Feb 1, 2012 12:00 PM

What do you do if your client is suffering from diminished capacity? There are no bright line rules an attorney can rely on

By Ivan Taback & Vanessa L. Maczko

What should an estate-planning attorney do when a client comes to her office to discuss an estate plan that's out of line with what the attorney would recommend or otherwise deem appropriate? What if the client is adamant about this plan even though it's inefficient for tax purposes or will likely cause conflict within the client's family? When an attorney finds herself in this situation, she should consider the possibility that the client is suffering from diminished capacity. Before drafting and executing the requested plan, the attorney should determine whether the client has sufficient capacity to understand and implement the plan and, if she doesn't, the attorney must consider her ethical obligations to the client. Sufficient capacity is a prerequisite for implementing an estate plan and, unfortunately, there are no bright line rules an attorney can rely on to determine capacity or how to deal with a client with diminished capacity.

State law provides attorneys with a standard by which to judge the capacity of a client. The Restatement (Third) of Property (Restatement Third Property) and the Restatement (Third) of Trusts (Restatement Third Trusts), for example, set forth a capacity standard for testamentary planning and one for inter vivos transfers. Once an attorney has determined that her client has diminished or no capacity, the attorney must determine her ethical obligations to the client by looking to the state's rules on ethical conduct. Many states base their ethical rules on the Model Rules of Professional Conduct (the Model Rules), which we discuss below. Although state law and ethics rules provide some guidance as to what to do when a client may have diminished capacity, neither provides clear instructions and, in some cases, further muddies the issues.

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GSTs	Family Offices
Private Foundations	Life Insurance
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Topics of Interest

Estate Tax	Donor Advised Funds
GSTs	Family Offices
Private Foundations	Life Insurance
2010 Tax Act News	Industry Trends Surveys

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