ACTEC commentaries on the Model Rules of Professional Conduct - Adopted by the Board of Regents of the American College of Trust and Estate Counsel - October 1993

Real Property, Probate and Trust Journal, Winter 1994

D. Lawyer for Fiduciary

Under the majority view, a lawyer who represents a fiduciary generally with respect to a fiduciary estate stands in a lawyer-client relationship with the fiduciary and not with respect to the fiduciary estate or the beneficiaries. In this connection note that a distinction should be drawn between the duty of a lawyer who represents a fiduciary in the fiduciary's representative capacity (a "general" representation) and the duties of a lawyer who represents the fiduciary individually (i.e., not in a representative capacity).

The distinction between the two types of representation is developed in the ACTEC Commentary on Model Rule 1.2 (Scope of Representation). Unless otherwise indicated, all references in the Commentaries to "the lawyer for a fiduciary" are intended to be to a lawyer who represents a fiduciary generally and not to a lawyer who represents a fiduciary individually. Note also that under some circumstances a lawyer may properly represent the fiduciary and one or more of the beneficiaries.(7)

E. Duties to Beneficiaries

The lawyer who represents a fiduciary generally is not usually considered also to represent the beneficiaries. However, most courts have concluded that the lawyer owes some duties to them. some courts subject the lawyer to the duties because the beneficiaries are characterized as the lawyer's "joint," "derivative" or "secondary" client. Other courts do so because the lawyer stands in a fiduciary relationship with respect to the fiduciary, who, in turn, owes fiduciary duties to the beneficiaries. The duties, commonly called "fiduciary duties," arise largely because of the nature of the representation and the relative positions of the lawyer, fiduciary, and beneficiaries. However, note that the existence and nature of the duties may be affected by the nature and extent of the representation that a lawyer provides to a fiduciary. Thus, a lawyer who represents a fiduciary individually regarding a fiduciary estate may owe few, if any, duties to the beneficiaries apart from the duties that the lawyer owes to other nonclients.(8)

F. General Nature of Duties

Unfortunately, the duties that the lawyer for a fiduciary owes to the beneficiaries of the fiduciary estate have not been adequately identified, defined, or discussed. In general, the duties prohibit the lawyer from taking advantage of his or her position to the detriment of the fiduciary estate or its beneficiaries. Thus, the lawyer who represents a fiduciary is prohibited from making sales to, or purchases from, the fiduciary. In some jurisdictions the prohibition extends to transactions between the lawyer and the beneficiaries of the fiduciary estate. Indeed, in exceptional cases the lawyer for a fiduciary may be subject to the duties of the fiduciary. That approach was taken in a leading New York decision, In re Bond & Mortgage Guarantee Co.(9) In that case the lawyers for a trustee for the holders of mortgage participation certificates were required to disgorge the increase in the value of certificates that the lawyers had purchased from third parties.