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ESTATE PLANNING FOR Spouses

by

Gerry W. Beyer

    Today you are meeting with a new estate planning client.  During the initial telephone contact, the client indicated a need for a simple plan, “nothing too complex” were the exact words.  As you enter your reception area to greet the client, you are surprised to see two people waiting — the client and the client’s spouse.  The client explains that the client wants you to prepare estate plans for both of them.  Your mind immediately becomes flooded with thoughts of the potential horrors of representing both husband and wife.  You remember stories from colleagues about their married clients who placed them in an awkward position when one spouse confided sensitive information that would be relevant to the estate plan with the admonition to “not tell my spouse.”  You also recall the professional ethics rules which prohibit representing clients with conflicting interests.  What do you do?  What is the best way to protect the interests and desires of the client and the client’s spouse and still avoid ethical questions as well as potential liability?

    This scenario is replayed many times each day in law offices across Texas and the United States.  The joint representation of a husband and wife in drafting wills and establishing a coordinated estate plan can have considerable benefits for all of the participants involved.  However, depending on the circumstances, joint representation may result in substantial disadvantages to either or both spouses and may subject the drafting attorney to liability.  The attorney’s duties of loyalty and confidentiality in joint representations, as well as how conflict situations should be handled, whether the conflict is apparent initially or arises during the representation, can be gleaned from the Texas Disciplinary Rules of Professional Conduct.

    This article provides insights and suggestions for estate planning attorneys regarding the most effective ways to represent a husband and wife in achieving their testamentary desires by examining the potential dangers of joint representation, the different models of representing a husband and wife, and making recommendations regarding the best way to protect the client(s), their desires, and the drafting attorney.

I.   Potential Dangers of Joint Representation

   A.   Conflicts of Interest

           A conflict of interest between the spouses or between the spouses and their attorney can arise for many reasons.  These conflicts often do not become apparent until well into the representation.  If the attorney is skillful (or lucky), the conflict can be resolved and the joint representation continued.  In other cases, however, the conflict may force the attorney to withdraw from representing one or both of the spouses.

        1.  Family Structure

             With the frequency of remarriage and blended families in today’s society, it is not surprising that non-traditional families are a ripe source of conflict.  A step-parent spouse may not feel the need or desire to provide for children that biologically are not his or her own.  This fact can come into direct conflict with the expectations of the parent spouse who may feel that the children are entitled to such support and that the step-parent spouse is just being selfish.  Alternatively, the spouses may be in conflict over how the estate plan should provide for ‘our’ children, ‘your’ children, and ‘my’ children, and whether any of these classifications should receive preferential treatment.

        2.  Past Relationship of One Spouse With Attorney

             Where one of the spouses has a prior relationship with the drafting attorney, regardless of whether that relationship is personal or professional, there is a potential for conflict.  The longer, closer, and more financially rewarding the relationship between one of the spouses and the attorney, the less likely the attorney will be free from that spouse’s influence.  See James R. Wade, When Can A Lawyer Represent Both Husband and Wife in Estate Planning?, Prob. & Prop., March/April 1987, at 13.  Because the spouses rely on the attorney’s independent judgment to assist them in effectuating their testamentary wishes, it is important that neither of the parties has any actual or perceived disproportionate influence over the attorney.

        3.  Differing Testamentary Goals

             Spouses may also have different ideas and expectations regarding the forms and limitations of support provided by their estate plan to the survivor of them, their children, grandchildren, and so forth.  By including need-based or other restrictions on property, one spouse may believe that the other spouse will be “protected” while that spouse may view the limitations as unjustifiable, punitive, or manipulative.  If one spouse has children from a prior relationship, that spouse may wish to restrict the interest of the non-parent spouse via a QTIP trust or other arrangement to the great dismay of the other spouse who would prefer to be the recipient of an outright bequest.  No one distribution plan may be able to satisfy the desires of both spouses.

        4.  Power Difference Between Spouses

             One spouse may dominate the client side of the attorney-client relationship.  If one spouse is unfamiliar or uncomfortable with the prospect of working with an attorney or if one spouse is unable, for whatever reason, to make his or her desires known to the drafting attorney and instead simply defers to the other spouse, it will be difficult for the attorney to fairly represent both parties.

