A conflict of interest is when one person has loyalty to two or more sides of a disagreement. Without the disagreement, you can have apotential conflict of interest when one person has loyalty to more than one person in a transaction. For me the situation arises most often when I represent husband and wife with their estate planning, but another common way conflicts arise in trusts and estates is when one person is both a fiduciary (such as an executor, trustee or agent) as well as a beneficiary.
Spouses can have different desires about how to set up their estate plans, such as who will receive their assets on their deaths, who will be their fiduciaries and how their distributions will be structured. As long as both spouses agree, I do not have a conflict of interest and can easily represent both spouses. This makes it easier and cheaper for you. When I represent both spouses to develop their estate plan, I ask them to sign a waiver of the potential conflict of interest in order to warn them of a potential problem in our lawyer-client relationship. If an actual conflict arises (for instance, if the spouses disagree as how to distribute their assets), then I need to withdraw as both spouses’ attorney. At that point I cannot represent one spouse to the disadvantage of the other.
Clients may be in a conflict position if they are both a fiduciary and a beneficiary. This can be a conflict of interest because a fiduciary often distributes assets to other people. For example, if a daughter is the trustee for her parents’ trust that distributes the parents’ assets between several siblings including herself, the daughter may not want to distribute the assets to her siblings. However, as her parents’ fiduciary, she is required to distribute the assets as her parents wished. This is not to say that you shouldn’t name one child as your fiduciary over another, but it is good to be aware of this potential problem area.
There are many other times that conflicts of interest arise, but these are the two most common. It is helpful to recognize that these conflicts exist and to prepare for them. If you have any questions or concerns, please feel free to call me.
Previously posted by Susan on March 9, 2015