Love Among the Ruins: the Ethics of Counseling Happily Married Couples

• Publication year: 1998

SEATTLE UNIVERSITY LAW REVIEWVolume 22, No. 1SUMMER 1998

Love Among the Ruins: The Ethics of Counseling Happily Married Couples

Teresa Stanton Collett(fn*)

I. Introduction

The hypothetical couples presented by the Seattle University Law Review(fn1) challenge lawyers to think about the nature of the client-attorney relationship and the attorney's role in acknowledging or defining the client's relationship with others. Like other transactional lawyers, estate planners find themselves counseling multiple clients, many of whom demand departure from the individualistic norms inherent in the current system of lawyer regulation.(fn2) As illustrated by the hypothetical couples presented for consideration in this symposium, many prospective clients defy the conventional wisdom of the times exemplified by Justice Brennan's description of marriage in Eisenstat v. Baird.(fn3) Rejecting the conception of marriage as "an association of two individuals each with a separate intellectual and emotional makeup,"(fn4) these couples offer their shared lives as evidence of a union that transcends the individuals, not as a replacement of the individuals, but rather as their completion.(fn5)

Yet estate planners are acutely aware of the fact that when family disputes arise, past sacrifices of individual interests are often repudiated and compensation is sought for the losses incurred.(fn6) These retrospective claims for compensation are not limited to those who directly benefited from the sacrifice. These claims often include advisors and counselors who, it has been argued, should have dissuaded the individual from compromising his or her good for the good of another.(fn7) Thus, the estate planning lawyer shares some of the trial lawyer's skepticism when confronted with clients proposing to compromise seemingly important individual rights and interests without apparent personal gain.

This Article explores the professional tension experienced by lawyers when clients embrace an ideal of marriage as "the two shall become as one," in a legal system that has repudiated this understanding in favor of the "reality" of marriage as an association dedicated to the individual fulfillment of the man and woman involved.(fn8) Part II describes the three purposes of estate planning that define the parameters of any proposed representation. Estate planning lawyers assist clients in minimizing taxes, directing gifts to particular beneficiaries, and insuring the continuing care of loved ones. The decision to accept or reject proposed representation often turns upon whether the client's needs and desires are within these accepted purposes of estate planning.

Parts III and IV of this Article provide respective analyses of the two hypothetical fact patterns presented in this symposium. Spouses in both hypotheticals express a desire to delegate decision-making to their mate. While Professors Cahn and Turtle explore the possibility of the stronger spouse abusing the trust inherent in the proposed delegation,(fn9) this Article explores the impoverished decision-making that would occur if the delegation were intended to preclude participation. Respect for clients' autonomy and their understanding of the marital relationship requires that lawyers accept the clients' sense of the proper ordering of their relationships. However, the lawyer's responsibility to provide the best legal representation possible, combined with legal constraints embodied in the law of undue influence and postmarital agreements, warrants conditioning representation upon full participation of both spouses in the planning process, regardless of any delegation of ultimate decision making authority.

II. The Purposes of Estate Planning Representation

Except in cases of court appointment(fn10) or where representation would result in violation of the law,(fn11) American lawyers are largely free to accept or decline representation of prospective clients for almost any reason.(fn12) Lawyers often consider the following factors in selecting clients: (1) the client's apparent ability to pay any fees incurred;(fn13) (2) the type of legal assistance needed;(fn14) (3) an intuitive assessment of the future client-attorney relationship;(fn15) (4) the likelihood that the lawyer will be required to use tactics that the lawyer finds offensive;(fn16) (5) whether the lawyer believes that the client's claim or defense should be recognized by the law;(fn17) or (6) whether the lawyer believes that the matter is one worth devoting time to.(fn18) Each of these factors is relevant in estate planning practices, and has been discussed by various commentators.(fn19) All of these factors can be summarized in two questions. First, what is the client asking me to do?(fn20) Second, who is this client asking me this?

Estate planning lawyers answer the first question in their definition of the estate planning process. They tend to understand this process as having three primary purposes: minimizing estate taxes, insuring distribution of the property to particular individuals, and caring for present or future family members. While almost no lawyer would reject any of these as legitimate purposes of estate planning, each lawyer tends to emphasize one purpose over the others based upon his or her experience, skills, and the perceived objectives and needs of the client.

A. Estate Planning as Tax Planning

Many lawyers believe minimizing estate taxes is the primary purpose and function of estate planning.(fn21) It seems self-evident that few people want the government to be a primary beneficiary of their estates, and those who do can certainly set forth such intent in their estate planning documents. Absent such an intent, most clients want to insure the passage of the greatest amount of wealth with the least amount of taxes.(fn22) This is accomplished in part by estate planning.(fn23)

Husbands and wives may transfer an unlimited amount of property to each other without incurring any federal gift or estate taxes.(fn24) Furthermore, as of 1998, $625,000 in property may be transferred by any individual free of federal gift and estate taxes.(fn25) This is known as the "unified credit deduction equivalent amount," or more simply the "credit deduction equivalent."(fn26) In 1998, therefore, married couples with a combined estate of $625,000 or less have no need for planning to minimize federal gift and estate taxes.

If the aggregate wealth of the married couple is valued between $625,000 to $1.25 million, proper use of the individualized deduction for transfers of $625,000 or less, plus the unlimited marital deduction, allows the couple to ultimately transfer all of their property free of federal gift and estate taxes in 1998. At the death of the first spouse to die (the decedent), the estate is divided into two shares. Up to $625,000 of property is transferred either to beneficiaries other than the surviving spouse, or more often to the trustee of a "bypass" or "unified credit" trust.(fn27) This transfer is tax-free owing to the unified credit deduction. While the particular provisions of bypass trusts vary, such trusts often provide that all income is to be paid to the surviving spouse, and principal is to be distributed for the surviving spouse's benefit, as long as distribution is limited by an ascertainable standard.(fn28) In most cases, the trustee of the bypass trust can be the surviving spouse with no adverse tax consequences.(fn29) While such trusts give substantial protection to the interests of the surviving spouse, that protection is not the equivalent of ownership. The trust property therefore also transfers tax-free at the death of the surviving spouse. In this manner, the first $625,000 of the decedent's estate escapes federal taxation, both at the decedent's death and at the death of the surviving spouse.

All property remaining in the decedent's estate after the transfer of $625,000 to the by-pass trust or other beneficiaries is then transferred to the surviving spouse outright. This property passes tax-free since there is an unlimited marital deduction for any transfers of property between spouses.(fn30) Using this method, there is no estate tax due at the death of the first spouse, and only the property remaining in the estate of the surviving spouse at his or her death, with a value exceeding the amount of his or her unified credit deduction equivalent, is ever subject to federal estate tax.(fn31)

For married couples with a combined estate exceeding twice the applicable unified credit amount, there is no complete escape from federal gift and estate taxes.(fn32) Proper estate planning, however, can minimize taxes by arranging the timing and transfers of property.(fn33) This is most easily done when each spouse owns property of equal value. Individual estates of equal value eliminate the role of chance in planning since effective planning depends, in part, upon accurate predictions about which spouse will die first.(fn34) "Equal estates offer, without regard to the order of death, the flexibility to defer estate taxes by passing all property, other than the first [$625,000], to the survivor or to pay tax on part or all of the first-to-die's estate."(fn35) Typically, there is little tax advantage to transferring more than $3 million either outright to beneficiaries other than the surviving spouse, or to a bypass trust for the benefit of the...