Ethical Challenges in Estate Administration

By: Monica Goel, Esq.Tredway, Lumsdaine & Doyle

DOC ID# 92448

Ethical Issues in Probate Practice

Sources Determining who your client is Representing an Estate

Potential Conflicts of Interest Actual Conflicts of Interest The Unknown Conflict

Avoiding Conflicts of Interest Involving Clients and Beneficiaries

Estate Planning Attorney Acting as Attorney for Trustee

Estate Planning Attorney Acting as Trustee and Probate Counsel

Attorneys acting as Trustees, Executor or Administrator

Problems Where Attorney May be a Percipient Witness Where counsel for executor/trustee was also the

drafting estate planning attorney

Competency Acting with Diligence Acting as a Supervising Attorney Obligation to Associate with Competent Counsel

Probate Fees dictated by statutory schedule Attorneys' fees and the personal representative's commissions are

paid out of the estate and are computed as a percentage of the gross value of the estate. The statutory fee schedule is as follows:

VALUE OF ESTATE PERCENT PAID AS FEES/COMMISSIONS

First $ 100,000.00 4%Next $ 100,000.00 3%Next $ 800,000.00 2%Next $ 9,000,000.00 1%

Statutory v. Extraordinary Fees

These are the fees that may be charged for ordinary services to the estate, which generally includes all normal services rendered in administering the estate.

The Probate Code also permits the Court to authorize extraordinary attorneys' fees for work performed by an attorney beyond the above-mentioned services.

Extraordinary fees will usually include, but are not limited to, any attorney services in regard to the sale of real property, or any other large asset, leases, rentals, evictions, litigation, negotiations to avoid litigation, or preparation of personal and fiduciary income tax returns. These fees are calculated by the attorney keeping his or her time, and at the end of the probate administration, upon the preparation of the final/waiver of accounting, the time spent in extraordinary services is added and multiplied by the attorney's billable rate.

ETHICS STUFF FOR BUSY LAWYERS

SIX BASIC RULES FOR STAY’N OUT OF TROUBLE!

RULE 1

IF YOU DON’T KNOW THE LAW DON’T TAKE THE CASE

Avoid taking cases outside of your practice area absent supervision from competent colleague and stay current on changes in the law affecting your practice areas (CRPC 3-110) Medi-Cal Planning Elder Law Tax Law Domestic Partnerships and Sex Sax Marriage

RULE 2

AVOID CONFLICTS OF INTEREST Avoid acquiring interests adverse to your

client (Rule 3-300)Avoid Sexual Relationships with your ClientAvoid Conflicts of Interest ((Rule 3-310)

Avoid the Third Party Payor Trap – Remember who is your client!Estate PlanningTrust Administration

Avoid representation clients in a matter in which opposing counsel is your spouse, parent, child, etc.

RULE 3

KEEP CLIENT CONFIDENCES ALWAYS? What about when your client as

executor/trustee is the bad actor?Actions taken by your client would

warrant removal or surcharge?

RULE 4

AVOID REPRESENTATION OF CLIENTS WITHOUT WRITTEN FEE AGREEMENTS/ AVOID UNCONSCIOUABLE FEES (B&P CODE § 6149 and Rule 4-200 )

RULE 5

AVOID THE PITFALLS OF LIMITED SCOPE REPRESENTATION

RULE 6

DON’T AVOID OR IGNORE YOUR CLIENT: MAKE THAT CALL: COMMUNICATE, COMMUNICATE, COMMUNICATE (Rules 3-500 and 3-510)

Common Ethical Challenges in the Trust Practice Can you avoid allocation on death of first spouse when

trust requires mandatory sub-trust split? Answer: Yes. Probate Code Section 15404 allows for

modification or termination by settlor and all beneficiaries.

Pitfalls Split families Contingent Beneficiaries Minor contingent beneficiaries – can they give consent or do

they need guardian ad litem to give such consent?

Common Ethical Mistakes that Can Lead to Malpractice Actions that will trigger property tax

reassessment Client wants to share his inheritance with spouse.

Transfer to client alone first and then do a second transfer to include spouse to avoid reassessment

Transfer to grandchild while parent still living will trigger reassessment

Siblings buying each other out their distributive share after distribution from trust

Representing Co-Executors/Co-TrusteesDo you have conflict language in your

Retainer Agreement?What do you do when conflict arises?

Questions?