Gift giving can be complicated, but especially so for lawyers if they are the intended recipient. A ruling handed down by the Vermont Supreme Court last month increased a lawyer’s suspension from three months to five months because the legal documents he drafted conveyed his client’s real and personal property to himself. While the lawyer did not view the transaction as a gift, the Court refused to deviate from the plain language of the rule.
A bit of an “unusual” arrangement
The client’s deteriorating health and desire remain in her home prompted the lawyer to recommend an “enhanced life estate.” An ELE deed would allow the client to convey real estate to a third-party while reserving a life estate. Further, the lawyer advised his client that she could bequeath her real and personal property via a trust agreement. This arrangement was alleged to have contemplated the client conveying her real property through an ELE deed to an individual serving as a trustee of the trust, and upon the client’s death, the trustee would sell the property and distribute the proceeds to the beneficiaries. A new will was also to be prepared which would name the trustee as the sole beneficiary and executor of the client’s estate—with the intention that any funds from the probated property would go to the trust beneficiaries.
The lawyer here knew his client for several years—living in the same community, attending the same church. He even considered his client to be a family friend. The lawyer asserted that when the client requested the lawyer fill these contemplated roles, he drafted the documents accordingly. The lawyer acknowledged that the arrangement was “a little unusual,” but he thought it was lawful and proper. The Court disagreed.
No gifts allowed
The Court found the lawyer violated Rule 1.8(c) by “prepar[ing] on behalf of a client an instrument giving the lawyer . . . any substantial gift”. The lawyer’s argument that he was acting as a trustee with intent to distribute the property was swiftly rejected by the Court as not excusing the violation of the ‘plain prohibition’ contained in the rule. The Court found that the lawyer prepared a document that gave his client’s property to himself without restriction and that the lawyer is still responsible even if he did not think the documents constituted a gift. The Court found that these types of transactions undermine public confidence in the legal profession.
The Court further found that by drafting and presenting legal documents that gave him interests in his client’s property and estate, the lawyer violated Rule 1.7, which provides that a “lawyer shall not represent a client if the representation involves a concurrent conflict of interest unless, among other things, “each affected client gives informed consent.” The lawyer claimed to have advised his client that someone else should be used as the trustee and grantee and that the client should consult with another lawyer, but the client refused. No waiver detailing the conflict or inherent risks involved was ever signed. The Court rejected the argument that such violation is acceptable because of the client’s insistence.
Lesson for the day
Not every gift is one worth receiving. Many jurisdictions allow for an exception Rule 1.8(c) if the client and lawyer are related—see examples in Ohio and DC. But this case serves as important reminder to check your home state’s view on the matter. While you may not view yourself as reviewing a gift, think about how the court would view it.