When Parents Get Involved: Ethical Risks in Estate Planning and Divorce Prep

“When Parents Get Involved: Ethical Risks in Estate Planning and Divorce Prep,” that is the subject of today’s ACTEC Trust and Estate Talk.

This is ACTEC Fellow Kristin Yokomoto of Costa Mesa, California.

Parents inserting themselves into their adult children’s legal planning isn’t new, but it’s increasingly messy. Between ethical rules, privileged concerns, fee arrangements, and the emotional swirl of prenups and divorce conversations, attorneys can find themselves managing not one client but an entire family dynamic. When parents attend meetings, fund the representation, or influence the strategy, the result could be muddled.

ACTEC Fellows Carole Bass of New York City and Shari Levitan from Boston join us today to walk through the risks, boundaries, and best practices for managing third-party involvement while protecting privilege and maintaining ethical footing. Welcome, Carol and Shari.

Parents as the First Call: How Prenups Become a Family Affair

Shari Levitan: Thank you. So many of us have had the experience where the first call that we get is from the senior generation, the parents saying, “Gee, my daughter is getting married and I either like or I don’t like my client’s spouse. I’m worried about our family assets. Tell me about premarital agreements. Maybe, “we,” collectively, want one or we don’t want one.” And then the next conversation, we’ll have my daughter join and we’ll all talk about this together.

And sometimes as you proceed, it turns out that the parents and the daughter in this case are not on the same page. Daughter doesn’t care or doesn’t want to protect the same things in the same way. And perhaps it’s the first time that daughter is learning about the extent of the wealth already set aside in irrevocable trusts and partnership agreements. And it puts the attorney often in a conflict if we already represent the parents in their own planning and the child in a premarital agreement, none of us want to get the call from the daughter that says, “I really don’t want this agreement, but don’t tell my parents.” Or the parents who call and say, “We really don’t like our son-in-law to be, so whatever you can do, I don’t think this thing is going to last, make sure that it is completely bullet proof.”

Carol, what’s your experience here?

When Parents and Adult Children Are Not Aligned

Carole Bass:  I have the same experience. I’m seeing this more and more often where the prenuptial agreement becomes a whole family affair and everybody’s involved and everybody wants to put in their two cents and that the child who’s getting married wants their parents to be on every call, that they have trouble sometimes making decisions at an adult level without their parents’ presence.

I think a lot of this is kind of the phenomenon we see in other areas of the world with this helicopter parenting and snowplow parenting. And for people who don’t know, helicopter parenting is kind of this over-parenting where parents are involved in every aspect of their children’s lives and managing everything for them. And I think the generation we’re seeing now for prenups have grown up and a lot of them have grown up in that kind of environment and they’re kind of anxious and not fully developed adults. Are you seeing that as well, Shari?

Helicopter Parenting and Decision-Making in Prenuptial Agreements

Shari Levitan: Absolutely and to the extent where I’ve had the experience where the parent is answering the questions, child is sitting side-byside — when I say child, this is an adult about to get married and have a family. And the parent is answering the questions, and I’ve had the experience where the parent sees the final version of the agreement and says, yes, we’re signed off. And I say, I need to hear from my client, because the child is the client, technically.

I’ve had a parent who’s a lawyer want a word version of the document to edit it. And I’ve said, there’s going to be one lawyer here, not two, take your pick. But it’s not just being a little bit of a consigliere or bouncing a particular economic decision to go one way or another. But it’s wholesale every bit of the decision regarding the agreement itself. And what we really caution is at the end of the day, the first question on a deposition in an ugly litigated divorce that you never want the client to have to answer is: is this the agreement that you intended? Is this the agreement you want? Did you know what was in it? Parents may be long dead at that point. So we have to make sure that this is our client’s wish. But it puts us in a potential conflict because if we get told “don’t tell my parents,” and we know that the parents whom we represent as independent clients have an estate plan that provides for an outright bequest or gives a broad power of appointment at death, we’re not at liberty — as we’ll discuss in a moment — to just tell the parents if the daughter in my example says, “don’t tell my parents.” So we’re trying to navigate counseling the daughter to talk with her parents. And otherwise, we’re going to find ourselves in a position where we can’t represent anybody and we have to withdraw.

Let’s talk a little bit about privilege and then separately the ethical obligations here.

Identifying the Client and Avoiding Conflicts of Interest

Carole Bass: Just before I get into privilege, just to continue a bit on what you said, I think it’s really important to make clear who the client is, to make sure that the child is the one that’s signing the engagement agreement, and maybe even thinking about if we need something in our engagement agreement or separate, if the parents are going to be involved to just make clear who gets to know what and who the client is and so that everybody is clear from the beginning.

Shari Levitan: Absolutely. We can’t be in a position where we don’t know and step over a line.

Attorney-Client Privilege Risks When Parents Attend Meetings

Carole Bass: That’s 100%. On the privilege side, for all these conversations we’re having where the parents are on every call and in every meeting, I think it’s really important for us to keep in mind that there is no parent-child privilege for the most part, it’s not like marital privilege. And the general rule for attorney-client privilege is that the presence of a third party will cause a waiver of attorney-client privilege. So if you’re sitting in a room with the person getting married and their parents already that’s a non-privileged conversation.

