New Hampshire Bar Ass'n Ethics Comm., Op. 2011-12/7, 4/11/12
Key Guidance: Lawyers need to put on their thinking cap before accepting or drafting a client's gift to themselves, their families, or their favorite charities.
Potential Value: Provides a road map for lawyers to stay within the ethical lines when a grateful client wants to make a gift that will benefit the lawyer directly or indirectly.
Ethics rules limit the situations in which lawyers may properly accept or facilitate a client's gift--however benign--to themselves, their families, or their favorite charities, the New Hampshire bar's ethics committee made clear April 11 (New Hampshire Bar Ass'n Ethics Comm., Op. 2011-12/7, 4/11/12).
The opinion analyzes whether a lawyer may accept from a client, or draft documents for effectuating, several different gifts that will benefit the lawyer, her relatives, and a charity with which she is associated. Each proposed gift must be evaluated on its own facts under conflicts rules and other law relating to lawyer-client gifts, the committee advised.
The opinion describes a situation that will be familiar to many general practitioners in smaller communities, where social and family connections among lawyers and clients are not uncommon.
According to the committee, the inquiring lawyer has represented a client in business and estate planning matters for 20 years. The client is a long-standing board member of the local hospital, and the lawyer is chairing a major campaign for the hospital's endowment committee. In addition, the lawyer's daughter is married to the client's brother.
The client, having had a health scare, is now focusing on estate planning matters. Out of an estate valued at approximately $3 million, he wishes to make several lifetime and testamentary gifts that will potentially benefit the lawyer and her family: one to the lawyer herself, one to the lawyer's son-in-law, one to the lawyer's daughter, and one to the local hospital.
A lawyer shall not solicit any substantial gift from a client, including a testamentary gift, or prepare on behalf of a client an instrument giving the lawyer or a person related to the lawyer any substantial gift unless the lawyer or other recipient of the gift is related to the client. For purposes of this paragraph, related persons include a spouse, child, grandchild, parent, grandparent or other relative or individual with whom the lawyer or the client maintains a close, familial relationship.
In appreciation for the lawyer's services over the years, the client wants to give her theater tickets and $200 for the lawyer and her husband to go out for dinner.
The committee said that this unsolicited gift is not restricted by a reading of Rule 1.8(c) itself, but that because a lawyer holds a position of trust and confidence when representing a client, the gift must be evaluated based upon standards governing fiduciary relationships. Substantial unsolicited gifts will be closely scrutinized, the opinion warns.
The panel found guidance in Comment  to Model Rule 1.8, which indicates that a substantial gift may be voidable under the doctrine of undue influence even though Rule 1.8(c) does not forbid the acceptance of an unsolicited gift.
The opinion also points out that according to Section 127(2) of the Restatement (Third) of the Law Governing Lawyers (2000), lawyers are forbidden to accept a gift from a client, including a testamentary gift, unless (a) the lawyer is a relative or “other natural object of the client's generosity”; (b) the value and benefit of the gift are “insubstantial in amount”; or (c) the client has first received independent advice or been encouraged to seek such advice. The client's relative wealth bears on whether a gift is “substantial,” according to Comment f.
In addition, the committee consulted the Commentaries on the Model Rules of Professional Conduct (4th ed. 2006), by the American College of Trust and Estate Counsel. ACTEC's commentaries to Rule 1.8 suggest that the substantiality of a gift is determined by its size relative to both the client's estate and the recipient's estate.
The panel concluded that because this inquiry involves an unsolicited onetime gift of theater tickets and a dinner by a fairly wealthy client to his longtime lawyer and friend, the gift would probably be viewed as insubstantial and therefore not prohibited by Rule 1.8(c) or other law pertaining to lawyer-client gifts.
If feasible, it would be best practice for a lawyer receiving an unsolicited gift to obtain court approval or get consent from all other beneficiaries or devisees, the committee said.
In the revocable trust that the lawyer is drafting for the client, the client wants to include two gifts to the lawyer's relatives. He wishes to leave a recently purchased sports car to the lawyer's son-in-law (the client's brother), and a valuable painting to the lawyer's daughter (the client's sister-in-law).
Regarding the gift of the sports car to the lawyer's son-in-law, the committee advised that even though the proposed gift is to a relative of the lawyer, she is not precluded from drafting the gift under Rule 1.8(c) because the recipient is the client's brother.
“[N]othing in the Rule prohibits a lawyer from preparing a document that gives a client's assets to a person related to both the client and the lawyer,” the opinion states. Unless the client and his brother are estranged, it is acceptable for the lawyer to draft that gift, the committee concluded.
Regarding the gift of the painting to the lawyer's daughter, the committee found that the lawyer may draft the gift only if the client's relation to the lawyer's daughter--the client's sister-in-law--meets the test of Rule 1.8(c).
Whether those two are “related,” the panel explained, depends on a factual analysis of the familial relationship between the client and his sister-in-law to determine whether the relationship is “close” and similar to other familial relationships listed in Rule 1.8(c), such as spouse, child, grandchild, or grandparent.
It is possible that the client and his brother's wife have such a relationship, but the lawyer should not summarily assume that they do, the panel said.
Regarding the proposed gift to the hospital, the committee found that so long as the lawyer did not solicit the gift, Rule 1.8(c) does not prohibit her from drafting the client's trust to include it, because the gift does not directly benefit the lawyer or her family. However, Rule 1.7 on concurrent conflicts requires the lawyer to obtain the client's informed consent before drafting the gift, the committee advised.
In light of the lawyer's role as chair of the hospital's endowment committee, the opinion states, she has both a fiduciary duty to the committee and a personal interest in promoting its success. These connections to the hospital, as the intended donee, clearly present “a personal interest of the lawyer” and “responsibilities … to a third party” that would constitute a concurrent conflict of interest under Rule 1.7(a)(2), the committee explained.
The committee cautioned that the lawyer should be mindful of New Hampshire's “harsh reality” test for evaluating conflicts of interest, under which some conflicts of interest cannot be waived.
It also pointed to Maryland Ethics Op. 2003-08, 19 Law. Man. Prof. Conduct 564 (2003), which concluded that a lawyer on a church legacy committee may not prepare wills for church members who wish to bequeath property to the church. That opinion took the position that the lawyer's responsibility for advancing the church's financial interests would conflict with his independent professional judgment in representing the parishioners, and that this conflict could not be cured by consultation and client consent.
The committee here concluded, however, that a lawyer's membership on a hospital endowment committee does not invariably prohibit the lawyer from seeking client consent to the lawyer's drafting of the client's gift to the hospital.
The lawyer may draft the client's gift to the hospital, the committee advised, but only after fully discussing the potential conflict with the client and obtaining the client's informed consent, confirmed in writing, as required by Rule 1.7(b)(4).
Copyright 2012, the American Bar Association and The Bureau of National Affairs, Inc. All Rights Reserved.
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