        5.  Stability of the Marriage

            If the attorney seriously questions the stability of the marriage, it will be practically impossible to create an estate plan which contemplates the couple being separated only by death.  As one commentator explained, “[N]o court would permit a lawyer to go forward when such a situation involves partners in a partnership or the principals in a close corporation, or a trustee and beneficiary of a trust, or a corporation and its officers.  The courts will not take a different view when the clients are husband and wife.”  Geoffrey C. Hazard, Jr., Conflict of Interest in Estate Planning for Husband and Wife, 20 Prob. Law. 1, 14 (1994).

        6. Characterization of Property and Relative Size of Separate Estates

            Significant conflict may arise if one spouse has a separate estate that is of substantially greater value than that of the other spouse, especially if the wealthier spouse wants to make a distribution which differs from the traditional plan where each spouse leaves everything to the survivor and upon the survivor’s death to their descendants.  The attorney may generate a great deal of conflict among all of the parties if, to act in the best interest of the not-so-wealthy spouse, the attorney provides information regarding that spouse’s financial standing under the contemplated distribution, if the wealthy spouse were to die first.

            Conflict may also exist in situations where one spouse wants to make a gift of property which the other spouse believes is that spouse’s separate property and therefore not an item which the first spouse is entitled to give.  The potential for this type of conflict is especially great where the spouses have extensively commingled their separate and community property.

   B.  Release of Confidentiality and Evidentiary Privileges

         Joint representation may force spouses to forego their normal confidentiality and evidentiary privileges.  Disclosure of all relevant information is the only way to work toward the common goal of developing an effective estate plan.  In subsequent litigation between the spouses regarding the estate plan, none of the material provided to the attorney may be protected.  However, release of these privileges protects the attorney by eliminating the potential conflict between the attorney’s duty to inform and the duty to keep confidences.

    C.  Discourages Revelation of Pertinent Information

         The fact that there is no confidentiality between the spouses in joint representation situations may not be a problem if the spouses have nothing to hide and have common estate planning goals.  On the other hand, joint representation can place one or both of the spouses in the compromising position of having to reveal long held secrets in the presence of his or her spouse, e.g., the existence of a child born out-of-wedlock.  Even worse is the scenario where the spouse withholds the information leaving the other spouse vulnerable and unprotected from the undisclosed information which, if known, may have resulted in a significantly different estate plan.

    D. Withdrawing from representation

        A potential conflict which becomes an actual conflict during the course of representation may not prevent the attorney from continuing the representation if the spouses previously gave their informed consent.  However, if the conflict materially and substantially affects the interests of one or both of the spouses, the attorney must carefully consider the negative impact that the conflict will have on the results of the representation and on the attorney’s independent judgment.  The prudent action may be withdrawal.  A midstream withdrawal can be very disruptive to the estate planning process and result in a substantial loss of time (and even money) to both the spouses and the attorney.

    E. Difficulty in Determining When Representation Completed

        There is some question as to whether a spouse who sought joint representation in the creation of his or her estate plan can, at a later date, return to the same attorney for representation as an individual.  The determination as to when the joint representation ends is quite settled with respect to subsequent attempts to unilaterally revise the estate plan — it does not end.  Any subsequent representation of either spouse which relates to estate planning matters would constitute information that the attorney would be obligated to share with the other spouse/client.  Regarding other legal matters, representation “should be undertaken by separate agreement, maintaining a clear line between those matters that are joint and those matters that are individual to each client.”  Teresa Stanton Collett, And the Two Shall Become One . . . Until the Lawyers Are Done, 7 Notre Dame J.L. Ethics & Pub. Pol’y 101, 141 (1993).

II.   Models of Representation for Married Couples

      When a married couple comes to an attorney’s office for estate planning advice, the chances are that they are unaware of the different forms of representation which are available or the specific factors they must consider to determine which form of representation is appropriate.  The attorney has the burden to use his or her skills of observation and information gathering and apply the relevant professional conduct rules to help the couple to make a choice that best fits their situation.

