Law Tips – Ethical Quandaries: Multi-Generational Clients

ICLEF Law Tip #49

Ethical Quandaries: Multi-Generational Clients

What if the child informs the lawyer that the child is getting divorced but does not want the lawyer to tell the parent for fear that the parent will change the provisions of the parent’s documents?  Unexpected ethical issues are lurking in your estate planning practice.  Sean Obermeyer of Taft, Stettinius  Hollister LLP, Indianapolis, brings up important considerations in his recent CLE presentation on “Ethical Quandaries in Estate Planning.”

Mr. Obermeyer’s ethics pointers cover both the common and less common situations that may develop in estate planning.  For instance, he points to possibilities of conflicts in the everyday case involving a lawyer representing two or more related parties, such as a husband and wife or parent and child, at the same time with respect to estate planning matters.  As well as he alerts practitioners to potential issues in the more infrequent situation of representing multiple business owners (or of a business that has multiple owners) in connection with succession planning.

One potential ethical quandary Sean illustrates that could develop down-the-road, so to speak, occurs in the case of  “Multi-generational clients.”  His advice follows:

Multi-Generational Clients

Although less common than representing spouses, it is not uncommon for the same lawyer to represent multiple generations of the same family with respect to estate planning matters.  In general, the same concerns regarding conflicts of interest are present, but it is often more likely that the conflicts will be expressed at some point in the future in the multi-generational context.

For example, a wealthy client may be the primary shareholder of a corporation that has been held in the family for multiple generations.  The client is getting older and desires to begin transitioning control of the business to a child, who is also a shareholder of the corporation (although currently a minority shareholder).  Client and child have a good relationship and generally get along well, but they do occasionally disagree regarding business matters.  Assume the lawyer begins representing the child in addition to parent.  It is not difficult to imagine a number of conflicts that may arise.

What if the lawyer advises the parent about the possible tax savings that may be realized if the parent makes some generation-skipping gifts to or for the benefit of grandchildren, even though this will diminish the amount of property that ultimately passes to the child?  Or, what if the lawyer advises the parent to include certain powers of appointment in favor of the child in the parent’s documents to add flexibility or potentially to reduce death taxes, but the parent does not want the lawyer to advise the child of the existence of the powers of appointment out of fear the child may hastily exercise them?  Or, what if the child informs the lawyer that the child is getting divorced but does not want the lawyer to tell the parent for fear that the parent will change the provisions of the parent’s documents?

You should operate as if every multi-generational representation involves a conflict of interest and to obtain the parties’ informed consent to the conflict at the start of the engagement.  In addition, you should make it clear to each represented family member (preferably in writing in the engagement letter)  that you cannot and will not keep secrets as between them.  As with any joint representation, if a dispute about estate planning or related property matters arises between the family members and they are unable to resolve their dispute, it may become necessary for the lawyer to withdraw from representing all of the family members and for each of them to obtain separate counsel.

Sean reminds practitioners that Most estate planning lawyers consider themselves to be “ethical” people. Nevertheless, the ethical rules applicable to lawyers, and, in particular, the Indiana Rules of Professional Conduct,  can sometimes be difficult to apply in the context of relatively common estate planning situations. A lawyer should not assume that, simply because he or she is an “ethical”  person, his or her conduct will comport with the Rules in every given situation. Nor should a lawyer assume that the relatively non-adversarial nature of an estate planning practice makes detailed knowledge of the Rules unnecessary. If the preservation of your reputation and your law license is important to you, you owe it to yourself to become, and remain, familiar with the Rules.

We are appreciative of Sean Obermeyer’s contributions to Law Tips.  His ethical pointers continue here next week.  So, visit us again.

Ethics is a key topic for ICLEF throughout the year.  However, December is a prime time to attain your ethics credits.  To view the Online / On Demand Seminar or attend one of the Video Replays of “Estate Planning Beyond the Basics”, Click Here. This seminar includes the fully informative program from Sean Obermeyer that we are excerpting in these blogs.  Also, Mr. Obermeyer’s as well as several other excellent Ethics presentations are offered at our ever-popular CLE, “All Day Ethics,” on December 31 – Click Here for more Information or to Register.

About our Law Tips faculty member:
Sean Obermeyer is an associate in Taft, Stettinius & Hollister, LLP, Indianapolis.  He practices in the Private Client Practice Group, concentrating in the areas of estate planning, probate, guardianships, and trust administration. He also assists clients with estate, gift and generation-skipping transfer tax matters, formation and operation of family business entities and private foundations, and planning for children with special needs. Mr. Obermeyer earned his bachelor’s degree from Hanover College, and his law degree from Indiana University Robert H. McKinney School of Law.  Prior to law school, Mr. Obermeyer was an assistant vice president and branch manager for PNC Bank.

About our Law Tips blogger:
Nancy Hurley, Law Tips blogger, has long-standing connections with Indiana lawyers. She was formerly a member of the ISBA and IBF staffs for over 30 years. Nancy’s latest lifestyle venture is with ICLEF. We are utilizing her exceptional writing and interviewing skills while exploring how her Indiana-lawyer background fits with ICLEF’s needs. When she isn’t ferreting out new topics for Law Tips, her work can be found in our Speaker Spotlight blogs, postings on the ICLEF Facebook page, Twittering and other places her legal experience lends itself.

Thank you for reading Law Tips. You may subscribe to this weekly blog through the RSS link at the top of this page. You are encouraged to comment below or contact Nancy. She enjoys hearing from readers and welcomes your input as she continues to sift through the treasure trove of knowledge of our CLE faculty to share with you on Law Tips.

ICLEF – Indiana Continuing Legal Education Forum, Indianapolis, IN

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