul. Reg. Fla. Bar 4-1.7(c).
[17] Rul. Reg. Fla. Bar 4-1.7(b)(1).
[18] See Rul. Reg. Fla. Bar 4-1.7.
[19] See Fla. Prob. R. 5.030.
[20] See Fla. Stat. §733.617(5).
[21] See Fla. Stat. §733.6171.
[22] See Brake v. Murphy, 736 So. 2d 745 (Fla. 3d DCA 1999).
[23] Id.
[24] See Fla. Stat. §§733.602, 733.609.
[25] See Fla. Bar Prof’l Ethics Comm., Op. 76-16 (1977); see also Fla. Stat. §733.0504.
[26] Note that the lawyer for the personal representative has a right to inform the surviving spouse of his or her entitlements under Florida law (elective share, family allowance, and exempt property). It is normal for the surviving spouse to look for this information from the personal representative or the lawyer for the personal representative. The personal representative is not required to treat the surviving spouse as an adverse party simply because the surviving spouse files an elective share claim or other claim for statutory entitlements.
[27] Rul. Reg. Fla. Bar 4-1.7(b)(4).
[28] Rul. Reg. Fla. Bar 4-1.7(c).
[29] Rul. Reg. Fla. Bar 4-1.7(b)(1).
Anthony P. Guettler is a partner with Gould Cooksey Fennell in Vero Beach. Guettler is Florida Bar board certified in wills, trusts and estates. He represents high-net-worth families in estate and tax planning with a focus on helping achieve wealth transfer goals. He also works with personal representatives, trustees, and beneficiaries on estate and trust administration, providing guidance to fiduciaries and beneficiaries in trust and estate disputes.
R. Lee McElroy IV is a partner with Downey | McElroy, P.A., in Palm Beach Gardens. He was elected to the American College of Trust and Estate Counsel in 2017 and practices in the areas of probate and trust litigation, trust and estate administration, guardianship law, and fiduciary litigation. McElroy graduated with honors from Florida State University (1998) with a degree in history and earned his J.D. from the University of Tennessee College of Law (2001). He is admitted to practice in Tennessee and Florida. After law school, McElroy served in the U.S. Navy Judge Advocate General’s Corps for three years. He was awarded the Navy and Marine Corps Commendation Medal for running a Guantanamo Bay office in Cuba for three months (2003). He was also awarded the Navy and Marine Corps Achievement Medal for his service from 2002-05. McElroy is an active member of the Real Property, Probate and Trust Law Section of The Florida Bar. He frequently lectures on probate and trust matters.
This column is submitted on behalf of the Real Property, Probate and Trust Law Section, John C. Moran, chair, and Allison Archbold and Homer Duvall, editors.
