Finding Fiduciaries: The Attorney as Fiduciary, Part 3

/ December 7, 2018

Occasionally a client will ask her attorney to serve as trustee (or trust protector). Any attorney considering acceptance of a fiduciary appointment must be mindful of several practical and ethical considerations. First, the attorney should determine whether her professional liability insurance covers acting as a fiduciary. The attorney should then consider the following ethical obligations pursuant to the Minnesota Rules of Professional Conduct.

Rule 1.1 requires a lawyer to provide competent representation. A lawyer should not accept a fiduciary appointment unless she can perform her fiduciary duties (e.g. make investment decisions) competently.

Rule 1.2 requires an attorney to consult with the client about how the objectives of the representation are to be carried out. If an attorney is going to serve as fiduciary and simultaneously provide legal services she should explain the costs of, and alternatives to, such dual service.

Rule 1.4 requires a lawyer to explain a matter to the extent reasonably necessary to permit the client to make an informed decision regarding the representation. In the context of the attorney serving as fiduciary this rule requires the lawyer to reasonably explain: (1) the implications of the lawyer serving as fiduciary; (2) alternative choices of fiduciary available to the client; and (3) the attorney’s potential pecuniary interest in the arrangement. Because of the potential for conflict with the attorney’s self-interest, the client should be advised to consult with independent counsel.

Rule 1.5 prohibits a lawyer from charging an unreasonable fee. When a lawyer serves as fiduciary the question arises as to the fee that may be properly charged for fiduciary services as opposed to legal services. While a lawyer may simultaneously serve as fiduciary and attorney for the fiduciary, and be compensated in both capacities, the lawyer should not be compensated twice for the same work.

Rule 1.7 prohibits a lawyer from representing a client absent informed consent, confirmed in writing, if the representation will be materially limited by the lawyer’s personal interests. A client is permitted to appoint her attorney as fiduciary so long as the client is properly informed, the appointment does not violate the conflict of interest rules, and the appointment is not the product of undue influence or improper solicitation by the lawyer.

While attorneys can serve as a fiduciary- it is extremely important for an attorney to weigh the risks and potential for unforeseen conflicts.

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