Conflicts, Confidentiality, and Other Ethical Considerations in Estate Planning focuses on the rules of professional conduct that govern lawyers whose practices involve tax and estate planning. These so-called ethical rules represent serious efforts at self-regulation by the legal profession in each state. The rules are intended to protect the public, the profession, and the legal system as a whole. The ethical rules are related to, but distinct from, the standard of performance by which a lawyer's civil liability (malpractice) is determined. Notably, the violation of an ethical rule could give rise to a disciplinary action against the lawyer, which could result in the lawyer being exonerated, censured, suspended from practice or disbarred. The same conduct could have serious civil consequences, including the invalidation of documents, recovery of fees paid to the lawyer, and imposition of liability on the lawyer in a malpractice action.

Written by John R. Price, Esq., Perkins Coie LLP, this Portfolio deals with the ethical obligations of lawyers in private practice, most notably as set out by the American Bar Association in the Model Rules of Professional Conduct. Although the focus is on the ethical rules, malpractice issues are mentioned at appropriate places throughout the portfolio because of the interrelationship between ethical and malpractice standards. Treasury Circular 230, which governs the conduct of private attorneys, as well as certified public accountants and other persons enrolled to practice before the IRS, also is discussed in detail. Ethical guidelines adopted by other professional groups are mentioned as appropriate. In addition, some attention is given to the special rules that apply to lawyers in government service, including the IRS Rules of Conduct.

Selected rules from the ABA Model Rules of Professional Conduct are reprinted in this Portfolio with the permission of the American Bar Association. In addition, former Rule 2.2 is reprinted with permission from the American Bar Association, from the ABA Model Rules of Professional Conduct. Rule 2.2 was deleted when the Model Rules of Professional Conduct were amended.

Conflicts, Confidentiality, and Other Ethical Considerations in Estate Planning allows you to benefit from:

• Hundreds of hours of original research on specific tax planning topics from leading practitioners in this area
• Invaluable practice documents including tables, charts and lists
• Plain-English guidance from world-class experts
• Real-world and in-depth analysis that lets you explore various options
• Time-saving access to relevant sections of tax laws, regulations, court cases, IRS documents and more
• Alternative approaches to both common and unique tax scenarios

This Portfolio is part of the Estates, Gifts and Trusts Portfolios Library, a comprehensive series containing more than 80 Portfolios, which covers critical transactions in estate, gifts and trusts planning. This highly-regarded resource library offers commentary on a wide range of estate planning topics including: Generation Skipping Tax, Family Limited Partnerships, Charitable Remainder Trusts, Estate Planning for Closely-Held Businesses, Exempt Organizations and Private Foundations, Life Insurance, Valuation, and more.