   A.  Family Representation

          Under the concept of family representation, the attorney represents the family as an entity rather than its individual members.  This approach attempts to achieve a common good for all of the participants and thus the attorney’s duty is to the family interest, rather than the desires of one or both of the spouses.  However, representation of the family does not end the potential for conflict between the spouses, instead it broadens the potential basis of conflict by adding other family members to the equation.  Further, even where there is no conflict of purposes between the spouses, the attorney may feel an obligation to the family to discourage or even prevent the spouses from effectuating their common desires where those desires do not benefit the family as a whole (e.g., where the spouses choose not to take advantage of tax saving tools, such as annual exclusion gifts, in favor of retaining the assets to benefit themselves).  This type of representation, at least for spousal estate planning purposes, is unnecessarily complicated and may even frustrate the common desires of the spouses.  In addition, this model of representation has not been clearly recognized by the courts.

    B. Joint Representation

        Joint representation is probably the most common form of representation estate planners use to develop a coordinated estate plan for spouses.  Joint representation is based on the presumption that the husband, wife, and attorney will work together to achieve a coordinated estate plan.  In situations where the attorney does not discuss the specific representative capacity in which he or she will serve, joint representation serves as the ‘default’ categorization.  Despite its widespread acceptance, however, joint representation has its pitfalls.

          A critical issue faced by an attorney who represents multiple parties is the attorney’s obligation to make sure that the representation complies with the Texas Rules of Professional Conduct.  Most relevant in the joint representation of husband and wife is Rule 1.6 which prohibits representation where it “involves a substantially related matter in which that person’s interests are materially and directly adverse to the interests of another client of the lawyer . . . .”  Additionally, the Rule provides that if in the course of multiple representation such a conflict becomes evident, the lawyer must withdraw from representing one or both of the parties.

          The rule does, however, contain a savings clause which permits the attorney to accept or continue a representation where a conflict of interest exists if (1) the attorney believes that the representation will not be materially affected, and (2) both of the parties consent to the representation after full disclosure of all of the potential disadvantages and advantages involved.  Many attorneys, regardless of whether potential conflicts are apparent, take advantage of this part of the rule and routinely disclose all advantages and disadvantages and then obtain oral and/or written consent to the representation.  This approach exceeds the minimum requirements of the rule and helps protect all participants from unanticipated results.  Of course, there are still situations which cannot be overcome by disclosure and consent, such as where the attorney gained relevant, but confidential, information during the course of a previous representation of one of the parties.  In this type of situation, the attorney has no choice but to withdraw from the joint representation and recommend separate counsel for each spouse.

          As noted previously, there is no confidentiality or evidentiary privilege afforded the married couple as to anything said or any materials produced in the course of planning the estate and for as long thereafter as the couple may be considered a client of the attorney.  In situations where the attorney fails to adequately explain this fact, the attorney may, months or even years later, be presented by one of the spouses with confidential information which effects the estate plan.  This leaves the attorney in the unenviable position of having to explain to the revealing spouse that the information cannot be held in confidence because (1) it affects the estate plan, and (2) the other spouse remains a client as to that estate plan.  The attorney must then attempt to convince the revealing spouse to disclose the information to the other spouse.  If the revealing spouse refuses, the attorney is forced to decide between making the disclosure him- or herself or withdrawing from the representation (which, of course, will make the other spouse wonder what triggered the withdrawal).

    C. Separate Concurrent Representation of Both Spouses

         The theory of separate concurrent representation in a spousal estate planning context is that a single attorney will undertake the representation of both the husband and the wife, but as separate clients.  All information revealed by either of the parties to the attorney is fully protected by confidentiality and evidentiary privileges, regardless of the information’s pertinence to establishing a workable estate plan.  Thus, one spouse may provide the attorney with confidential information that undoubtedly would be important for the other spouse to have in establishing the estate plan, but the attorney would not be able to share the information because the duty of confidentiality would be superior to the duty to act in the other spouse’s best interest.  Proponents of this approach claim that informed consent given by the parties legitimizes this form of representation.  However, due to the confusion it creates for the attorney regarding to whom the duty of loyalty is owed and whose best interest is to be served, it is hard to understand why any truly informed person would consent.  The dual personality that this form of representation requires of the attorney has resulted in it being dubbed a “legal and ethical oxymoron.”  See Hazard at 11.

