May a lawyer tell trust beneficiaries about suspected misappropriation by the trustee client?

Plain-English summary

A lawyer who represented a trustee suspected the trustee had misappropriated trust funds. The lawyer asked whether the other beneficiaries could be informed.

The opinion forbids disclosure without the trustee’s consent. It permits continued representation if the trustee comes forward with the necessary information and permits the lawyer to discuss withdrawal if the trustee will not take needed steps. It also permits immediate withdrawal. If the trustee does not take those steps and the lawyer believes the conduct is fraudulent or criminal, the lawyer must withdraw if continued representation would assist it.

In practice

The opinion separates disclosure to beneficiaries from the lawyer’s representation of the trustee. It conditions disclosure on consent and addresses when withdrawal is permissible or required.

Common questions

Q: May the lawyer notify beneficiaries without the trustee’s consent?

A: No. The opinion prohibits that disclosure absent the trustee client’s consent.

Q: May the lawyer withdraw before the trustee responds?

A: Yes. The opinion permits withdrawal at that point regardless of what steps the trustee is willing to take.

Q: When is withdrawal required?

A: If the trustee will not take the necessary steps, the lawyer believes the conduct fraudulent or criminal, and continued representation would assist it.

Background and rules framework

The published answer discusses confidentiality and withdrawal under the stated facts but cites no numbered rule.

See also

• Missouri Informal Op. 2021-01: Confidentiality and Client Funds

Source

• Landing page: https://mo-legal-ethics.org/informal-opinion/20060053/

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

QUESTION: Attorney has reason to believe that a Trustee misappropriated, and perhaps stole, funds from a Trust. Since Attorney represented the Trustee,is Attorney permitted to notify and inform the other beneficiaries of the Trustee’s management of the Trust and of Attorney’s suspicions? To Attorney’s knowledge, the other beneficiaries have received no information regarding the Trust, and they have not contacted Attorney.

ANSWER: Attorney may not disclose the information to the other beneficiaries, unless Attorney has the consent of the Trustee. If the Trustee will come forward with the necessary information, Attorney may continue to represent the Trustee in attempting to resolve any problems. It is permissible for Attorney to advise the Trustee that Attorney will withdraw if the Trustee is unwilling to take the steps Attorney believes to be necessary, including consenting to disclosure to the other beneficiaries. It is also permissible for Attorney to withdraw, at this point, regardless of the steps the Trustee is willing to take. If the Trustee is not willing to take the steps necessary to resolve the problem and Attorney believes that the Trustee’s conduct is fraudulent or criminal, Attorney must withdraw if Attorney’s representation would assist the fraudulent or criminal activity.