Introduction
Those of us who routinely represent trustees may have casually said “I’m the attorney for the trust” on occasion. Technically, of course, you are not the attorney for the trust. Instead, you are the attorney for the trustee who is administering the trust. The “attorney for the trust” phrase, while inaccurate and misleading, is nonetheless heard and tolerated in practice. Experienced practitioners presumably think of “I’m the attorney for the trust” as an abbreviated way of saying “I’m the attorney for the trustee of the trust.” However, the phrase “attorney for the trust” can cause significant problems when it is included in the terms of a trust agreement.
A Troubling Scenario
Imagine the following scenario: The settlor of an inter vivos trust died two years ago. He left a trust agreement providing that Attorney X (not the scrivener of the document) would be the “attorney for the trust.” The successor co-trustees, when they commenced serving, retained Attorney X as their counsel. Subsequently, there was a breakdown in the relationship between Attorney X and the co-trustees. When the co-trustees told Attorney X that they wanted to terminate her services and retain substitute counsel, Attorney X told them that they could not terminate her because she was the “attorney for the trust,” not the attorney for the trustees. Moreover, Attorney X told the co-trustees that she would seek to have them removed, if they contravened the trust agreement’s direction that Attorney X serve as “attorney for the trust.”
The co-trustees petitioned the Probate Court to confirm their authority to discharge Attorney X, based in part on the trust agreement provision empowering the co-trustees to hire (and implicitly to fire) attorneys and other professionals. In the Probate Court proceeding, Attorney X informed the Court that, as “attorney for the trust,” she represented both the co-trustees and the trust beneficiaries – especially the beneficiary who was then involved in trust-related litigation with the co-trustees, even though that beneficiary was represented by separate counsel. Attorney X took this position despite the fact that her engagement letter was addressed solely to the co-trustees and despite the fact that she had previously filed an appearance in the litigation solely on behalf of the co-trustees.1
Trust as Relationship
Is there such a role as the “attorney for the trust”? Was Attorney X correct that she represented both the co-trustees and the trust beneficiaries? I suggest that the phrase “attorney for the trust” is inherently defective and should not be used, or tolerated, in practice.
By definition, a trust (here, meaning the type of trust used in estate, donative or charitable planning) is a relationship among a trustee, a beneficiary, and property. “A trust . . . is a fiduciary relationship with respect to property, arising from a manifestation of intention to create that relationship and subjecting the person who holds title to the property to duties to deal with it for the benefit of charity or for one or more persons, at least one of whom is not the sole trustee.”2 “[A] trust involves three elements, namely, (1) a trustee, who holds the trust property and is subject to equitable duties to deal with it for the benefit of another; (2) one or more beneficiaries, to whom . . . the trustee owes the duties with respect to the trust property; [and] (3) trust property, which is held by the trustee for the beneficiaries.”3
Not a Legal Entity
Geometrically speaking, a trust is a triangle with three points: the trustee, the beneficiary, and the property. One element of the trust relationship, the property, is inanimate and therefore incapable of retaining legal counsel. Two elements of the trust relationship, the trustee and the beneficiary, are legal persons who are respectively capable of retaining legal counsel. However, unlike a corporation, a trust is not an artificial legal person. Hence, neither the trustee nor the beneficiary can retain legal counsel to represent “the trust” as an entity or organization. Instead, the trustee can retain counsel to represent the trustee with respect to the administration of the trust, and the beneficiary can retain counsel to represent the beneficiary’s interests with respect to the trust.
When a trust is thought of as an incorporeal relationship among three elements, the inability of an attorney to represent “the trust” should be apparent. Saying that one is the attorney for “the trust” is akin to saying that one is legal counsel for “the Holy Trinity” or “the love triangle.” While there is no Michigan case law on point, this fundamental truism has been expressly recognized elsewhere. According to the California Supreme Court: “[W]hen a fiduciary hires an attorney for guidance in administering the trust, the fiduciary alone . . . is the attorney’s client. The trust is not the client, because a trust is not a person but rather a fiduciary relationship with respect to the property.”4
Cannot Hire or Fire Counsel
The nonsensical 1980 pop song “Fish Heads” described all the things that “roly poly fish heads” cannot do: “They don't play baseball; they don't wear sweaters; they're not good dancers; they don’t play drums!” In a similar vein, there are many things that a trust cannot do. A trust cannot hire an attorney; it cannot communicate with an attorney; it cannot assert attorney-client privilege; and it cannot terminate the services of an attorney. All these actions would have to be taken by the trustee who is administering the trust.
