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Risk Managing Conflicts of Interest when Advising the Elderly in Estate Planning

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A New York law firm advised a husband 86 years old and his wife on an estate plan that gave the wife control over a trust that included the husband’s major assets and an apartment and house worth a total of $15 million. The husband later alleged malpractice asserting among other claims that the lawyers failed to inform him of the conflict of interest in representing both. The firm defended by showing two documents the husband signed that included language that he and the wife understood the inherent conflict of interest of the joint representation, had had the opportunity to consult independent counsel, and waived the conflict.

The court held that given the clarity of the documents in question the husband was bound to read and know what he signed and was, therefore, responsible for his signature. The court was not impressed with the husband’s claim that he had a mild cognitive impairment. The court noted that there was no showing that the lawyers knew or should have known of the impairment or that there was any question of the husband’s legal capacity.

The dissent to this decision argued that it was appropriate to consider the husband’s age and infirmity in assessing how reasonable the claim of lack of understanding was. The husband’s counsel seized on the dissent and stated “I believe there is a particular duty when dealing with a client of advanced age” and that “… the facts of this case, particularly concerning [the husband’s] age and impaired mental state, would shock the conscience of the Court of Appeals….”

It is hard to think of how the lawyers in this case could have documented more thoroughly their efforts to cover the conflict of interest issue with the husband and obtain informed consent. Yet even after the lawyers prevailed in two New York courts, the husband was granted leave to appeal to the Court of Appeal in February. This malpractice claim is far from over.

So what is a lawyer to do in risk managing representation of the elderly? Here are some suggestions:

  • Recognize that representing older adults presents a different context for meeting fiduciary obligations. The gravity of this context is heightened when the older adult is of questionable competence. You should develop a strategy for serving older adults and coping with the tough issues. Your strategy should include older adult counseling skills, elder law CLE, donated legal service, knowledge of the applicable Kentucky Rules of Professional Conduct, and risk management.
  • The most difficult professional responsibility problems commence when representing an older adult with diminished mental capacity. For guidance on dealing with this situation see SCR 3.130 (1.14), Client Under a Disability, and the KBA Bench & Bar article “Golden Oldies” available in the Resources section, Bench & Bar Articles, on Lawyers Mutual’s web site.
  • The key risk management tools are:
      1. Make absolutely clear who your client is. Older adult clients often are accompanied by relatives who are not your client and must understand that. On occasion relatives or other nonclients pay for your legal services for an older adult. Be sure to comply with SCR 3.130 (Rule 1.8 (f)) on accepting compensation from one other than a client.
      2. Always use letters of engagement, nonengagement, and disengagement when an older adult is involved.
      3. A careful conflict of interest analysis must be conducted at the outset of the representation with emphasis on intergenerational conflicts that typically center on preservation of assets; spousal conflicts in estate planning and divorce matters; and fiduciary conflicts when a lawyer represents a fiduciary or is a fiduciary.
      4. Be alert for the development of a conflict of interest during the representation. Older adult representation carries a greater risk of conflicts developing well into the matter than do most other representations.
      5. Do not have an older adult client execute a legal instrument immediately after you have advised him that he may want to consult independent counsel concerning a conflict waiver. Give the client at least a day to think it over. Schedule a follow-up appointment for execution. Document the file showing the deliberate way the client was advised and that he had adequate time outside your influence to consider seeking independent counsel. A later claim of undue influence when things do not go to the client’s satisfaction should fail using this procedure.
      6. Client communication must be emphasized throughout the representation.
      7. Ducumenting the file is essential and most important when getting the older adult's consent to a settlement or when the older adult is making an important financial decision.
      8. Withdrawal from representing an impaired older adult is discouraged. When withdrawal cannot be avoided, it must be done carefully and in strict compliance with the requirement to protect the client’s interest. See SCR 3.130 (1.16) Declining or Terminating Representation.

Sources: Conflict Waiver and Acknowledgement Stop Former Client’s Malpractice Claim, ABA/BNA Lawyers’ Manual On Professional Conduct, Current Reports, Vol. 22, No.23, page 550 (12/15/06) citing Bishop v. Maurer, N.Y. Sup. Ct. App. Div. 1st Dep’t, No.7693, 10/24/06); Elderly Man’s Malpractice Suit Over Estate Advice Dismissed, Anthony Lin, New York Law Journal (10/26/06); extracts from Golden Oldies, Kentucky Bench & Bar, 61, No. 4, Fall 1997.

 


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