Detailed Analysis

I. Introduction

A. Overview

B. Sources of Rules

1. Model Rules of Professional Conduct (Model Rules)

a. Meaning and Construction of Model Rules

b. Ethics Opinions

c. Ethics 2000

2. Internal Revenue Code Requirements and Treasury Circular 230

3. Model Rules and Circular 230 Not Always Consistent

4. Model Code of Professional Responsibility (Model Code)

5. Model Rules and Areas of Legal Specialization

6. Restatement (Third), Law Governing Lawyers

II. Duties of Lawyers During the Estate Planning Process

A. Roles of a Private Lawyer

B. To Whom Does Lawyer Owe Duties? - Who Is the Client in an Estate Planning Representation?

C. Stages of the Estate Planning Process

1. Establishing the Client-Lawyer Relationship - Client Intake

2. Counseling

3. Performing Work Within the Scope of Representation

4. When and How Does the Lawyer-Client Relationship Terminate?

5. Continuing Duties to Former and Deceased Clients - Conflicts and Confidentiality

D. Tax Return Advice

III. Model Rules of Professional Conduct

Introductory Material

A. Model Rule 1.1 - Competence

1. The Rule

2. Relationship to Malpractice Liability

3. Addressing Competency Issues

a. Self Improvement

b. Obtaining Expert Help - Association, Consultation, or Referral

4. Drafting Errors

a. Ambiguous Documents

b. Typographical Error

5. Other Evidence of Incompetence

B. Model Rule 1.2 - Scope of Representation and Allocation of Authority Between Client and Lawyer

1. The Rule

2. Duty to Inquire

3. Acceptance or Rejection of Representation

a. Engagement Letter

b. Declination Letter

4. Counseling or Assisting in Fraudulent Conduct

5. Advising on Errors and Omissions in Tax Returns

6. Obligation to Clarify Limits on Lawyer Conduct

C. Model Rule 1.3 - Diligence

1. The Rule

2. Prompt Action

a. Diligence in Estate Planning

b. Diligence in Tax Matters

3. Comparison with Diligence Required Under Circular 230

D. Model Rule 1.4 - Communications

1. The Rule

2. Overview

3. Adequately Informing, Counseling and Educating a Client

E. Model Rule 1.5 - Fees

1. The Rule

2. Basis of the Fee

a. Hourly Rates, Fixed Rates, Percentage Schedules

b. Premium and Discounted Rates

c. Change in Basis of Fee

3. Tax Deductibility

4. Charges for Nonlegal Services and Disbursements

5. Contingent Fees

6. Denial of Fees

7. Circular 230

8. Expert Witness Fees

9. Fee Splitting with Nonlawyers

10. No Rebates, Kickbacks or Other Secret Benefits

F. Model Rule 1.6 - Confidentiality of Information

1. The Rule

2. Confidentiality and the Evidentiary Privilege

3. Duration of Duty

4. Representation of Fiduciaries

5. Multiple Simultaneous (Joint or Common) Representations

6. Implied Authorization to Disclose

7. Planning for the Lawyer's Death or Disability - Implied and Express Authorization to Disclose

8. Evidentiary Privilege and Third-Party Communications

9. E-Mail Communications

G. Model Rule 1.7 - Conflict of Interest: Current Clients

1. The Rule

2. Introduction

3. Do the Interests of Two or More Clients Conflict?

4. Estate Planning for Multiple Members of a Family

a. Husband and Wife

b. Other Members of a Family

5. Issues Associated With Fiduciaries

a. Designating Fiduciaries and Counsel for the Estate

b. Representing Fiduciaries

c. Express and Implied Waiver of Conflicts by Fiduciaries

6. Representing Partners, Partnerships and Similar Entities

7. Transactions with Another Client

8. Miscellaneous Potential Conflicts

a. Membership on Board of Charity

b. Lectures

9. Waivers; Prospective Conflicts

10. Circular 230

H. Model Rule 1.8 - Conflict of Interest: Current Clients: Specific Rules

1. The Rule

2. Introduction

3. Business Transactions

4. Gifts - Inter Vivos and Testamentary, and Survivorship Arrangements

5. Exoneration from Liability

6. Nonclient Pays Lawyer's Fee or Procures Estate Planning Documents

I. Model Rule 1.9 - Duties to Former Clients

1. The Rule

2. Introduction

3. Establishing a “Former Client” Relationship

4. Application in Estate Planning Context

J. Model Rule 1.10 - Imputed Disqualification: General Rule

1. The Rule

2. Application in Estate Planning Context

K. Model Rule 1.14 - Client with Diminished Capacity

1. The Rule

2. Introduction

3. Degrees of Competency

4. Client's Instructions

5. Guidance from ABA Ethical Opinions

6. Anticipating and Planning for Incapacity - Authorizing Disclosure of Confidences

7. Involvement of Family Members

8. Duties of Lawyer for Guardian or Conservator - Protecting the Ward, Disclosures, and Malpractice

L. Model Rule 1.16 - Declining or Terminating Representation

1. The Rule

2. Mandatory Withdrawal

3. Voluntary Withdrawal

M. Model Rule 1.18-Duties to Prospective Client

1. The Rule

2. Who Is a Prospective Client?

3. Duties to Prospective Clients

N. Model Rule 2.1 - Advisor

1. The Rule

2. Overview

3. Application in the Estate Planning Context

O. Former Model Rule 2.2 - Intermediary

1. The Rule

2. Introduction

3. Preconditions to Acting as Intermediary

4. Relationship to Model Rule 1.7 (Conflict of Interest: Current Clients)

5. Impartiality

6. Application in the Estate, Tax, and Business Planning Context

7. Termination of Representation

8. Ethics 2000

P. Model Rule 3.3 - Candor Toward the Tribunal

1. The Rule

2. Application in the Estate Planning Context

3. Application in the Tax Return Preparation Context

4. Ex Parte Proceedings

Q. Model Rule 4.1 - Truthfulness in Statements to Others

1. The Rule

2. General Standards of Truthfulness

3. Application to Tax Matters

R. Model Rule 4.2 - Communication with Person Represented by Counsel

1. The Rule

2. General Application

3. Review of Another Lawyer's Work

S. Model Rule 4.3 - Dealing with Unrepresented Person

1. The Rule

2. General Application

T. Model Rule 5.3 - Responsibilities Regarding Nonlawyer Assistant

1. The Rule

2. General Application

U. Model Rule 5.5 - Unauthorized Practice of Law; Multijurisdictional Practice of Law

1. The Rule

2. Overview

3. Application in Estate Planning Context

4. Application to Paralegals and Other Assistants

IV. Model Rule 8.3 - Reporting Professional Misconduct

A. The Rule

B. General Application

V. Principal Internal Revenue Code Penalty Provisions

Introductory Material

A. Preparer Penalty - § 6701

B. Section 6651 - Addition to Tax for Failure to File Tax Return or to Pay Tax

C. Section 6662 - Imposition of Accuracy-Related Penalty

D. Section 6663 - Imposition of Fraud Penalty

VI. Duties of Lawyers Employed by the Government

A. In General

B. Confidentiality of Returns and Return Information

C. Conflict of Interest

D. Model Rule 1.11 - Special Conflicts of Interest for Former and Current Government Officers and Employees

Working Papers

Table of Worksheets

Worksheet 1 Table of Model Rules Involved in Various Stages of Inter Vivos Estate Planning Process

Worksheet 2 Sample Engagement Letter

Worksheet 3 Sample Declination Letter

Worksheet 4 Subpart B of Treasury Dept. Circular No. 230 (Rev. 6-2005)

Worksheet 5 Scenarios of Disciplinary Actions From the Office of Director of Practice

Bibliography

OFFICIAL

Statutes

Treasury Regulations

Cases

UNOFFICIAL

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