Can a lawyer who advises a trust grantor be paid part of his fee directly by the bank serving as trustee?
Ohio BPC Opinion 90-022: Whether a Lawyer May Receive Part of His Fee From the Client's Trustee Bank
Short answer: The Board concluded that a lawyer may receive part of his fee from the client's trustee bank only after full disclosure and the client's consent, and only if his independent judgment is not impaired and he does not share fees with the bank.
Disclaimer: This is an advisory ethics opinion. Advisory opinions are not binding; they interpret the Ohio Board of Professional Conduct's rules of professional conduct and are persuasive authority. This summary is for research purposes only and is not legal advice. Verify current rules before acting on any specific guidance.
About this page: The plain-English summary and Q&A below were written by Ezel based on the official opinion. The opinion text is reproduced at the bottom; the official source (linked) controls.
Plain-English summary
The Board addressed whether an attorney could tell clients about a bank's small trust program and receive his fee, for advice on administering the trust, as a percentage of the trustee fee the grantor pays the bank, with the bank remitting that percentage directly to the lawyer. It concluded that, within proper guidelines, the attorney may inform clients of the bank's service, but identified several limits. The lawyer may not authorize the bank to recommend his services to people without counsel who receive the bank's marketing, because the bank is not an organization recognized under DR 2-103(D) to operate a referral service (DR 2-103(C)), and the lawyer may not share fees with the bank, a non-lawyer, under DR 3-102(A).
The Board treated the lawyer's independent professional judgment as the more serious concern. Under DR 5-101(A), the lawyer must, in consultation with the client-grantor, conclude that participation benefits the client and that he offers independent advice not available from the bank, and he must fully disclose the bank's role and his own financial and personal interest in the bank's payment. It quoted DR 5-107(A) and (B): a lawyer may not, absent the client's consent after full disclosure, accept compensation or anything of value for the representation from someone other than the client, and may not permit a person who pays him to direct or regulate his professional judgment. The Board explained these rules guard against conflicts where a third-party payer's interests may be adverse to the client and against undermining the independence of the lawyer's advice, citing ABA Formal Opinions 196 (1939) and 304 (1962) on undisclosed fees and commissions.
The Board reasoned that because the client often selects the bank as trustee only on the attorney's advice, it is imperative that the lawyer tell the client in advance that the bank will pay his fee, that the client must consent with knowledge of the entire transaction before the lawyer continues, and that the lawyer must keep his advice free of any interference by the bank. It concluded that only when those conditions are satisfied may the attorney ethically agree to receive all or part of his fee from the bank managing the client's trust, and it expressly did not address related advertising or unauthorized-practice questions.
Currency note
The Board flags this opinion as not current in light of subsequent rule amendments to DR 2-101 (effective January 1, 1993 and August 16, 1993) and DR 2-103 (effective July 1, 1996). It issued in 1990 under Ohio's former Code of Professional Responsibility (superseded by the Ohio Rules of Professional Conduct effective February 1, 2007). Treat this page as historical context, not current guidance. Verify against the current Ohio Rules of Professional Conduct before relying on any specific rule mentioned here.
Common questions
Q: Can a lawyer be paid part of his fee directly by the bank acting as trustee?
A: Under this opinion, only after full disclosure and the client's consent with knowledge of the entire transaction, consistent with DR 5-101(A) and DR 5-107.
Q: Can the bank recommend the lawyer's services to its trust customers?
A: No. The Board concluded the lawyer may not authorize the bank to recommend his services, because the bank is not an organization recognized under DR 2-103(D) to run a referral service (DR 2-103(C)).
Q: Can the lawyer split fees with the bank?
A: No. The Board concluded that sharing fees with the bank, a non-lawyer, would violate DR 3-102(A).
Q: What must the lawyer protect against once the bank is paying him?
A: The Board concluded the lawyer must keep his professional judgment and advice free of any interference by the bank, consistent with DR 5-107(B).
Background and rules framework
The opinion interprets the former Code of Professional Responsibility: DR 2-103(C) and (D) (recommendation of a lawyer and recognized referral organizations), DR 3-102(A) (no fee-sharing with a non-lawyer), DR 5-101(A) (conflicts from the lawyer's own interests), and DR 5-107(A) and (B) (compensation from a third party and protecting professional judgment).
Citations and references
Rules of Professional Responsibility (Ohio, former):
- DR 2-103(C), (D), recommendation of a lawyer and recognized referral organizations
- DR 3-102(A), no fee-sharing with a non-lawyer
- DR 5-101(A), conflicts from the lawyer's own financial or personal interest
- DR 5-107(A), (B), compensation from a third party and protecting professional judgment
Other opinions cited:
- ABA Committee on Ethics and Professional Responsibility, Formal Op. 196 (1939): undisclosed retained portion of a fee
- ABA Committee on Ethics and Professional Responsibility, Formal Op. 304 (1962): undisclosed commission for recommending title insurance
See also
- Ohio BPC Op. 1990-009: Lawyer Also Acting as a Realtor
- Ohio BPC Op. 1989-031: Lawyer Employed by a CPA Firm
- Ohio BPC Op. 1989-002: Sharing Fees With a Suspended or Disbarred Lawyer
Source
- Landing page: https://ohioadvop.org/advisory-opinion-index/
- Original PDF: https://www.ohioadvop.org/wp-content/uploads/2017/04/Op-90-022.pdf
Original opinion text
Reproduced from the official source for research purposes. The linked source is authoritative.
