Ethics Opinions

Opinion 05-02

Summary: A lawyer should not accept the gift of a valuable item from a client without advising the client first to seek independent advice from separate legal counsel. If the lawyer has already received the gift, he may not prepare a gift tax return for the client or any other instrument incident to the transfer. Even if the lawyer does everything required under the Massachusetts Rules of Professional Conduct and Massachusetts case law, he should still weigh the consequences to his reputation of accepting or keeping such a gift since it may nevertheless be viewed as overreaching by the client’s family or by the probate court.

Facts: A lawyer received a valuable piece of art from a longstanding client. The client is a collector and is not related to the lawyer. The client has made gifts of artwork in prior years to family members and others and the lawyer has prepared federal gift tax returns for the client when the value of any item exceeded the amount of the applicable annual gift tax exclusion. The lawyer bills the client for his services on a monthly basis and no adjustment has been or will be made to any bill to reflect his receipt of the artwork last year. The lawyer asks whether he may keep the artwork and prepare a federal gift tax return for his client without violating the Massachusetts Rules of Professional Conduct.

Discussion: Rule 1.8(c) of the Massachusetts Rules of Professional Conduct provides as follows:

A lawyer shall not prepare an instrument giving the lawyer or a person related to the lawyer as parent, child, sibling, or spouse any substantial gift from a client, including a testamentary gift, except where the client is related to the donee.

Comment [2] to MRPC Rule 1.8 further provides:

A lawyer may accept a gift from a client, if the transaction meets general standards of fairness. For example, a simple gift such as a present given at a holiday or as a token of appreciation is permitted. If effectuation of a substantial gift requires preparing a legal instrument such as a will or conveyance, however, the client should have the detached advice that another lawyer can provide. Paragraph (c) recognizes an exception where the client is a relative of the donee or the gift is not substantial.

The question of whether any gift is “substantial” or not will ordinarily depend on the value of the gift in relation to the client’s assets as well as the lawyer’s own assets. See Restatement (Third) of the Law Governing Lawyers § 127 cmt. f (2000). However, at a certain monetary amount, gifts will be deemed to be substantial regardless of the relative size of the donor’s and donee’s estates. The Committee believes the fact that a federal gift tax return will be required to be filed under these circumstances is sufficient evidence that the gift to the lawyer was substantial for purposes of MRPC Rule 1.8(c). Under that Rule, a lawyer who received a substantial gift would clearly be precluded from preparing a document transferring title to the item to himself. In the Committee’s view, the preparation of a federal gift tax return evidencing the gift from the client to the lawyer would likewise be impermissible.

Massachusetts Bar Association Committee on Professional Ethics 145

2005 Opinions continued

Merely advising the client that he must engage another lawyer or accountant to prepare a federal gift tax return for 2004 is not the end of the lawyer’s obligations in this matter. MRPC Rule 1.8(c) also requires that the transaction meet fundamental standards of fairness. Some guidance may be found in the Supreme Judicial Court’s holding in Cleary v. Cleary, 427 Mass. 286 (1998). Although this case involved an attorney-in-fact who assisted his aunt in designating himself as the beneficiary of her annuity policies, the general principles it sets forth are applicable to the current situation. In Cleary, the Supreme Judicial Court held that a “fiduciary who benefits in a transaction with the person for whom he is a fiduciary bears the burden of establishing that the transaction did not violate his obligations.” 427 Mass. at 295. Furthermore, regarding attorney-client transactions, the Court stated that a lawyer “who bargains with his client in a matter of advantage to himself must show, if the transaction afterwards is called in question, that it was in all respects fairly and equitably conducted; that he fully and faithfully discharged all his duties to his client, not only by refraining from any misrepresentation or concealment of any material fact, but by active diligence to see that his client was fully informed of the nature and effect of the transaction proposed and of his own rights and interests in the subject matter involved, and by seeing to it that his client either has independent advice in the matter or else receives from the attorney such advice as the latter would have been expected to give had the transaction been one between his client and a stranger.” Id. at 290-291 (quoting Webster v. Kelly, 274 Mass. 564, 571 (1931)).

The Committee was not provided with information concerning the nature of the advice that the lawyer gave to his client before accepting the gift. However, if at a minimum the lawyer advised the client to obtain independent advice before the gift was made, to consider carefully how the gift would likely be regarded by the client’s family or other potential objects of the client’s bounty, and whether the fact of the gift might be used someday to challenge the independence of the lawyer or the competency of the client, it may be permissible under the MRPC for the lawyer to keep the artwork as long as he does not prepare the federal gift tax return or any other legal instrument necessary to effectuate transfer of title from the client to himself. Before deciding to keep the gift, however, the lawyer should also weigh carefully the potential consequences to his professional reputation. The reality is that, even when all proper steps are taken by the lawyer, such gifts are often viewed with suspicion, if not downright hostility, by probate judges and disappointed family members. As noted in § 127 cmt. a of Restatement (Third) of the Law Governing Lawyers (2000), a lawyer who accepts a substantial gift from a client “bears a heavy burden of persuasion that the gift is fair and not the product of overreaching or otherwise an imposition on the client.” This burden may be very difficult to satisfy if the client is deceased or incompetent and the gift may be subject to rescission notwithstanding the lawyer’s compliance with all of the requirements of Rule 1.8(c).

This advice is that of a committee without official governmental status.

This opinion was approved for publication by the Massachusetts Bar Association’s House of Delegates on March 3, 2005.

Massachusetts Bar Association Committee on Professional Ethics 146

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