Can a trustee's lawyer who discovers the trustee is stealing trust funds warn the beneficiaries or the court?
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This page answers the general question as of 1993. Ezel answers yours: whether it's allowed on your facts, under the current Massachusetts Rules of Professional Conduct, with citations.
Plain-English summary
A lawyer represented a trustee, in the trustee's fiduciary capacity, of a trust created for a missing sibling whose issue were the remaindermen. Reviewing brokerage statements the lawyer received, the lawyer discovered the trustee had written substantial trust checks to a personal account and to cash, and the trustee had not responded to the lawyer's or the accountant's requests for an explanation. The lawyer asked about the attorney-client privilege and whether disclosing the situation to the remaindermen was permitted or required.
The committee, drawing on five recent opinions (89-1, 90-1, 90-2, 91-4, 91-6), said the issue was not the privilege but the broader duty under DR 4-101 to preserve confidences and secrets. It held that the information, though it came from the bank rather than the trustee, was a "secret" under DR 4-101(A) because it was gained in the professional relationship and its disclosure would be detrimental to the client, and that the client's unexplained silence also fit the definition. The relevant exception was DR 4-101(C)(3), which permits revealing a client's intention to commit a crime and the information needed to prevent it. Per Opinion 90-2, the lawyer must conclude the client is "reasonably likely" to intend a crime before that discretion arises, and the committee noted that past misapplications do not foreclose the exception where there is an ongoing pattern or anticipated future concealment, such as false tax filings.
The committee added that DR 7-102(B)(1) could impose a mandatory duty: if a lawyer receives information clearly establishing that the client committed a fraud during the representation and the client refuses to rectify it, the lawyer must notify the affected person or tribunal unless the information is privileged. Under the committee's view in Opinions 89-1, 91-4, and 91-6, if the lawyer has discretion to reveal under DR 4-101(C)(3) the information cannot be privileged, making the DR 7-102(B)(1) obligation mandatory, though it noted that both present and former Bar Counsel read that rule to impose no mandatory duty here. The committee said the lawyer should usually discuss the matter with the client before disclosing, flagged unresolved substantive-law questions (including self-incrimination and the lawyer's possible fiduciary duty to the beneficiaries) that it could not answer, and pointed to Tarasoff and related authorities for guidance.
Currency note
This opinion was issued in 1993, before Massachusetts's adoption of the 2015 revisions to the Rules of Professional Conduct. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule, deadline, or requirement mentioned here.
Common questions
Q: Can a lawyer disclose that a trustee client is stealing trust funds?
A: The committee said the lawyer has discretion to reveal under DR 4-101(C)(3) if the lawyer concludes the client is reasonably likely to intend a future crime, and may reveal the information necessary to prevent it to the beneficiaries or the court.
Q: Does it matter that the misappropriation already happened?
A: The committee said past misapplications do not make the exception inapplicable, because the lawyer may conclude there is an ongoing pattern or future criminal activity (such as false tax returns) to conceal the conduct.
Q: Is disclosure ever mandatory rather than discretionary?
A: The committee said DR 7-102(B)(1) can require disclosure if information clearly establishes a fraud committed during the representation and the client refuses to rectify it, though it noted Bar Counsel read that rule not to impose a mandatory duty on these facts.
Q: Should the lawyer talk to the client first?
A: Usually, yes. The committee said that in the ordinary situation a lawyer should try to discuss the matter personally with the client before revealing a confidence, absent exigency or danger to the lawyer.
Background and rules framework
The opinion applied DR 4-101 (confidences and secrets), corresponding to Model Rule 1.6, including the future-crime exception of DR 4-101(C)(3) (now reflected in Model Rule 1.6(b)), and DR 7-102(B)(1) (duty on learning of a client's fraud during the representation), corresponding to Model Rule 4.1 and related candor obligations. The analysis turned on whether the client was "reasonably likely" to intend a crime and whether the fraud occurred during the representation.
Citations and references
Rules of Professional Conduct:
- Model Rule 1.6 / DR 4-101 (confidences and secrets; future-crime exception)
- Model Rule 4.1 / DR 7-102(B)(1) (disclosure of a client's fraud during the representation)
Cases:
- Tarasoff v. Regents of the University of California, 17 Cal.3d 425, 551 P.2d 334 (1976) (duty to warn an identifiable victim)
- McIntosh v. Milano, 168 N.J. Super. 466, 403 A.2d 500 (Law Div. 1979) (accord)
Other opinions cited:
- MBA Opinions 89-1, 90-1, 90-2, 91-4, 91-6 (disclosure of a client's ongoing fraud or crime affecting third parties)
See also
- MA Bar Ethics Op. 99-5: Joint clients and estate theft
- MA Bar Ethics Op. 94-3: Estate funds a client may divert and a surety conflict
Source
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