How to Comply with the Rules of Professional Conduct While Probating an Estate

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1 How to Comply with Rules of Professional Conduct While Probating an Estate An attorney who acts as personal representative (formerly executor or administrator 1 ) for an estate, or who represents personal representative, is subject to Massachusetts Rules of Professional Conduct. Here are six ways January to 2009 remain in compliance 2008: with The Year rules in of Ethics professional and Bar conduct Discipline when you are probating an estate: by Constance V. Vecchione, Bar Counsel This column takes second look at significant developments in ethics and bar discipline in 1. Open a separate, interest-bearing bank account for estate. Massachusetts over last twelve months. As soon as you are in possession of any estate funds, open a separate, interestbearing bank account for estate. Mass. R. Prof. C (e)(5) provides that trust Disciplinary Decisions The full bench of Supreme Judicial Court issued seven disciplinary decisions in Approximately funds, or 170 additional than those decisions that are nominal or orders in were amount entered or to be by held eir for a short single period justices of or Board of Bar Overseers. Several decisions by Court and Board were of significant time, interest must be to held bar, in an eir individual factually account or with legally. interest payable as directed by Curry and Crossen client or third person on whose behalf trust property is held. You can apply Of full-bench for a tax identification decisions, number two that in perhaps name of generated estate on-line most or by interest filing were Form companion cases of Matter of Kevin P. Curry, 450 Mass. 503 (2008) and Matter of Gary C. Crossen, SS Mass. 533 (2008). Curry held that disbarment was appropriate sanction for an attorney who, without any factual basis, persuaded dissatisfied litigants that a trial court Estates usually must be kept open for at least a year. See G.L., c. 197, sec. 9, judge had fixed ir case and developed and participated in an elaborate subterfuge to obtain statements barring creditor by claims judge's against law clerk estate intended if not filed to be within used to one discredit year of decedent s that judge in ongoing high-stakes civil case. In Crossen, Court held that disbarment was also warranted for anor death. attorney s A year, however, participation is not in a short same period scheme of time by actions and is too including long to maintain taping of a sham interview of judge s law clerk; attempting to threaten law clerk into making funds in an IOLTA account. If you do keep estate funds in an IOLTA account, you statements to discredit judge; and falsely denying involvement in, or awareness of, surveillance may of be liable law to clerk estate that for attorney amount had of interest participated that would in arranging. have been earned had These cases are particularly noteworthy for ir rejection of attorneys arguments that deception of law clerk was a permissible tactic akin to those used by government investigators 1 In new Massachusetts Uniform Probate Code, adopted effective April 1, 2012, fiduciaries of estates or discrimination testers. The SJC in both cases also reaffirmed that expert are called personal representatives. testimony is not required in bar disciplinary proceedings to establish a rule violation or a standard of care. 1

2 funds been in an interest-bearing account. Brown v. Legal Foundation of Washington, 538 U.S. 216, 123 S. Ct (2003) (lawyer who mistakenly uses an IOLTA account as a depository for money that could earn interest for client will be liable to client for any lost interest ). In addition, wher you hold estate funds in a bank or at anor type of financial institution, you must comply with record-keeping provisions of Mass. R. Prof. C. 1.15(f), including, where applicable, maintaining a compliant check register and reconciling account as required not less than every 60 days. 2. Do not pay yourself fees before creating an itemized bill. If you are holding estate funds as a personal representative, you are a fiduciary and should treat estate funds as you would treat any trust funds. In addition, before you pay yourself any fees, it is always better practice to create an itemized bill of your services. If, however, you are not personal representative but represent that fiduciary and have signatory power for estate account, you must deliver an itemized bill and or required information to personal representative when you withdraw any attorney s fees from account. See Mass. R. Prof. C. 1.15(d)(2) ( on or before date on which a withdrawal from a trust account is made for purpose of paying fees due to a lawyer, lawyer shall deliver to client in writing (i) an itemized bill or or accounting showing services rendered, (ii) written notice of amount and date of withdrawal, and (iii) a statement of balance of client s funds in trust account after withdrawal. ) 2

