ElderLaw Answers Blog

Should estate planning attorneys provide financial advice?  Almost all attorneys will say “no”. 

They see a clear line between counseling on tax avoidance and asset protection planning and investment advice.  Attorneys provide the former and financial professionals provide the latter.

This clear line breaks down where the attorney acts as trustee.  In that case he or she has a clear fiduciary duty to provide financial and investment advice, at least over the assets in trust, as well as legal counsel.

The distinction that is so clear to lawyers, also may not be so clear to clients.  Many recognize no difference between financial planning and estate planning.  When they show their list of investments to their attorney, they may expect some advice.  And the attorney may even offer an opinion based on his or her knowledge and experience about financial matters, which is often greater than the clients. 

If the attorney makes some comments on financial matters, does she take on greater responsibility on this issue?  Probably not if she is careful to couch it in terms of advising the client to seek expert financial advice.  For instance, the attorney may remark that an elderly client is highly invested in the stock market and that it would make sense to consult with a financial advisor about whether that is a good plan.

Attorneys can protect themselves with clear fee agreements delineating what they have been hired to do — advise on and prepare estate planning documents — and what they have not been hired for — financial and investment planning.   The distinction, however, still may be unclear to many clients.

This issue comes to the fore in an article in The Boston Globe  about attorneys at major Boston law firms, whose clients were invested with Bernard Madoff.  All of the firms mentioned either act as trustees or have or had separate subsidiaries providing financial advice.  It’s not clear whether any of these unfortunate investors were clients of the firm’s financial services arms or simply of its estate planning departments.  The question in either case is whether the firm had any duty to investigate and advise on whether it was appropriate to invest with Madoff.

The experts quoted in the article suggested that the law firms probably have no liability.  First, if they were providing only legal advice, they were not hired to advise on investments.  Presumably the clients had other advisors to counsel them on that question.  If, on the other hand, the firm’s financial arms were involved, the defense is that Madoff was so effective in his fraud that no one can be faulted for being hoodwinked.  After all, the SEC investigated him and said he was clean.

Of course, the clients are still left holding their empty Madoff account statements.

An interesting post recently surfaced on the listserv for members of the Academy of Special Needs Planners.  a member who is trustee of many special needs trusts asked whether it would be appropriate for one of his trusts to pay for pay-per-view pornography for the beneficiary.  While the attorney felt that 12 of such movies over four days was a bit excessive, the beneficiary’s mother (in fact) argued that the beneficiary has no social life and that watching pornography is his only outlet.

Perhaps surprisingly, the response of other members was largely in favor of the trust paying for the movies, with some reasonable limitations.  One attorney-special needs trustee reported that she has a similar case where the trust beneficiary is a young man who is a double amputee.  She put him on a budget and has him buy videos rather than using pay-per-view, since he can watch them as often as he likes.

Another attorney pointed out that 70 percent of pay-per-view movies rented through hotels are X-rated.  “More important,” he said “human being are inherently sexual creatures, and should enjoy as a basic human right the ability to express their sexuality.”  He also pointed out that some producers of adult films are better than others in terms of their treatment of the actors and their protection from AIDS and other STDs and suggested that any movies purchased by the special needs trust be “produced by companies that exhibit an appropriate level of regard for the health and dignity of the actresses and actors who appear in them.”

This is just one example of the kinds of requests received by trustees of special needs trusts which are not seen be trusts designed more for asset management and protection.  It’s one of the reasons that the choice of trustee for a special needs trust is so important.  A knee-jerk reaction of saying no to such a request would not serve the needs of the special needs trust beneficiary.

At the recent annual conference of the Academy of Special Needs Planners, participants spent a day focussing on the legal issues surrounding the settlement of personal injury law suits, including lien resolution, the creation of qualified settlement funds and Medicare set aside trusts, structured settlements, and issues around the creation of special needs trusts to shelter and manage the lawsuit proceeds.  While many special needs planning attorneys have been working with personal injury attorneys on these issues for many years, the body of law involved has been growing in both depth and breadth. 

At the conference in San Diego, participants began speaking of this body of law as Special Needs Settlement Planning, or “SNSP ” services, and the rubric stuck.  The first user of this name may be Patrick Hindert on his S2KM blog.

According to a study by Harris Interactive for Martindale-Hubbell, 55 percent of adult Americans do not have wills.  So, we asked our users on ElderLawAnswers.com why not.

Most of those who responded, 35 percent, said it was because they thought their estates were too small to need a will.  The next biggest category, 26 percent, avoided creating and executing an estate plan because of the cost.  In short, more than 60 percent of our respondents do not have wills due to financial concerns — the size of their estate or the cost of preparing the plan.

Another 16 percent of respondents didn’t want to think about dying or becoming incapacitated.  And 12 and 11 percent, respectively, said they don’t have the time or don’t know who to talk to about creating an estate plan.

These results, which are consistent with other questions on the Martindale-Hubbell survey, reflect a serious shortcoming by the legal profession.  With most people having no estate plan, and most shying away from carrying out the plan due to financial concerns, many families end up paying lawyers significantly more in messy guardianship proceedings and probate contests.

Either the cost of a basic estate plan must come down or the need for such a plan must be better explained to clients and potential clients, especially as the Baby Boom generation gets older.