    D. Separate Representation

         A final option for the attorney and the married clients is for each of the spouses to seek his or her own separate counsel.  This approach is embraced by many estate planning attorneys as the best way to protect a client’s confidences and ensure that the client’s interests are not being compromised or influenced by another.  By seeking independent representation, spouses forego the efficiency, in terms of money and time spent, that joint representation offers, but they gain confidence that their counsel will protect their individual priorities rather than be diluted by the priorities of the spouse.  Additionally, separate representation substantially decreases the potential that the attorney will be trapped in an ethical morass because of unanticipated conflicts or unwanted confidences.

III.   Recommendations

       Decisions regarding the form of representation most appropriate for a husband and wife seeking estate planning assistance could be made by the attorney alone, based on his or her past experiences, independent judgment, and skills of observation regarding the potential for conflict between the spouses.  The better course of action is for the attorney to explain the choices available to the spouse along with the related advantages and disadvantages and then permit the spouses to decide how they would like to proceed.  The two viable options are joint representation and representation of only one spouse.  See Malcolm A Moore, Representing Both Husband and Wife Ethically, ALI-ABA Est. Plan. Course Mat. J., April 1996, at 5, 7. As previously mentioned, representation of the family as an entity and separate concurrent representation by one attorney are appropriate forms of representation for a husband and wife only in extremely rare cases.

    A. Representation of Only One Spouse

         This form of representation allows each of the spouses to be fully autonomous in dealing with their attorney.  Only the information the client spouse is comfortable with sharing is revealed to the other spouse.  As one commentator explained, “it [separate representation for each spouse] is consistent with the present dominant cultural view of marriage as a consensual arrangement and is most consistent with the assumptions about the attorney-client relationship.”  See Collett, at 128.

          Where it is obvious to the attorney that the couple would be best served by this style of representation, it is the attorney’s responsibility to convince the couple of this fact.  Examples of facts that alert the attorney that separate representation is probably the best choice include situations where the marriage was not the first for either or both of the parties, where there are children from previous relationships, where one party has substantially more assets than the other, and where one spouse is a former client or friend of the consulted attorney.

          When recommending separate representation, the attorney should take care to point out that this suggestion is not an inference that their relationship is unstable or that one or both parties may have something to hide.  Instead, it is merely a reflection that each spouse has his or her own responsibilities, concerns, and priorities which may or may not be exactly aligned with those of the other spouse.  Accordingly, and the best way to achieve a win-win result and reduce present and future family conflict is for each spouse to retain separate counsel.

    B. Joint Representation of Both Spouses

         Despite the potential dangers to clients and attorneys alike, joint representation is the most common form of representation of husband and wife for estate planning matters.  With appropriate and routine use of waiver and consent agreements, the attorney may undertake this type of representation with a minimum of risk to the attorney and a maximum of efficiency for the clients.  Unfortunately, however, use of disclosure and consent agreements is far from a standard procedure.  One survey revealed that over forty percent of the estate planning attorneys questioned do not, as a matter of practice, explain to the couple the potential for conflict that exists in such a representation, much less put such an explanation in writing.  One attorney stated that he only felt it was necessary to discuss potential conflicts where the representation involved a second or more marriage, and that he only put it in writing if he felt a real problem was indicated in the first meeting.  Another respondent failed to disclose the potential for conflict because he was afraid it would appear as if he were issuing a disclaimer for any mistakes he might make.  Finally, it seems that denial of the existence of potential conflicts occurs on the part of the attorney as well as the spouses, as evidenced by one practitioner’s statement, “I have a hard time believing that I should tell clients who have been married for a long time and who come in together to see me that there may be problems if they get a divorce.”  Francis J. Collin, Jr., et al., A Report on the Results of a Survey About Everyday Ethical Concerns in the Trust and Estate Practice, 20 ACTEC Notes 201 (1994).

          The recommended practice is to provide parties with (1) full disclosure and (2) obtain their informed consent, regardless of the perceived potential for conflict.  These steps are detailed below.

