Ezel / Ethics Opinions / MBAR
MBAR March 3, 2005

Can a lawyer keep a valuable gift from a client and prepare the gift tax return for it?

Short answer: A lawyer should not accept a substantial gift without first advising the client to get independent counsel, and may not prepare the gift tax return or any instrument that effects the transfer to the lawyer. Even when all of Rule 1.8(c)'s requirements are met, the gift may still be challenged.

Apply this to your situation

This page answers the general question as of 2005. Ezel answers yours: whether it's allowed on your facts, under the current Massachusetts Rules of Professional Conduct, with citations.

Currency note: this opinion is from 2005
Subsequent statutory amendments, court decisions, or later opinions or rule amendments may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.
Disclaimer: Advisory only. Not binding precedent.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official ethics opinion. The original opinion (linked on this page) is the authoritative source for any reliance.

Plain-English summary

A lawyer received a valuable piece of art from a longstanding client who was an art collector and not related to the lawyer. In prior years the lawyer had prepared the client's federal gift tax returns when a gift exceeded the annual exclusion. The lawyer asked whether he could keep the artwork and prepare the gift tax return reporting the gift without violating the rules. The committee analyzes the question under Mass. R. Prof. C. 1.8(c), which bars a lawyer from preparing an instrument giving the lawyer a substantial gift from a client unless the client is related to the lawyer.

The committee first concludes the gift was substantial: while substantiality usually turns on the value relative to the client's and lawyer's assets, the committee treats the fact that a federal gift tax return must be filed as sufficient evidence that the gift was substantial for purposes of Rule 1.8(c). Because the rule would clearly preclude the lawyer from preparing a document transferring title to himself, the committee concludes that preparing the federal gift tax return evidencing the gift would likewise be impermissible.

Advising the client to engage another lawyer or accountant for the return does not end the lawyer's obligations. Rule 1.8(c) also requires that the transaction meet fundamental standards of fairness. The committee draws on Cleary v. Cleary, which places on a fiduciary who benefits from a transaction the burden of showing the transaction was fair and that the client was fully informed or had independent advice. The committee concludes that if, at a minimum, the lawyer advised the client to obtain independent advice before the gift and to consider how it would be viewed, it may be permissible to keep the artwork so long as he prepares no instrument effecting transfer of title. The committee adds that the lawyer should weigh the consequences to his reputation, because such gifts are often viewed with suspicion by probate judges and family members, and the gift may be subject to rescission even with full compliance, citing the Restatement's "heavy burden of persuasion."

In practice

Under this opinion, conduct in which a lawyer keeps a substantial client gift is permissible only where the lawyer advised the client to obtain independent advice before the gift and the transaction meets Rule 1.8(c)'s fairness standard, and the lawyer prepares no instrument (including the federal gift tax return) that effects the transfer to himself. Per the opinion, the lawyer bears the burden of showing the transaction was fair, and the committee notes the gift may still be challenged or rescinded even when every rule requirement is satisfied.

Common questions

Q: Can a lawyer keep a substantial gift from a client?

A: The committee concludes it may be permissible only if the lawyer first advised the client to obtain independent advice and the transaction meets the fairness standard, and the lawyer does not prepare any instrument effecting the transfer to himself.

Q: Can the lawyer prepare the gift tax return reporting the gift?

A: No. The committee concludes that preparing the federal gift tax return evidencing the gift to the lawyer is impermissible under Rule 1.8(c), the same as preparing a document transferring title.

Q: What makes a gift "substantial" under Rule 1.8(c)?

A: Substantiality ordinarily depends on the gift's value relative to the client's and lawyer's assets, but the committee treats the requirement to file a federal gift tax return as sufficient evidence that the gift was substantial here.

Background and rules framework

The opinion interprets Mass. R. Prof. C. 1.8(c) (gifts to a lawyer; preparation of instruments) and its Comment 2, corresponding to Model Rule 1.8(c). It applies Massachusetts fiduciary-fairness principles from Cleary v. Cleary and the Restatement (Third) of the Law Governing Lawyers section 127.

Citations and references

Rules of Professional Conduct:

  • Model Rule 1.8 / Mass. R. Prof. C. 1.8(c) (substantial gifts from clients; preparing instruments)

Cases:

  • Cleary v. Cleary, 427 Mass. 286 (1998) (fiduciary's burden to show a benefiting transaction was fair)
  • Webster v. Kelly, 274 Mass. 564 (1931) (attorney bargaining with a client must show the transaction was fairly conducted)

Other authorities cited:

  • Restatement (Third) of the Law Governing Lawyers section 127 (2000)

See also

Source

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