A fiduciary (which includes, includes, but is not limited to, a personal representative, conservator and trustee) is absolutely entitled to hire an attorney to assist them in their duties in managing the estate or trust. Furthermore, the attorney’s compensation comes at the expense of the estate or trust. This authority is expressly allowed by statute:
- “[A personal representative may]… [e]mploy an attorney to perform necessary legal services or to advise or assist the personal representative in the performance of the personal representative’s administrative duties, even if the attorney is associated with the personal representative, and act without independent investigation upon the attorney’s recommendation. An attorney employed… shall receive reasonable compensation for his or her employment.” MCL 700.3715(w).
- “Acting reasonably in an effort to accomplish the purpose of the appointment and without court authorization or confirmation, a conservator may … [e]mploy an attorney to perform necessary legal services or to advise or assist the conservator in the performance of the conservator’s administrative duties, even if the attorney is associated with the conservator, and act without independent investigation upon the attorney’s recommendation. An attorney employed… shall receive reasonable compensation for his or her employment.” MCL 700.5423(2)(z).
- “[A trustee may]… employ an attorney to perform necessary legal services or to advise or assist the trustee in the performance of the trustee’s administrative duties, even if the attorney is associated with the trustee, and to act without independent investigation upon the attorney’s recommendation. An attorney employed under this subdivision shall receive reasonable compensation for his or her employment.” MCL 700.7817(w).
Since the attorney is paid by the estate or trust, many people assume that the attorney represents the best interests of that estate or trust and, thus, exists to serve and answer questions for the heirs, devisees or beneficiaries. In reality, this is not true. The attorney represents the fiduciary, not the trust or estate. This means that the fiduciary and his or her attorney enjoy the attorney-client privilege and do not have to divulge their confidential communications. This also means that the attorney acts at the direction of the fiduciary and protects his or her interests, not necessarily those of the estate. The attorney does not represent the interests of the beneficiaries and does not have the obligation to divulge information or answer questions outside of the mandatory accountings, reports and disclosures required by law.
This arrangement is also codified by court rule. “An attorney filing an appearance on behalf of a fiduciary shall represent the fiduciary.” MCR 5.117(A).
ESTATE OF MAKI V COEN – MICHIGAN COURT OF APPEALS (2017)
In Estate of Maki v Coen, 318 Mich App 532; 899 NW2d 111 (2017), the Michigan Court of Appeals determined that an estate has no standing to sue the attorney who represented the estate’s conservator for a breach of the attorney’s professional duty of care. If the attorney owed duties to both the conservator and the estate, it would create a conflict of interest.
Tyler Maki was born in 1994 with a congenital birth defect. Tyler’s family filed a medical malpractice action on his behalf against his doctors and medical care providers. The law firm Sommers Schwartz, PC represented Tyler in the action. The parties settled the lawsuit in 1998, and the medical providers agreed to pay an immediate cash settlement and provide Tyler with regular payments from a structured annuity.
Tyler’s mother, Mandy Maki–Childs, was his conservator from November 1998 until October 2006. Defendant Victor Coen of Sommer Schwartz PC represented Maki–Childs in connection with her duties as Tyler’s conservator. According to plaintiff, Coen did not include the structured settlement income on the annual accounts he prepared in connection with the conservatorship. Coen allegedly excluded the settlement income because the settlement had confidential terms and because a letter from the probate judge did not, in his opinion, require an accounting of the funds. Plaintiff contends that problems developed because of Maki–Childs’s failure to account for the settlement funds, and she was removed as conservator. Tyler’s new conservator, Heidi Brown, filed suit against Maki–Childs in 2009 for her failure to account for the settlement funds during her conservatorship. Defendant John C. Burns represented Brown in that lawsuit. In October 2011, the court entered a judgment against Maki–Childs in the amount of $673,958.15, and Maki–Childs filed for bankruptcy. Defendant Phoebe J. Moore, founder of defendant Phoebe J. Moore, P.C. (collectively, the Moore defendants), replaced Brown as Tyler’s conservator in December 2011.
Tyler’s father, Michael Paul Maki, was appointed plenary guardian over both Tyler’s estate and person. Maki sued defendants on behalf of Tyler’s estate (hereinafter, plaintiff), alleging that they “owed Tyler, as their client.” a duty of care to provide services as would attorneys of ordinary learning and judgment. Plaintiff alleged that Coen and his employer, Sommers Schwartz, PC (collectively, the Coen defendants), violated their duty of care in connection with the legal services they provided to Maki–Childs during her conservatorship. The complaint specified that the Moore defendants did not timely pursue and preserve plaintiff’s claims against the Coen defendants. The complaint similarly alleged that defendant Burns should have discovered any meritorious cause of action against the Coen defendants during his representation of conservator Heidi Brown.
The Coen defendants moved for summary disposition, asserting that plaintiff lacked standing as the real party in interest because Coen’s client—the only person entitled to file a malpractice claim—was conservator Maki–Childs. Burns moved for summary disposition as well, arguing that he had no attorney-client relationship with plaintiff and that plaintiff was not the real party in interest. Finally, The Moore defendants also moved for summary disposition, arguing, in relevant part, that plaintiff lacked standing to file a lawsuit against the Coen defendants. The trial court concluded that only Maki–Childs had standing to sue the Coen defendants. The trial court also explained that concluding the attorney represented both the conservator and the estate would lead to a conflict of interest, so it concluded that the attorney could only have been representing conservator Maki-Childs.
The Court of Appeals affirmed the lower court’s decision. It affirmed that MCL 700.5423(2)(z) and MCR 5.117(A) establish that an attorney hired to perform legal services for a conservator represents the conservator and does not have an attorney-client relationship with the estate. In addition, the court rejected Maki’s argument that even without an attorney-client relationship, the estate could sue in tort because it was a third-party beneficiary of the contract between Coen and Maki-Childs. The attorney’s mere knowledge of a benefit to Tyler’s estate was not enough elevate it to the status of a named third-party beneficiary, and in any event the estate’s complaint never pleaded such status. Accordingly, the court upheld the trial court’s grant of summary disposition in favor of both Coen and Sommers Schwartz PC. Likewise, Moore and Burns could not sue Coen and Sommers Schwartz PC because the estate was not their client of Coen and, therefore, could not be sued by the estate for legal malpractice.
WHAT CAN BENEFICIARIES DO?
Case law, statute and court rule is clear that the attorney hired by the fiduciary represents the fiduciary only and not the estate or the beneficiaries. This does not mean that the beneficiaries are without recourse. Beneficiaries can retain their own legal counsel to represent their interests and file any petitions necessary to compel the fiduciary to do his or her job properly or protect the beneficiary’s rights. Under some circumstances, the court can order an estate to pay the attorney fees of an individual not acting as a fiduciary. In re Valentino Estate, 128 Mich App 87; 339 NW2d 698 (1983). A beneficiary’s attorney fees “may be charged against the estate” if “the services rendered were beneficial to the estate as a whole rather than to an individual or group of individuals interested therein…”. Becht v Miller, 279 Mich 629, 638; 273 NW 294 (1937). However, it should be “limited to those cases in which the services performed have not only been distinctly beneficial to the estate, but became necessary either by reason of laches, negligence or fraud of the legal representative of the estate.” Id.
Our skilled probate lawyers have significant experience representing the interests of fiduciaries and beneficiaries alike. If you have further questions or need legal representation, then do not hesitate to contact the experienced attorneys at Kershaw, Vititoe & Jedinak PLC for assistance today.