Trusts and Estates

Ca. Trs. & Estates Quarterly Volume 12, Issue 2, Summer 2006


By Jeffrey A. Jaech and Kathleen A. Meehan*


When a personal representative’s personal interest conflicts with his fiduciary duties, the question arises whether that fiduciary needs two separate attorneys. Consider these not-so-hypothetical scenarios:

  • You represent the decedent’s surviving spouse. She is now the sole trustee of a living trust that she and her late husband established with their community property. As is typical, the trust instrument provides for the creation of two subtrusts following the husband’s death: a revocable survivor’s trust to hold the surviving spouse’s one-half of the community property and an irrevocable trust (the bypass trust) to hold her husband’s one-half of the community property. The community property included their residence. Rather than divide ownership of the residence between two trusts, your client tells you she wants the entire residence to become part of her survivor’s trust, and property of equal value would be allocated to the bypass trust. The residence is appraised at $1,000,000. Your savvy client reminds you that an undivided one-half interest in the residence would be worth less than $500,000, because of its lack of marketability. Thus, she proposes effectively to buy her husband’s one-half of the residence for $400,000. Your client’s personal interest in buying her husband’s share for that price may conflict with her duty to the other trust beneficiaries to obtain a higher price.1 Should you advise her that she should get another lawyer to advise her in her individual capacity?
  • Your client is the executor and also the residuary beneficiary. A question arises whether a devise to another beneficiary should bear its own estate tax, or whether the tax should be paid from the residue. May you represent your client personally against the other beneficiary as the client seeks an order that taxes fall on each devisee? What if your client as executor seeks to collect a debt from a beneficiary, the collection of which would enhance the residue passing to your client? Could you represent your client in an action, unrelated to the estate, to collect a debt from a beneficiary for the client’s personal account?
  • You represent the administrator of an estate, who tells you that he borrowed $115,000 from the estate without court authorization for personal reasons. The administrator asks for your help in keeping him "out of trouble." You immediately attempt to find for the administrator a personal loan, so he can repay the estate, but are unsuccessful. What should you do now? Would withdrawing as the administrator’s counsel solve your problem? Should you advise the administrator to hire another lawyer to keep him "out of trouble"?

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