        1.  Full Disclosure

            Informed consent is not possible without full disclosure.  Because estate planning attorneys often meet one or both of the spouses for the first time the day of the initial appointment, it is not possible for the attorney to know more about the couple than what he or she sees and hears during the interview.  Because there is no way to be sure which specific issues are relevant to the spouses, it is extremely important for the attorney to discuss as many different potential conflicts as are reasonably possible.  Even if the attorney has some familiarity with the couple, it is better to cover too many possibilities than too few.

          The amount of disclosure that must be provided for the consent given to be considered “informed” is different for each client.  The attorney has the responsibility to seek information from the parties to be sure that all relevant potential conflicts are addressed as well as the effects of certain other incidents, such as divorce or death of one of the spouses.  It is also a good idea to include a discussion of the basic ground rules of the representation detailing exactly what is and is not confidential, rights of all parties to withdraw, and other procedural matters such as attendance at meetings and responsibility for payment of fees.

            a.  Oral Disclosure

                 An oral discussion of potential conflicts which exist or which may arise between the couple will allow the attorney to gather information about the clients while disseminating information for them to use in making their decisions.  Oral disclosure also permits a dialogue to begin which may encourage the clients to ask questions and thereby create a more expansive description of the advantages and disadvantages of joint representation as they apply to the couple.

            b. Written Disclosure (highly recommended)

               Though there is no rule or standard which requires that disclosure or the clients’ consent be evidenced by a written document, the seriousness and legitimacy that go along with a signed agreement serve as additional protection for all participants.  By documenting the disclosure statement and each client’s individual consent to the joint representation, the couple may be forced to reconsider the advantages and disadvantages of joint representation and may feel more committed to the agreement.  Additionally, if there are any issues which they do not feel were addressed in the document, they may be more likely to express them so that the issue can also be included in the agreement.  Finally, reducing the agreement to written form helps protect the attorney should any future dispute arise regarding the propriety or parameters of the representation.

        2. Consent Agreement For Joint Representation — Form

            The form reproduced below is found in 11 Donald J. Malouf & Henry J. Lischer, Jr., West’s Texas Forms — Estate Planning § 1.3 (2d ed. 1994).  You may use this form as a basic guideline in developing your own consent agreement for joint representation.  Consider expanding the form to cover the specific potential conflicts in your clients’ case or provide a list of common examples.  The consent may be included as part of a standard engagement agreement or it may be used as an independent document.

Joint Representation Letter

The legal professional has become appropriately concerned about joint representation of clients.  A husband and wife may have different interests in estate planning that concern their community and separate property interests.  If we are to act as attorneys for both of you, we will try to explain the consequences of the decisions you make and balance all factors.  We cannot, therefore, be an advocate for either of you against the other.  This process could favor one of you to the detriment of the other.

In assisting you in your estate plan, we must necessarily obtain confidential information from each of you.  However, if we represent both of you, we cannot keep that information confidential from either of you.

We will probably make recommendations that affect your community and separate property interests after your deaths.  A conflict may exist in the determination of what is community property and what is separate property.  That determination may be more beneficial for one of you than the other.  If you partition community property or give property to your spouse as part of your estate plan, the possibility of a divorce must also be recognized.  Consequently, our present recommendations could affect the income, property, and support provisions in any such divorce or after the death of one or both of you.

You are each, of course, welcome to have your own counsel for any part or all of the matters to be discussed.

If you do wish us to proceed with estate planning assistance to you, please sign below:

I have read the letter above and I understand that conflicts of interest exist between my spouse and me in the matters about which we are consulting you.  If I wish to have separate counsel or desire that you not be involved in any aspect of estate planning on my behalf, I shall notify you in writing.  I consent to have your firm represent both of us in our estate planning until you are notified otherwise in writing.  I understand that, where you are representing both of us on the same matters, as among my spouse, me, and you, no confidential communications are possible.

__________________________ _________________________

Client                                  Client

__________________________ _________________________

Date                                    Date

   Note:  The author wishes to express his appreciation for the excellent assistance in both the research and writing of this article provided by Ms. Elizabeth Thomson Hetrick, May 1996 J.D., St. Mary’s University School of Law.

    In publishing this article, the author is not engaged in rendering legal, accounting or other professional service. If legal advice is required, the service of a competent professional should be sought.