The Supreme Court of Ohio
BOARD OF COMMISSIONERS ON GRIEVANCES AND DISCIPLINE
41 SOUTH HIGH STREET-SUITE 3370, COLUMBUS, OH 43215-6105
(614) 644-5800 FAX: (614) 644-5804
OFFICE OF SECRETARY
OPINION 90-22
October 12, 1990
[CPR Opinion-provides advice under the Ohio Code of Professional Responsibility which is superseded by the Ohio Rules of Professional Conduct, eff. 2/1/2007.]
[Not current-subsequent rule amendments to DR 2-101, eff. Jan. 1, 1993 and Aug. 16, 1993; DR 2-103, eff. Jul. 1, 1996.]
SYLLABUS: A lawyer may represent a grantor of a trust, and at the same time, receive a portion of his fee from the third party trustee bank after the client has knowledge of the entire transaction and consents to such a fee arrangement.
OPINION: We have before us your request for an opinion concerning the propriety of an attorney informing his clients of a bank's small trust program and receiving his fee for advice in connection with the administration of the trust, a percentage of the trustee fee that the grantor (client) pays the bank. The bank, it is contemplated, would remit a percentage amount directly to the lawyer. The bank now markets such a small trust program and it wishes to provide and help pay for such a lawyer assisted option when the grantor (client) chooses it.
In your request letter you pose these questions:
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Is it ethically proper to inform my clients of the availability of the bank's small trust program?
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Is it ethically proper to agree with my client that the amount of compensation and fee agreed to between lawyer and client can be paid directly to the lawyer, upon the client's instructions, from the bank that is managing the client's trust?
If the establishment and operation of such a small trust program comes within the legal and ethical guidelines discussed herein, an attorney may inform his clients of any such service offered by the bank. There are a number of ethical concerns that would define and limit the attorney's role in such a program. An attorney is not permitted to authorize the bank to recommend the use of his services to those persons who are without legal counsel but who may receive solicitations or marketing information directly from the bank. DR 2-103(C). The bank is not an organization recognized under DR 2-103 (D) that may operate a lawyer referral service. In a similar vein, the lawyer could not agree to share his fees with the bank (a non-lawyer) without violating DR 3-102 (A).
A more serious question arises in considering whether the lawyer's relationship with the bank may impair his independent, professional judgment. The lawyer must in consultation with his client (the grantor under a trust agreement) come to the conclusion that participation in the bank's small trust program is of benefit to the client and that the lawyer has independent, professional judgment and legal advice to offer the client that is not available from the bank or its trust department. DR 5-101 (A) requires the lawyer in this situation to disclose fully to the client the role of the bank and his own financial and personal interest in the payment of this fee by the bank.
Your second question involving the payment of attorney's fees by the bank to the lawyer by the means of returning a portion of the percentage fee it charges the client-grantor raises certain ethical problems.
DR 5-107 (A) and (B) provide as follows:
A. Except with the consent of his client after full disclosure, a lawyer shall not: 1. accept compensation for his legal services from one other than his client, 2. accept from one other than his client anything of value related to his representation of or his employment by his client.
B. A lawyer shall not permit a person who recommends, employs, or pays him to render legal services for another to direct or regulate his professional judgment in rendering such legal services.
The Disciplinary Rules set forth above reveal a two-fold concern. First, prohibited conflicts of interest may arise when fees are paid to a lawyer by a third party whose interest may be adverse to the client's. Secondly, the receipt of a fee from a third party may undermine the independence of the attorney's advice and counsel or affect the advice he renders to his client during the course of representation. These concerns are not treated lightly by the original Canons of Professional Ethics, the current Code of Professional Responsibility, or the ABA Model Rules of Professional Conduct.
In ABA Committee on Ethics and Professional Responsibility, Formal Opinion 196 (1939), the Committee examined the relationship between a lawyer and his client for title examination when such attorney retained one-fourth of the fee for abstract examination. Apparently the arrangement was carried out without the knowledge or consent of the client. The Opinion states that such an arrangement is improper unless it comes about with the full knowledge and consent of the client.
In ABA Committee on Ethics and Professional Responsibility, Formal Opinion No. 304 (1962), the ABA again examined an attorney who received a commission for recommending or selling title insurance without full disclosure to the client. The Committee rendered the following opinion:
A lawyer who receives a commission (whether delayed or not) from a title insurance company or guaranty fund for recommending or selling the insurance to his client, or for work done for the client or the company, without either fully disclosing to the client his financial interest in the transaction, or crediting the client's bill with the amount thus received, is guilty of unethical conduct. Such conduct would be a direct violation of Canon 38.
The small trust program that you have outlined in your question will remit to the lawyer a percent of its service fee that the client incurs. The client's selection of the bank's services as trustee will often occur only because of the attorney's advice that such management services are important to the client as grantor of the trust. It is imperative that the lawyer inform the client in advance that his fee will be paid by the bank. The client must give his consent, with knowledge of the entire transaction, before an attorney can ethically continue his representation. Then during the course of the advice the attorney renders to the client-grantor, he must take care that his professional advice is not clouded in any respect by the bank. There can be no interference with the relationship between attorney and client.
In conclusion, it is our opinion that only when these conditions are satisfied can the attorney ethically agree to receive all or part of his fee from the bank managing the client's trust.
This advisory opinion expressly does not treat related issues of public communication, marketing and advertising of the small trust program (DR 2-101(A)) or any questions relating to the unauthorized practice of law (DR 3-101) by the bank or any of its personnel. This is an informal, non-binding advisory opinion based upon the facts presented and limited to questions arising under the Code of Professional Responsibility.