Chapter 38 - EXHIBIT 38N • "ETHICAL CONSIDERATIONS IN INTERNATIONAL ESTATE PLANNING"

• Jurisdiction: Colorado

EXHIBIT 38N • "ETHICAL CONSIDERATIONS IN INTERNATIONAL ESTATE PLANNING" This article was originally published in the BNA Tax Management Estates, Gifts & Trusts Journal (September 2011). The article is reprinted with permission from Tax Management Inc., a BNA Company. For customer service call 1-800-223-7270 or e-mail tm@bna.com. For more information, visit BNA Tax Management's website at www.bnatax.com.

Ethical Considerations in International Estate Planning

by Christopher M. Reimer, Esq., and Michael A. Heimos, Esq.^*

INTRODUCTION

International estate planning raises a number of unique professional responsibility issues. Legal professionals have traditionally been subject to regulation and discipline from the highest authority within each jurisdiction in which they are licensed. However, with the rise of the global economy, many clients and their assets do not easily fit into a single jurisdiction. International estate planners must adapt to an increasing number of different, and even inconsistent, ethical standards. Many of these standards may be vague or uncertain. Failure to adhere to applicable rules may subject an attorney to professional discipline, including investigation, the loss of fees, suspension, and disbarment. Collateral consequences may include civil malpractice liability and, in certain situations, criminal prosecution. Potential ethical issues raised by international estate planning include the increased risk of unauthorized practice of law, whether to obtain the assistance of foreign counsel or consultants (including partnership and fee-splitting rules), permissible advertising in foreign jurisdictions, and how to avoid aiding clients in carrying out fraudulent or criminal activities.

UNAUTHORIZED PRACTICE OF LAW

Inadvertent unauthorized practice of law poses one of the foremost risks to any form of international legal practice. Often, a client or assets may be located in a jurisdiction in which the lawyer has not received a license. Most jurisdictions have statutes or rules that prevent individuals from practicing law if they have not obtained authorization from the appropriate licensing authority.¹ Practicing law in a foreign jurisdiction without a license may also violate the rules of the jurisdiction in which the lawyer is licensed.

Unauthorized practice of law can trigger undesirable consequences. Attorneys may be denied fees for the work they have done,² enjoined from future practice in the jurisdiction³ (which can pose special problems to growing firms), endanger their malpractice coverage,⁴ or have their pleadings (or even estate planning documents) rendered void.⁵ Jurisdictions may charge local attorneys with aiding and abetting the unauthorized practice of law.⁶

Attorneys may seek to minimize the problem by relying on a narrow definition of the phrase ''practice of law."⁷ They may also count on authorities not sanctioning them for isolated instances of unauthorized practice.⁸ But relying on such techniques may be risky if there is no rule, statute, or case law guaranteeing their success.

Another strategy is for an attorney to seek authorization to engage in limited practice of law in a foreign jurisdiction on a temporary basis. This solution may be of limited use because such pro hoc vice admission is typically limited to a specific matter and authorities may not extend it to include general estate planning business.⁹

An international estate planning attorney may attempt to limit advice to non-local matters while he or she is present in a foreign jurisdiction. As shown by case law in New York, this strategy is not foolproof, because there is a possibility that such advice may implicate matters of local law in which the attorney is not licensed.¹⁰ Another strategy is for international estate planning attorneys to render advice from jurisdictions in which they are licensed and simply not practice law in foreign jurisdictions. This solution may be difficult to carry out, especially if the needs of particular clients require an attorney to leave the jurisdiction to meet with a trust's settlors, trustees, or beneficiaries, examine property, or negotiate or collaborate with foreign counsel.¹¹ An attorney may also be subject to ethical sanctions despite the lack of physical presence in a jurisdiction.¹²

One possible solution is for a law firm to establish a foreign presence with the use of licensed, foreign professionals. This goal presents its own practical and ethical issues. It is likely necessary that locally licensed professionals conduct the practice of law in such offices. Non-local attorneys may carry out some transitory professional activities incidental to a firm's out-of-state operations if the attorneys carry out such activities in a coordinating-supervisory capacity.¹³ Otherwise, local law will likely prohibit foreign attorneys from practicing law in the jurisdiction. Law firms seeking to expand themselves across international borders also need to be mindful of different rules that apply to lawyers abroad, including different legal structures, systems segmenting the legal profession, requisite and prohibited local affiliations, and supranational regulations.

On August 12, 2002, the American Bar Association House of Delegates adopted nine recommendations contained in the Final Report of its Commission on Multijurisdictional Practice (MJP).¹⁴ Though not a panacea, the work of the MJP goes a long way to guiding practitioners in this area. The MJP website has an excellent page with numerous helpful links — such as, a ''Chart on State Implementation of MJP Recommendations.¹⁵

EMPLOYMENT OF FOREIGN COUNSEL AND LEGAL CONSULTANTS

It may be necessary for the international estate planner to seek the assistance of foreign attorneys or legal consultants. Attorneys have a general duty to provide clients with competent representation, including appropriate knowledge, skill, thoroughness, and preparation for a matter.¹⁶ Competent representation may require association or consultation with another attorney,¹⁷ including one licensed in a foreign jurisdiction. The attorney may also need to retain experts on foreign law or collaborate with foreign counsel if property is located abroad. In such situations, the attorney is likely responsible for ensuring that foreign co-counsel act in a competent and ethical fashion.¹⁸ The local attorney likely must remain responsible for foreign matters.¹⁹ Firms employing foreign counsel should be careful not to include prohibited information in their letterhead, business cards, or other promotional materials, including impermissible claims that a foreign attorney practices law in the local jurisdiction²⁰ or that such attorney has specialties not recognized by the local licensing authority.²¹ Local attorneys should also be careful to avoid assisting foreign attorneys in conducting the unauthorized practice of law in the local jurisdiction.²²

The American Bar Association has issued an opinion authorizing U.S. attorneys to form legal partnerships with attorneys licensed to practice law in foreign jurisdictions.²³ The local attorney has a duty to ensure that foreign lawyers who are party to such an arrangement are qualified under the standards of their home jurisdictions and to ensure that the partnership is managed in an ethical fashion.²⁴

Employing foreign counsel may raise questions about the ethics of fee-splitting. The Model Rules of Professional Conduct allow lawyers from different firms to split legal fees if (1) the division is proportional or each lawyer assumes joint responsibility for the representation, (2) the client agrees in writing, and (3) the total fees are reasonable.²⁵ Attorneys generally may not share legal fees with non-attorneys.²⁶ But the rules may consider a foreign attorney an "attorney" for fee-splitting purposes, despite lacking a license in the domestic jurisdiction.²⁷ While past decisions have tended to focus on U.S. attorneys sharing fees with attorneys licensed in other U.S. states, a similar rationale should apply to non-U.S. attorneys if a foreign jurisdiction subjects such attorneys to regulations and standards of professionalism beyond those of a layperson.²⁸

ADVERTISING IN FOREIGN JURISDICTIONS

Traditionally, the American Bar Association and licensing authorities have exhibited hostility towards advertising by legal professionals. In Informal Opinion 513, the ABA Committee on Professional Ethics explained that it was unethical to solicit legal employment through advertisements and personal communications not warranted by personal...