Professional Responsibility Rules When Dealing With Clients Who Have Diminished Capacity

“Professional Responsibility Rules When Dealing With Clients Who Have Diminished Capacity,” that’s the subject of today’s ACTEC Trust and Estate Talk.

Transcript/Show Notes

This is Jim Milton, ACTEC Fellow from Tulsa, Oklahoma. In today’s episode, we will delve into a crucial and often complex aspect of legal practice: how to safeguard the rights of all clients, including those who may be facing diminished capacity due to various factors such as age, illness, or cognitive impairment. How can estate planning attorneys navigate this delicate terrain, ensuring their clients receive appropriate legal representation while adhering to the strict ethical guidelines that govern the legal profession?

ACTEC Fellow Professor Mary Radford of Atlanta, Georgia, joins us today to discuss this topic and offer recommendations to professionals as we navigate the complex intersection of legal ethics and the duty of care to clients with diminished capacity. Welcome, Mary.

Understanding Model Rule 1.14: Client With Diminished Capacity

Thank you, Jim. Today I’m going to talk about a model rule of professional conduct that a lot of lawyers don’t even know exists. And even those who know it exists, many of them haven’t even read it. Now that’s Model Rule 1.14, or some people refer to it as 1.14, and it’s titled “client with diminished capacity”. So why do we need to know about this rule? Well, I can say with almost 100% certainty that anybody listening to this podcast, if you haven’t already, you will encounter a situation where you’re dealing with somebody whose capacity is diminished.

Encountering Diminished Capacity Scenarios

Now that might be a current client who’s perhaps growing older and perhaps facing a diagnosis of Alzheimer’s. It might be a potential new client who comes into your office accompanied by a family member and asks for some dramatic change in the estate plan, and you’re a little bit suspicious about the role that other family member is playing.

It might be a lawyer who’s appointed to represent an individual for whom guardianship proceedings have commenced. Or you might even be representing the petitioner, perhaps an adult child who’s trying to have guardianship for his or her parent. You might be brought in on a personal injury case to help set up a special needs trust with an individual who’s suffered a traumatic brain injury. Or you might represent a trustee of a discretionary trust, and it turns out one of the beneficiaries lacks capacity.

You might be approached by a young adult, perhaps named Britney, who asks you to have her father removed as her conservator and to have the conservatorship that she’s been under for 13 years terminated. Or you might see signs that one of your current client’s capacity is declining and that your client is now vulnerable to some types of elder abuse, perhaps a romance scam. You might have a current client who seems fine, but suddenly, in a flash, undergoes some trauma- a stroke, a brain injury- that renders that individual completely but temporarily incapacitated. You might be a lawyer who is drafting documents, as we often do, that describe what happens when a fiduciary or a beneficiary becomes incapacitated. How do you define that?

So, in most of these situations, the individual involved is going to be showing some signs of cognitive impairment. As I mentioned, that might be due to a sudden change in capacity, or, more commonly, it’s going to be a gradual decline due to a progressive or degenerative disease. And why can I be so certain you are going to encounter this? Well, the major risk factor for cognitive impairment is age. And I don’t need to tell you that our society is aging. In fact, the fastest-growing segment of the population in the United States is people aged 85 and over. So, let’s get back to this rule.

Understanding Model Rule 1.14: Ambiguity and Implications

Model Rule 1.14. So, this rule has been adopted in every state except one, and that’s California. And mysteriously, because the Supreme Court of California did not tell us why it did not adopt Model Rule 1.14 when it adopted all the other model rules. But if you live in California, there’s a great resource for you because that state’s Bar Ethics and Professionalism Committee issued a formal opinion. It’s called Formal Opinion No. 2021-207. And for anybody in any state, it’s a great read when it comes to the issues of dealing with a client whose capacity is diminished.

Now, the model rule itself is a bit vague. First of all, it doesn’t even define diminished capacity. It just says–if you have a client whose capacity to make adequately considered decisions in connection with the representation is diminished- and then it mentions that might be because of a minority, mental impairment, or some other reason –and it just leaves it at that. So, I want to direct you to another resource. Those are the ACTEC Commentaries on the Model Rules of Professional Conduct. A sixth edition just came out in 2023. The commentaries are designed to make sure that estate planning lawyers understand the ramifications of the model rules as they deal with what we do on a day-to-day basis.

So, the commentary adds a new concept, and that concept is declining capacity. So, a client with declining capacity is somebody who is exhibiting signs of reduced capacity but still has the ability to make some decisions with respect to some financial, medical, or personal matters. And this is probably the more challenging ethical situation for us. And keep in mind, just as an example, that people can live with Alzheimer’s disease, which is the major cause of dementia, for 15 to 20 years. And also, there’s usually a two-to-three year gap between the time they show some signs of reduced capacity and an actual diagnosis taking place.

