Breach of Trust

In order to practice law in California, one needs to acquire a license. More particularly, a person needs to acquire a law license. Like any other license granted by the state of California, the license can be stripped from the licensee by the issuing body. Lawyers who lose their license are said to have been "disbarred." Yes lawyers are so special that they get their own word to describe loss of professional status.

Probably the fastest way for a lawyer to lose their license, disbarment, is to steal money from a client. This initially might seem like a difficult task at first blush but often times clients entrust their lawyer with a large some of money. For example, a few years ago, a client asked me to hold $60,000 in an escrow account. Since I was the sole signatory on the account, I could (if I wanted to destroy my professional and personal life) withdraw all the money from said account and expend it for my personal benefit. Since I am writing this post as an active member of the state bar of California, let us just say that the client's money was handled ethically.

Unfortunately some lawyers do not exhibit ethical behavior, commit egregious breaches of trust and suffer disbarment for stealing client money. An example of such is the sordid story of an attorney by the name of Sydney Kirkland, a soon to be former member of the state bar of California.

Jeanette Letman created a revocable trust which named Grover Gordon, a close elderly friend and companion, as sole beneficiary of her trust estate. Ms. Letman amended her trust numerous times and eventually settled on Mr. Gordon and Ms. Kirkland as successor co-trustees. This last amendment occurred on April 14, 2010. It should be noted that an attorney should rarely, if ever, name themselves as trustee because of ethical and legal
constraints. 

Ms. Letman passed away on January 15, 2011 and thereby Mr. Gordon and Ms. Kirkland became co-trustees. According to state bar, the trust bank account when Ms. Letman passed away was $285,730. During her time as trustee, Ms. Kirkland's trusteeship was marked by serious problems. According to a ruling by a San Diego Superior Court judge: "Ms. Kirkland violated numerous fiduciary duties. Ms. Kirkland exercised undue influence. Ms. Kirkland forged a bank statement. Ms. Kirkland forged the signature of Mr. Gordon. Ms. Kirkland prepared a false accounting. Ms. Kirkland misappropriated substantial money and also jewelry and personal property without knowledge or consent of Mr. Gordon."

Ultimately it was found that Ms. Kirkland had misappropriated $275,742.5 of Mr. Gordon's inheritance. Consequently, Ms. Kirkland stipulated to disbarment in light of her wrongful conduct in a January 16, 2013 filing with the state bar court of California. Additionally, Ms. Kirkland faces criminal and possibly civil charges for her actions.

It is obviously difficult to rationalize why an attorney with no discipline record up to that point would act in such a heinous fashion. Lawyers are often entrusted with great sums of money and sometimes attorneys do not follow through on their ethical requirements. Ms. Kirkland is an unfortunate example of that.

Lawyer Guarantees - A Myth

Unicorns are not real despite whatever you see, hear or read

When I have been retained by a client, a common question I receive is whether I can guarantee a result or particular outcome. The short answer is no, I cannot guarantee a result. Cal Rules of Prof Cond 1-400.

Many clients are dismayed to hear that attorneys cannot guarantee results. Their rationale is that why pay an attorney an appreciable sum of money yet receive no certainty that the attorney will achieve the desired result. In today's society results matter and that notion affects the mindset of clients whether they are buying a home, selling a car or retaining an attorney. Clients want the legal system to be linear whereby if they follow the perceived right steps the desired result will come. Unfortunately the legal system does not work that way.

One common example in estate planning of where clients would like for the legal system to be linear is in regards to a Heggstad petition. 

A Heggsad petition is where the trustee seeks a court-order to have a home be transferred into a trust because the deceased settlor (the person who wrote the trust) failed to appropriately transfer it, i.e. through a deed, when the settlor was still living. 

What typically occurs is that the successor trustee is told that they are now in charge of the trust. The trustee then begins to look for trust assets to distribute. The trustee will see that title, i.e. the deed, to the settlor's home is listed in the decedent's name. In order to sell the home, a title company will customarily insist that title be held in the name of the trust in order for the successor trustee to sell it. Thus, instead of title being held by John Doe, the title company would want title to be held as John Doe, trustee of the Doe 2012 Revocable Trust. 

The solution to this problem is for the trustee to file a petition under Prob C § 850(a)(3) in hopes that a judge will order that the home is in fact a trust asset. The best evidence to support the petition is the listing of the home on a schedule of trust assets. The schedule of assets is almost always attached as an appendix to the trust. The term "Heggstad petition" is the common method to describe a Prob C § 850(a)(3) petition. 

So over the years, various people have come to me with a Heggstad issue. Their deceased parent wrote a trust but never formally transferred the home into the trust. They then tell me that the schedule of assets lists the home. I tell them that this is a solid evidence of the parent's intent to hold the home in trust. However, I make it explicitly clear that a judge is not obligated to grant a Heggstad petition despite the evidence at hand. In other words, I cannot, much like any other ethical California attorney, guarantee that the Heggstad petition will be successful. Naturally this disappoints clients who sometimes make the reflexive response that a good attorney should be able to guarantee results. Well that is not the case suffice to say.

Granted a lawyer will zealously advocate for a client, but they should be aware that guaranteed results do not exist in law. If they have this knowledge before meeting with an attorney, this will foster a better relationship because the client is already aware of the lawyer's limitations.   

Conflict of Interest

Attorneys, like other professionals, must follow ethical guidelines. Yes attorneys have ethics, or at least some do. Here in California, because we are so special, we have our own ethical rules. The vast majority of states model their rules after the American Bar Association's model rules. California was too cool for the ABA and adopted their own version although the two are similar in many respects.
 
One fundamental ethics rule is that all attorneys must avoid representation which involves a conflict of interest. Cal Rules of Prof Cond 3-310. While this rule may sound technical, conceptually it is easy to grasp. For example, assume husband and wife engage an attorney to assist with the drafting of their living trust. Invariably husband and wife will have somewhat divergent views as two minds never think exactly alike on every issue. Therefore, the attorney is presented with a conflict of interest situation. On one hand, husband will have his own views on where the marital estate should go while conversely the wife will have her own views. Since the attorney is entrusted with being an advocate for each client, he or she cannot do this to the full extent because if he advocates for husband's viewpoint this logically impairs wife's position and vice versa.

However, the California ethics rules allow for an attorney to cure a conflict of interest and represent the affected parties provided the attorney obtains from each their informed written consent. Cal Rules of Prof Cond 3-310. This consent is obtained after disclosing to the parties the conflict of interest and the dangers associated with it.

In the case of estate planning, few if any couples do not consent to dual representation. One reason might be is that it doubles the cost conceivably if two attorneys are used instead of one. Another reason why couples typically consent is that their interests are often aligned though not perfectly identical. For example, the vast majority of couples mutually agree to leave everything to the survivor and the remainder to the children split equally. Still, even if everything is already understood prior to meeting the attorney, counsel must nonetheless obtain their informed written consent because conflicts may arise.