Drafting Attorneys as Fiduciaries: Fashioning an Optimal Ethical Rule for Conflicts of Interest

Abstract

The American Bar Association recently revised the ethical rules that govern lawyers. Its Ethics 2000 Commission proposed a number of changes to the Model Rules of Professional Conduct, including revisions to the rules that affect how the profession handles conflicts of interest in the area of attorneys who draft instruments that name themselves as fiduciaries. The intersection of these changes, with their subsequent clarification by an ABA opinion issued in May 2002, has broad implications for attorneys practicing in this area. Given the increasing elderly population, the trillions of dollars that they are transferring to their baby-boomer children, and the shrinking number of banks willing to assume the role of fiduciary, there is an argument that the profession should be encouraging its members to take on this role for clients. However, the financial interest that the drafting attorney has in the fiduciary fee and the information asymmetry between lawyers and most clients create a conflict of interest. This article explores the ethical norm that resulted from the Ethics 2000 revisions to the Model Rules and the issuance of the ABA opinion interpreting those revisions. It explores the flaws in this norm and how it might be revised to better minimize the agency costs that exist while remaining consistent with the fiduciary nature of the attorney-client relationship.