If the phrase “attorney for the trust” really meant that the attorney represented the trust, rather than the trustee, then nobody could discharge such attorney, because a trust is not a legal person or an organized entity, and nobody has the right to act on behalf of the trust except for the trustee. What settlor would desire to have the trustee of his trust advised by an attorney who cannot be fired?
Joint Representation
Designating an “attorney for the trust” in the trust agreement creates a minefield of ethical issues. In the scenario presented above, Attorney X took the position that she represented both the co-trustees and the beneficiaries, by virtue of her position as “attorney for the trust.” Attorney X was describing a joint representation situation, which is governed by MRPC 1.7(b): “A lawyer shall not represent a client if the representation of that client may be materially limited by the lawyer’s responsibilities to another client ... unless: (1) the lawyer reasonably believes the representation will not be adversely affected; and (2) the client consents after consultation.”
This situation raises the question whether it is reasonable for a lawyer to believe that she can simultaneously represent the interests of both the trustee and the beneficiary of the same trust with regard to trust-related matters, without the representation of either or both being adversely affected. In my opinion, it is not possible for a lawyer to reasonably reach such a conclusion.
Unified Legal Strategy Impractical
Joint representation of multiple clients is permissible only when it is possible for the lawyer to devise a legal strategy that serves the interests of, and is agreed to by, all of the clients. It is extremely unlikely that the trustee and the beneficiaries will agree on every decision that is made in the course of a trust administration. Even if the parties could reach a consensus on how to administer the trust, each party’s interests would be affected to some extent, either positively or negatively, by many decisions made during administration, so that the attorney would have to seek conflict waivers from the affected clients each time such situation arose.
Competing Legal Interests
The trustee and the beneficiary of a trust will routinely have fundamentally different interests that a single attorney cannot simultaneously protect. An attorney is a fiduciary who owes a duty of loyalty to his/her clients.5 An attorney cannot ethically serve as counsel for multiple clients who have disparate and competing interests.
Many examples of competing interests between the trustee and the beneficiary are readily apparent. An attorney cannot simultaneously represent the trustee with regard to minimizing the risk of liability, and the beneficiary with regard to identifying and seeking redress for any breaches of fiduciary duty. An attorney cannot simultaneously represent the trustee with regard to the preparation of the trust inventory and accountings, and the beneficiary with regard to analyzing whether such documents raise any concerns regarding the trust administration.
An attorney cannot simultaneously represent both the trustee and the beneficiary with regard to the beneficiary’s request for a discretionary distribution from the trustee, and the trustee’s consideration of such request. An attorney cannot simultaneously represent the trustee with regard to calculating the amount of the beneficiary’s distributive share, and the beneficiary with regard to checking the accuracy of the trustee’s calculation. An attorney cannot simultaneously represent the trustee with regard to requesting that the beneficiary execute a receipt and release form upon final distribution, and the beneficiary with regard to evaluating whether to execute such an instrument.
Trust Administration by Committee
Moreover, joint representation of the trustee and the beneficiary would fundamentally alter the nature of the trust administration process. Typically, the trustee makes decisions regarding trust administration without consulting the beneficiaries at each step of the way. Where the joint-representation attorney is involved in advising on, or implementing, such decisions, the attorney would have to seek consent from the beneficiary-client to a proposed course of action by the trustee-client. Trust administration would essentially be governed by a committee comprised of the trustee and the beneficiaries.
No Attorney-Client Privilege
In a joint representation situation, information exchanged between the attorney and one client cannot be withheld from any of the other clients. Hence, the trustee would be entitled to all information exchanged between the joint-representation attorney and the beneficiaries, and the beneficiaries would be entitled to all information exchanged between the joint-representation attorney and the trustee. Neither the trustee nor the beneficiaries could assert attorney-client privilege with respect to the other.
Who Pays Legal Fees?
Another practical difficulty would be determining liability for the attorney’s fees. The Michigan Trust Code provides that a trustee may pay for professional services, such as legal fees, from the assets of the trust.6 However, trust beneficiaries have no comparable right under Michigan law, suggesting that (unless the trust agreement provided otherwise) the joint-representation attorney would have to invoice the trustee and the beneficiaries separately for legal services rendered to each of them.
