May a lawyer who serves on a company's board of directors prepare an estate plan for a client who wants to name that same company as a beneficiary?

Plain-English summary

This opinion re-issues the analysis of Formal Opinion 38 (2007) under the current Nevada Rules of Professional Conduct. It asks whether a lawyer who sits on a company's board of directors may render estate-planning services to a client who is interested in naming that same company as a beneficiary, and whether the lawyer must disclose the board relationship to the client.

The Committee answered no to the first question. NRPC 1.7(a) prohibits representing a client where there is a concurrent conflict of interest, which exists when there is a significant risk that the representation will be materially limited by the lawyer's responsibilities to a third person or by a personal interest of the lawyer (NRPC 1.7(a)(2)). Although the lawyer does not represent the company and has no attorney-client relationship with it, the lawyer holds a fiduciary relationship to the company as a director, with duties of loyalty, confidentiality, and impartiality. Citing Comments 8 and 9 to ABA Model Rule 1.7 (which note that a lawyer's duties of loyalty and independence may be materially limited by fiduciary duties arising from service as a trustee, corporate executor, or corporate director), the opinion concludes that the lawyer's inside knowledge of the company's finances and interest in advancing its economic goals would create a conflict. For example, if the company is heading toward bankruptcy or dissolution unknown to the public, the lawyer's confidentiality duty to the company could keep the lawyer from warning the estate-planning client.

The answer to the second question was yes: the lawyer must disclose to the client that the lawyer is associated with the company and that there may be a conflict. If a conflict exists, the lawyer may seek the written consent of both the estate-planning client and the company, but only if the lawyer reasonably believes the representation will not be adversely affected, and must obtain the company's consent to disclose any information that could affect the client's decisions. Regardless of whether an actual conflict exists, the opinion concludes the lawyer should reveal any potential conflict arising from the board position so the client can make an informed decision to proceed or seek other counsel. The opinion adds Ricks v. Dabney (In re Jane Tiffany Living Trust 2001), 177 P.3d 1060 (Nev. 2008), to the authorities relied on.

In practice

The opinion holds that, under the current Nevada rule, a lawyer-director should not prepare an estate plan naming the company as a beneficiary because the lawyer's fiduciary duties to the company create a concurrent conflict under NRPC 1.7(a)(2). Disclosure of the board relationship and any potential conflict is required, and the lawyer may undertake the work only with the informed written consent of both the client and the company and a reasonable belief that the representation will not be adversely affected.

Common questions

Q: Can a lawyer who serves on a company's board prepare an estate plan leaving assets to that company?

A: The opinion concluded the lawyer should not, because the lawyer's fiduciary duties to the company and inside financial knowledge create a concurrent conflict under NRPC 1.7(a)(2) that can materially limit independent advice to the client.

Q: Does the lawyer have to tell the estate-planning client about the board seat?

A: Yes. The opinion holds the lawyer must disclose the association with the company and that there may be a conflict, and should reveal any potential conflict even where no actual conflict exists, so the client can decide whether to proceed or seek other counsel.

Q: Can informed consent cure the conflict?

A: Per the opinion, the lawyer may seek written consent from both the client and the company, but only if the lawyer reasonably believes the representation will not be adversely affected, and the company must consent to disclosure of information that could affect the client's decisions.

Background and rules framework

The opinion interprets NRPC 1.7 (concurrent conflicts of interest), particularly 1.7(a)(2) (material limitation by responsibilities to a third person or the lawyer's own interests), with reference to NRPC 1.8 and 2.1 and to the comments to ABA Model Rule 1.7 (consulted for guidance under NRPC 1.0A). It applies Nevada authority including Duval Ranching Co. v. Glickman, Williams v. Waldman, and Ricks v. Dabney.

Citations and references

Rules of Professional Conduct:

• Model Rule 1.7 / Nev. RPC 1.7(a)(2) (concurrent conflict; material limitation)
• Model Rule 1.8 / Nev. RPC 1.8 (specific conflict rules)
• Model Rule 2.1 / Nev. RPC 2.1 (independent judgment; candid advice)

Cases:

• Duval Ranching Co. v. Glickman, 930 F. Supp. 469 (D. Nev. 1996), conflict from responsibility to a third party
• Williams v. Waldman, 108 Nev. 466, 836 P.2d 614 (1992), client entitled to disinterested advice
• Ricks v. Dabney (In re Jane Tiffany Living Trust 2001), 177 P.3d 1060 (Nev. 2008)

Other opinions cited:

• Maryland State Bar Ass'n Comm. on Ethics, Docket 2003-09 (2003): lawyer on a church legacy committee offering estate plans benefiting the church

See also

• NV Ethics Op. 38: the same question, issued earlier under the former SCR numbering
• ABA Formal Op. 98-410: lawyer serving as director of a client corporation

Source

• Landing page: https://nvbar.org/for-lawyers/ethics-discipline/ethics-opinions/
• Original PDF: https://nvbar.org/wp-content/uploads/Ethics_Op_47_0.pdf