It is generally known that in some limited circumstances an estate planning attorney can face potential liability exposure to the trust or will beneficiaries, such as, and depending on the facts and circumstances, if the beneficiaries can establish that the attorney did not draft the documents or a provision in the documents to say what the client told the attorney to draft. Of course, even in that circumstance the client should read the documents before signing them.
It is less often discussed that in some circumstances a trust administration attorney also can face potential liability exposure to the trust beneficiaries if the evidence establishes that the attorney participated in the trustee client’s breach of the trustee client’s fiduciary duties. These are fact specific cases in which the alleged “participation” is one of the key issues. The following are some of the relevant cases in this area, listed by more recent case first: Wolf v. Mitchell, Silberberg & Knupp (1999) 76 Cal. App. 4th 1030; Pierce v. Lyman (1991) 1 Cal. App. 4th 1093; Atascadero v. Merrill Lunch Pierce Fenner & Smith (1998) 68 Cal. App. 4th 445; Morales v. Field, DeGoff, Huppert & MacGowan (1979) 99 Cal. App. 3d 307.
I have become more focused on this potential scenario because it is or could be present in a couple of my recent cases, and in those situations or cases I am seeing that the different trust administration attorneys handled their situations in different ways.
The trustee is the trust administration attorney’s client – the beneficiaries are not the attorney’s clients. Thus, for this scenario to apply the trust administration attorney must have done something that put her or him in the position of participating in her or his trustee client’s breach of the trustee client’s fiduciary duties. Providing advice to the trustee client is not sufficient – something more is required.
Again, these are fact specific situations. The trustee client must have in some manner breached or must be breaching her or his fiduciary duties (i.e., a past, ongoing, or present breach). Of course, the ultimate answer to that question or issue is determined only subsequently and after the fact by the trier of fact. Nevertheless, in appropriate situations the trust administration attorney should take into consideration the question or issue that or whether the trustee client potentially may have breached or is breaching or may with further action breach her or his fiduciary duties.
The question or issue for the trust administration attorney to then consider is whether the attorney has in some manner impermissibly participated or might in some manner impermissibly participate or be a participant in that breach, and, of course, what best course of action the attorney will take moving forward. For example, possible scenarios could include the trust administration attorney doing something to actively conceal the trustee client’s breach from the beneficiaries or from the Court, or the attorney actively misrepresenting the relevant facts to the beneficiaries or to the Court, or perhaps for the administration attorney to do something else that in some manner impermissibly and actively participates in the client’s breach of her or his fiduciary duties. Again, I am seeing situations or cases in which different trust administration attorneys handled their situations in different ways.
Depending on the facts and the evidence at hand, these potential situations can be difficult to evaluate because the attorney also represents and is an advocate for her or his client – but in some situations a question may arise whether the administration attorney has gone too far in that representation and advocacy? Past cases, for example, have included allegations of trust administration attorney potential liability for breach of fiduciary duty, conspiracy, or fraud such as concealment or misrepresentation, and other claims might also exist depending on the circumstances.
You might also be interested in some of my prior posts discussing various of the rules of professional conduct and possible attorney conflicts of interest as these issues continue to be present in some of my cases – you can click on the following link for the prior posts: https://wp.me/p1wbl8-rF
Best to you. David Tate, Esq.
Remember, every case and situation is different. It is important to obtain and evaluate all of the evidence that is available, and to apply that evidence to the applicable standards and laws. You do need to consult with an attorney and other professionals about your particular situation. This post is not a solicitation for legal or other services inside of or outside of California, and, of course, this post only is a summary of information that changes from time to time, and does not apply to any particular situation or to your specific situation. So . . . you cannot rely on this post for your situation or as legal or other professional advice or representation.
Thank you for reading this post. I ask that you also pass it along to other people who would be interested as it is through collaboration that great things and success occur more quickly. And please also subscribe to this blog and my other blog (see below), and connect with me on LinkedIn and Twitter.
Best to you, David Tate, Esq. (and inactive California CPA) – practicing in California only
Litigation, Disputes, Mediator & Governance: Business, Trust/Probate, Real Property, Governance, Elder Abuse, Investigations, Other Areas
Blogs: Trust, estate/probate, power of attorney, conservatorship, elder and dependent adult abuse, nursing home and care, disability, discrimination, personal injury, responsibilities and rights, and other related litigation, and contentious administrations http://californiaestatetrust.com
Business, D&O, board, director, audit committee, shareholder, founder, owner, and investor litigation, governance and governance committee, responsibilities and rights, compliance, investigations, and risk management http://auditcommitteeupdate.com
My law practice primarily involves the following areas and issues:
Trust, Estate, Probate Court, Elder and Dependent Adult, and Disability Disputes and Litigation
- Trust and estate disputes and litigation, and contentious administrations representing fiduciaries, beneficiaries and families; elder abuse; power of attorney disputes; elder care and nursing home abuse; conservatorships; claims to real and personal property; and other related disputes and litigation.
Business, Business-Related, and Workplace Disputes and Litigation: Private, Closely Held, and Family Businesses; Public Companies; Nonprofit Entities; and Governmental Entities
- Business v. business disputes including breach of contract; unlawful, unfair and fraudulent business practices; fraud, deceit and misrepresentation; unfair competition; licensing agreements, breach of the covenant of good faith and fair dealing; etc.
- Misappropriation of trade secrets.
- M&A disputes.
- Founder, officer, director and board, investor, shareholder, creditor, VC, control, governance, decision making, fiduciary duty, conflict of interest, independence, voting, etc., disputes.
- Buy-sell disputes.
- Funding and share dilution disputes.
- Accounting, lost profits, and royalty disputes and damages.
- Insurance coverage and bad faith.
- Access to corporate and business records disputes.
- Employee, employer and workplace disputes and processes, discrimination, whistleblower and retaliation, harassment, defamation, etc.
Investigations, Governance, and Responsibilities and Rights
- Corporate, business, nonprofit and governmental internal investigations.
- Board, audit committee, governance committee, and special committee governance and processes, disputes, conflicts of interest, independence, culture, ethics, etc.; and advising audit committees, governance committees, officers, directors, and boards.
Mediator Services and Dispute Resolution
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