Explanation of Implications
If an attorney did undertake such joint representation of the trustee and the beneficiaries, then all of the myriad complications and issues would have to be detailed in the initial engagement letter. “When representation of multiple clients in a single matter is undertaken, the consultation shall include explanation of the implication of the common representation and the advantages and risks involved.”7 It is difficult to imagine any letter adequately anticipating and explaining the multiplicity of problems that would arise from such joint representation.
Each Co-Trustee Entitled To Counsel
In the scenario presented above, the trust agreement provided that the co-trustees possessed broad administrative powers, including the power to hire attorneys. In fact, Michigan case law has construed MCL 700.7817(w) (trustee’s power to employ an attorney) to mean that each co-trustee of a trust may retain an attorney to advise the co-trustee regarding trust administration and/or litigation.8 So the designation of a single “attorney for the trust,” where the trust was under the administration of multiple co-trustees, was potentially inconsistent with the scope of MCL 700.7817(w). (Of course, co-trustees frequently choose to be represented by the same attorney, despite their right to retain separate counsel.)
Direction to Employ Attorney as Counsel for Trustee
If the settlor desires to have the successor trustee advised by a certain attorney, then the settlor may include a direction in the trust agreement (either mandatory or precatory) directing the trustee to employ such attorney as counsel for the trustee (not the trust). Such a direction raises difficult questions as to whether the settlor was motivated by a desire to confer a benefit upon the attorney or a desire to promote sound trust administration; if the settlor desired to confer a benefit upon the attorney, whether the attorney is a beneficiary of the trust; whether the attorney can compel the trustee to employ him; and whether the trustee owes any fiduciary duties to the designated attorney.
A mandatory direction that the trustee should employ a particular attorney is likely unenforceable due to the unique nature of the attorney-client relationship. “Even if a settlor intended to confer a right to the employment, the trustee is not necessarily obliged to employ the person. Thus, there is no such obligation to that person where the employment is of such a character that it might seriously interfere with the trustee's proper administration of the trust.9
The Probate Court likely would not compel a trustee to employ an attorney who the trustee does not want to work with. “A direction to employ a specified attorney . . . is not enforceable because the relationship is highly fiduciary and personal in character.”10
There is apparently no ethical rule against an attorney drafting a trust agreement in which the settlor designates the scrivener as the attorney desired to represent the successor trustee. “It appears that no rule of professional conduct prohibits the lawyer from drafting the instrument to name the lawyer as the lawyer for ... the trust [i.e., the trustee] provided there have been no improper suggestions or solicitation[.]”11 (MRPC 1.8(c), prohibiting an attorney from inserting a gift to the attorney in an instrument drafted for an unrelated client, apparently does not apply to a designation that an attorney is to be employed, presumably because compensation for services rendered does not constitute a gift).
In the view of the ethics panel, however, such a designation would be unenforceable by the attorney. “[T]he lawyer does have the responsibility of notifying the client at the time of drafting the instrument that notwithstanding the nomination[,] the fiduciaries may choose whomever they wish to act as counsel for ... the trust [i.e., the trustee], in line with the requirements of MRPC 1.7(b)(2).”12
Conclusion
Sometimes the niceties of legal language are a matter of preference and style. In this instance, however, inaccurate terminology creates the possibility of significant negative consequences, not only for the scrivener and the designated “attorney for the trust,” but also for the trustee and the beneficiaries. When we hear someone say, “I’m the attorney for the trust, we should respond, “There is no such thing; you mean that you represent the trustee of the trust, right?” If the other attorney does not agree with you, then you’ve got a problem.
Endnotes:
1 See MCR 5.117(A) (“An attorney filing an appearance on behalf of a fiduciary shall represent the fiduciary”).
2Restatement(3rd) of Trusts § 2 (2003).
3Id at cmt f.
4Borissoff v Taylor & Faust, 93 P3d 337, 340 (Cal. 2004) (internal quotation omitted).
5 See People v Waterstone, 486 Mich 942, 952; 783 NW2d 314, 322 (2010) (describing the attorney’s duty of loyalty to the client as “the backbone of our legal system”); see also cmt to MRPC 1.7.
6 MCL 700.7817(w).
7 MRPC 1.7(b).
8In re Fox Revocable Living Trust, No 292879, 2010 Mich App LEXIS 2160 (Nov 16, 2010) (unpublished).
9Restatement (3rd) of Trusts § 48 cmt b.
10Id.
11 Michigan Ethics Opinion RI-291 (Apr 23 1997).
12Id.
Source:
Michigan Probate & Estate Planning Journal (Vol. 34, No. 1)