And for the kids who are going back and talking to their parents and telling them every detail, the question becomes, are those conversations privileged? And for the most part, that answer is going to be no. There are a handful of states, I think 5 or 6, that have a limited statutory parent-child privilege, but limited the most part to criminal actions and to minor children.

Limited Parent-Child Privilege and the Arizona Accomazzo Case

Shari Levitan: And it won’t cover this. And that includes trustees, family office personnel, not just the parents. The only state that has a case that we’re aware of is Arizona, where I practice. And it’s the Accomazzo case (Accomazzo v. Hon. Kemp/Accomazzo) where over a decade ago, grown daughter and her parents met with attorney and there was credible evidence, the daughter testified, that she was a novice in dealing with legal matters and she had her parents to help explain things to her, help translate, not language-wise, but the legalities to meet with the lawyer. And the appellate court in Arizona bought that argument.

It is an oddity and I wouldn’t be absolutely certain that it would withstand scrutiny in other circumstances. It may have been very fact-specific as so many matrimonial cases are.

Carole Bass: That’s right. I agree that it’s an outlier and this is probably a court of equity type situation where the judge, for whatever reason, felt like they wanted to get to that result.

Ethical Duties to the Client Under the Model Rules

Shari Levitan: Yeah. And so this is really, if you get to litigation, whether there’s privilege on those conversations that led to the making of the agreement and its terms, same thing in a divorce, when parents come to settlement meetings, what should we offer, etc.

The ethical rules are most important here. We talked about who is the client in the matrimonial matters. There is one client and it is the person who is being married or being divorced. The parents are not parties to the marriage or the divorce. And yet the ethical rules say you have an obligation to your client. The Model Rules say you must adequately represent your client’s interests. You must explain fully to your client and ascertain that you have received sort of a knowing confirmation that this is what the client wants, that you have to communicate fully. You can’t have a surrogate that delivers the information. You cannot use the parents as the interim deliverer of information, which sometimes gets asked.

Carole Bass: So frequently. Or the person getting married or the person in the divorce is completely disconnected from the situation and just relying on the parents. You really have to get their attention.

Shari Levitan: I’ve had a Zoom meeting where the grown client is sitting there on the phone, eyes downward, and not a clue on my part whether they’re even listening and participating. It’s sort of, huh, and I need to look them in the eyeball and make sure that this is what they want.

And I’m not allowed to reveal information about the representation without informed consent. And that goes to the who are we sharing information with and when. And it comes up in subtle ways that seem very normal. So an agreement is in place. You’ve surmounted all these other obstacles. And a year or two later, parent whom you represent for a estate planning calls and says, I want to make a gift or a loan to my child or the couple to buy a new home. How should I do it? What does their agreement say?

Carole Bass: Right. And how does that inform? And what if you go back to your earlier example of the child who didn’t want the agreement and said, don’t tell my parents. And they’re your clients too.

Shari Levitan: That is exactly right, which was why I can’t be in that position. And it comes up in the most innocuous ways or we’re changing our estate plan and we want to be more fulsome in the powers that we give our children. And you know, something that would suggest not a good idea here.

And the same is true even — a premarital agreement or not — child who has become your client in the estate planning sense calls you up and says, my marriage is kind of rocky. I’m not at liberty to pick up the phone and say to the parents, “you need to change your estate plan today, things aren’t good here.”

Carole Bass: Right. I think that’s right and really important when we’re taking on these representations. And for instance, if you’re in a state planner and you represented a client family in planning for years and years and they ask you, “oh, can you represent child in a prenup?” Maybe you want to think before you take that on if it’s going to put the other relationship at risk. Maybe it makes sense to just farm that out sometimes because you’re in a conflicted, you’re in a potentially conflicted situation.

Asset Disclosure Challenges and Parental Control

Shari Levitan: And even when the family office says, “can you send us a copy of the signed premarital agreement?” We have copies of all of the signed documents for the family. We don’t know where it goes from there. So we can’t just upload a copy of the documents. Or if we get permission, we have to separately ask, can we share the asset disclosure? Because that’s yet another step that goes along. And so, each step of the way, the onus is on us as the planners to have robust conversations with our clients about where things can go wrong and make sure that we have good direction and we don’t become part of the problem later on.

Carole Bass: Right, I think that’s right. And you brought up the asset disclosure, and I find that’s one of the areas where the parents get most involved. One, because they have the information oftentimes, but they can be very sensitive about what they want to share with their own child and with the in-law to be. And it’s up to us to relay how important a full and adequate disclosure is in a premarital agreement and how it’s protecting them. That doesn’t always work either.

Shari Levitan: I think this is a good synopsis. Of course, the actual details vary from client to client and we’re happy to have presented this today.

Carole Bass: That’s right. It’s a very important topic that doesn’t get talked about enough.

Shari Levitan: Thank you.

Carole Bass: Thank you.

Kristin Yokamoto: Thank you, Carol and Shari. That was a very informative and interesting conversation and a great reminder of best practices when dealing with this type of situation.

You may also be interested in

• Joint Representations with Prenuptial Agreements (June 2021)
• Mistakes Made in Premarital Agreements by Estate Planning and Family Law Lawyers (Apr 2022)
• Unconscionability of Premarital Agreements – Pt 1 of 2 (Oct 2022)

A video resource to share with your clients

When and How to Use a Prenuptial Agreement

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