3 If you are serving both as personal representative and attorney for personal representative, bar counsel s position, again, is that you are required to create a bill for estate file before withdrawing any fees. Beneficiaries are entitled to review those bills if y contest your fees at time of an accounting. Maintaining contemporaneous time records and itemized bills is best way to assure that you neir under-bill nor overbill estate. 3. For billing purposes, distinguish legal work from non-legal work. Wher you are serving as a fiduciary or as attorney for a fiduciary, you cannot charge legal rates for purely administrative work or for or non-legal services you provide to estate. See, e.g., Corcoran v. Thomas, 6 Mass. App. Ct. 190, 191 (1978) (amount usually paid ors for similar work is factor in determining propriety of fee); Matter of Kliger, 18 Mass. Att y Disc. R. 350 (2002), and Matter of Chignola, 25 Mass. Att y Disc. R. 112 (2009) (lawyers received public reprimands for, inter alia, charging legal rates for non-legal services performed in fiduciary capacity.) Your fees for non-legal work should reflect market rate for type of service you are providing. When you are acting both as fiduciary and as attorney for yourself as fiduciary, your fees may be scrutinized very closely. Grimes v. Perkins School for Blind, 22 Mass. App. Ct. 439 (1986). Charging $250 per hour to write checks or meet a plumbing contractor at home of deceased may be deemed clearly excessive, and refore in violation of Mass. R. Prof. C. 1.5(a) and (b). Take care, also, not to charge for same services twice; i.e., both as fiduciary and as attorney. 3

4 4. Act diligently. Mass. R. Prof. C. 1.3 requires diligent representation. Have will allowed, obtain appointment of fiduciary (wher yourself or anor), and get inventory filed, assets marshaled, estate bills paid, accounts and tax returns filed, distributions made to heirs and estate closed, all in a timely fashion. In absence of extenuating circumstances such as real estate that is difficult to sell, estates can usually be completed shortly after expiration of one-year statute of limitations for claims against estate. Neglect of an estate is a frequent cause of discipline. See, e.g., Matter of Nealon, 26 Mass. Att y Disc. R. 427 (2010) (six months suspension with four months stayed on multiple conditions for, among or issues, failing to assist executrix to identify heirs at law and seek allowance of will); Matter of Burke, 23 Mass. Att y Disc. R. 49 (2007) (attorney disciplined, inter alia, for failing to timely file probate accounts and inventories.) You may also be held civilly liable if your delay in filing tax returns and paying taxes results in an assessment against estate for penalties and interest, or if unnecessary premiums on surety bonds are incurred as a result of your delays in closing estate. If you have liability insurance, make sure that you are covered for any work that you do as a fiduciary. 5. Act competently. Mass. R. Prof. C. 1.1 requires competent representation. Even relatively simple estates may present some complicated issues: e.g., selecting a valuation date for assets, determining when to make distributions so as to minimize tax liability of 4

5 beneficiaries, or selling real estate with title problems. Attorneys have been disciplined for inappropriate investments of estate funds. See, e.g., Matter of Nelligan, 27 Mass. Att y Disc. R. ; No. BD (July 7, 2011) (lawyer suspended for one year for investing over $4,400,000 of fiduciary funds for wards and trust beneficiaries in unsafe, unsuitable investments in a hedge fund and failing adequately to investigate or monitor investments, resulting in loss of 63% to 97% of capital investments.) If you are not experienced with those issues, consult with or engage an attorney who is. The new Massachusetts Uniform Probate Code makes substantial changes in procedures for administering an estate as well as changes in substantive law of intestate succession. If you practice in this area, you should study new law and attend continuing legal education presentations to thoroughly acquaint yourself with changes. 6. Be aware of potential conflicts of interest An attorney to a personal representative of an estate represents fiduciary, not beneficiaries. Spinner v. Nutt, 417 Mass. 549, 553 (1994). You should make sure that beneficiaries understand that you are not ir lawyer (see Mass. R. Prof. C. 4.3, prohibiting a lawyer for a party from advising an unrepresented party in same matter), and that if y disagree with handling of estate, y should seek separate representation. Conflicts may arise where an attorney engages in a business transaction with estate (e.g., acting as a broker for real estate or purchasing an asset of estate), 5

6 favors a beneficiary with whom he or she has had prior dealings, or accepts any kind of payment or favor from a person engaged to provide a service to estate. Attorneys have been disciplined for engaging in such conflicts. See, e.g., Matter of Lansky, 22 Mass. Att y Disc. R. 443 (2006) (six-month suspension of attorney who neglected estate and engaged in a conflict of interest by favoring one beneficiary over ors in a business transaction with estate); Matter of Lake, 13 Mass. Att y Disc. R. 397 (1997) (lawyer received admonition for acting as counsel to coexecutors and broker for sale of estate s property without consent of clients). These are just a few of potential conflicts. See Mass. R. Prof. C. 1.7 and 1.8. Resources Attorneys who eir act as or represent fiduciaries may find guidance as to ir ethical obligations in manual entitled Ethical Lawyering in Massachusetts (MCLE, Inc. 2d ed & Supp. 2002, 2007), particularly Chapter 16. The American College of Trust and Estate Counsel provides extensive annotated commentary to ABA Model Rules as it pertains to trust and estate attorneys in resources section of its Web site ( Bar counsel offers a one-hour class on trust account record-keeping rules on first Thursday of each month, at 8:00 a.m., from October through June at office of Boston Bar Association at 16 Beacon St., in Boston, The class is free, but call Office of Bar Counsel to register. 6