Understanding When an Attorney Trustee Faces an Ethical Dilemma

Occasionally, a person creating an estate plan using a living trust will opt to name an attorney as successor trustee. This often occurs in cases where the client has no other friends or loved ones who he feels comfortable appointing, and when he does not want to name a corporate trustee. When the trustee is also serving as the trust administration attorney, however, he cannot simultaneously receive compensation for both services. This is permissible only when first authorized by a court order. This is not the only issue that comes along with having a trust administration attorney also serve as the trust’s successor trustee. Potential ethical issues may arise as well. Following is an overview:

  1. An attorney owes a duty of fidelity to a client and therefore must act fairly with all business dealings. Decisions will be scrutinized closely to ensure that the attorney trustee is not taking advantage of the client, and is instead providing services that are in the client’s best interest.
  2. Accepting the role of trustee benefits the attorney, who may have the opportunity to earn compensation. This could pose a problem because the attorney’s self-interest is involved, which may compromise his ability to give disinterested advice to his client.
  3. Accepting the role of trustee could also present a problem with the attorney’s ability to avoid adverse interests, since serving as a trustee constitutes entering into a business transaction with a client.

Families who have named or are considering naming their attorney as a successor trustee of a living trust should be aware of these potential ethical issues. In some cases, it may be best for the attorney named to decline the trustee acceptance or for the family to request a resignation of the attorney trustee during the implementation of the estate plan.

For helpful information about the issues that can arise during a trust administration in Orange County, we encourage you to sign up for our free newsletter today.

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