In our law practice, we represent family members. When we are retained, it often has something to do with our client’s relationship with his or her family. Families are organic and they have systemic issues that date back for many years. We work very hard to design solutions to problems that aim at strengthening relationships in families, but sometimes, that cannot be done. Understanding exactly who our client is at all times is critical for effective representation. And, not incidentally, our professional code of ethics requires that we remain loyal to our clients, that we keep their affairs confidential, and that we advocate zealously for them. There does not have to be a fight among family members for us to have a conflict of interest.
A simple example is representing a married couple preparing their estate plan. Most married couples have common goals with their estate plans, especially if they are the parents of all of their children. It seems simple enough to represent both spouses. This is called joint representation. We review with joint clients that we owe each of them a duty of loyalty and confidentiality, and that if a dispute arises between them, or if they divorce, we cannot continue to represent either of them. This works out most of the time. But what starts out simple can become complicated quickly when circumstances change.
Let’s say that the estate plan of a married couple includes some trusts. When one of the spouses dies, the plan might require that a trust for the benefit of the surviving spouse is created and funded. And the surviving spouse is the trustee of that trust. So far, no conflict of interest. But if the trust is irrevocable, the trustee spouse now has a duty of loyalty to him or herself as primary beneficiary, but also to the next beneficiaries of the trust, who are called remainder beneficiaries. Now we are representing the surviving spouse as trustee as well as a continuing estate planning client. And let’s say that one of the assets of the trust is an interest in a family business, which we have given advice about to our clients in the past. One of the children is running the family business. Uh oh. Things just got complicated. Our client, and the trust for his or her benefit, own the business, and a remainder beneficiary has an interest in how the business is run, and our client owes a fiduciary duty to that remainder beneficiary. See how this gets tricky real fast?
What if that child is a child of the first deceased spouse and the step child of the surviving spouse? And what if our client wants to remarry and change his or her estate plan? And what if the step child marries someone whom our client does not like? And what if there is an offer to purchase the company and our client does not want to sell but the step child’s new spouse really wants to sell the company? And what if our client becomes incapacitated and another one of her children has authority under her power of attorney?
These examples are very commonplace. They are examples of life playing out and not of bad children or a bad estate plan. No one is actually fighting at this point. But changed circumstances cause us to constantly analyze possible conflicts of interest, because we have to keep in mind what the interests and duties of our clients are at all times, so as to maintain our ethical relationship with them.