Navigating Ethical Dilemmas: Rules and Conflicts

So, the rule itself, it’s got two parts. The first part, part A, presumes that everyone has capacity. So, in other words, it says that a lawyer, as far as reasonably possible, has to maintain a normal client-lawyer relationship with the client. Well, what’s that? Well, that’ll take us back to the rules that you do know, all those other model rules of professional conduct. Model Rule 1.1 talks about competent representation. Well, in order to competently represent a client with diminished capacity, you have to understand what diminished capacity is and what some of its causes are. And if you don’t, you want to associate with someone who does.

Model Rule 1.2 talks about the client directing the representation. Now again, that means the client, not you, makes the decision even though you know or you’re absolutely convinced that it’s an absolutely stupid decision. There’s an ABA opinion, ABA Opinion 96-604, that points out that just because a client is making decisions that might seem to you, the lawyer, to be ill-advised or errors in judgment, that doesn’t mean that the lawyer should step in and all of a sudden take over the decision-making process.

A third rule to keep in mind is Model Rule 1.4, which deals with communication with your client. And, again, we’re reminded that even if the client cannot, for example, enter into a legally binding contract, maybe the client is a minor. The client still may have some thoughts, some opinions, be able to reach conclusions and the law recognizes this, and we as lawyers need to recognize this also. Now, the rules that everybody knows about are the Conflict of Interest Rules, 1.7, 1.8, 1.9. Here’s where we need to be very careful, because sometimes we, in all good faith, are attempting to protect a client because we think that the client may be lacking in capacity.

But we have to remember that in many states, California is very strict on this, this can be a conflict of interest if your client in advance has informed you, for example, that she doesn’t want to have a guardian, ever. Now the most difficult rule to reconcile with Model Rule 1.14 is Model Rule 1.6, the confidentiality rule. And again, we lawyers tend to get a bit lax when we’re worried about our client, and we might, for example, reveal confidential information to a family member or somebody that we feel might be able to help the client. Now, before I leave confidentiality, I want to bring up a point for you to keep in mind. That’s on the related concept of attorney-client privilege.

You know that the model rules have comments, and comment three to Model Rule 1.14 says that the client may wish to have family members present during the consultation. And it goes on to say: “When necessary to assist in the representation, the presence of such persons generally does not affect the applicability of the attorney-client privilege.” I will caution you, there is no case that says that. It’s in that comment, but I would not rely on it. The ACTEC Commentaries say: “Before meeting with the client and others, the lawyer should consider the impact of this joint meeting on the attorney-client evidentiary privilege and discuss any issues with the client.” So that’s part A, the first part of the rule.

Taking Protective Action

Part 2, Part B, is called taking protective action. Now you can’t go into the role of a lawyer taking protective action unless you reasonably believe three things: you have to reasonably believe the client has diminished capacity and is at risk of substantial physical, financial, or other harm unless some action is taken, and the client cannot adequately act in the client’s own interest.

The rule then goes on to say that you may take reasonably protective action. That’s permissive. You don’t have to take reasonably protective action. But here’s where it gets dicey because the rule then says the lawyer may take reasonably protective action, including consulting with individuals or entities that have the ability to take actions to protect the client. Whoa, what’s happened here? What happened to confidentiality?

Well, Model Rule 1.14 says that Model Rule 1.6 impliedly authorizes some confidential information to be revealed in the case of protective action. Another thing that Model Rule 1.4(b) says is that in appropriate cases, the lawyer can seek the appointment of a guardian ad litem, conservator, or guardian of the client. Again, this can be a very clear conflict of interest, particularly if the client has told you in advance what she or he wants.

Another thing for you to know is that, I know I mentioned that ABA opinion, there seems to be some inconsistency about whether you are allowed to do this. So again, I would urge you to check, do not take the comment to the model rules just as law, but check the law in your state to find out how Model Rule 1.14 interacts with the other model rules. Thank you, Jim.

Closing Remarks

Well, thank you Mary for the excellent presentation and for educating other lawyers and the public on this very important rule. I’ve interacted with rule 1.14, the comments, and the ACTEC Commentary and I find it extremely helpful. In fact, I read all of those sources often when dealing with clients with diminished capacity.  Please stay tuned next week as we continue this topic with a podcast from ACTEC Fellow Gerard Brew.

Also may also be interested in:

• Steps a Lawyer Can Take in Identifying, Understanding, and Dealing With a Client With Diminishing Capacity (Dec 2023)
• The Uniform Guardianship, Conservatorship, and Other Protective Arrangements Act (Oct 2018)
• How Guardians Make Decisions on Behalf of Their Wards (Mar 2020)
• Supported Decision-Making (June 2021)

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