Trust and Transparency: Why Lawyers Shouldn’t Profit from the Wills They Draft

Clients may ask their trusted lawyer to draft their will, and act as an executor. That lawyer or the lawyer’s family member may also be named as a beneficiary. These situations raise significant ethical issues. Lawyers must navigate them with great care to ensure their professional duties remain aligned with the client’s best interests.

The Administration and Probate Act 1958 empowers the Court to allow up to 5% commission out of the assets of the estate for an executor’s pains and troubles (s65), and also to adjust excessive commissions or fees (ss65, 65A). Executors need the will-maker’s informed written informed consent to receive payment under a remuneration clause, such consent to be provided before the will was signed (s65B). These rules apply to all executors, whether legal practitioners or not.

In my view, lawyers should not draft a client’s will if they stand to gain financially from its terms. Rather they should refer the client to an independent lawyer to prepare the will. Despite my view, the current law and rules permit such arrangements.

The Legal Profession Uniform Law Australian Solicitors’ Conduct Rules 2015 (LPUL) provide that solicitors must not act for a client if there is a conflict between the duty to serve the best interests of the client, and their own interest.  A conflict may be real – or potential.

However, LPUL Rule 12.4 provides a carve out stating that a solicitor will not be in breach merely by drawing a will which appoints that solicitor as executor provided the solicitor informs the client in writing, before the will is signed:

1. of any entitlement under the will for that solicitor (or an associate) to claim executor’s commission, and that the client could choose an executor who may not claim a commission, and
2. that the will includes a provision entitling the solicitor to charge legal costs in relation to administration of the estate.

In my opinion, Rule 12.4 is flawed for the following reasons:

1. Where there is such a conflict, the client should receive independent legal advice. It is just nonsense that the conflicted solicitor advises the client about his/her own conflict – including (presumably) why the course proposed may not be in the best interests of the client.

And does the client pay for that advice?

The conflicted solicitor’s role should be limited to acknowledging the conflict and referring the client to a non-conflicted lawyer.

2. There is no logical basis for the carve out. It appears to operate solely to benefit solicitors who otherwise would be conflicted.
3. Obtaining of independent advice does not preclude an executor appointing the client’s preferred lawyer acting as an executor.

And make no mistake, non-conflicted lawyers may well advise the client against having a solicitor draft the will, be appointed an executor, and charge legal fees and/or commission to the estate.

4. Solicitors should not charge legal fees and an executor’s commission.

It is very messy and difficult for beneficiaries to judge what is properly remunerable work done for pains and troubles, and what is properly remunerable legal work.  When there is a dispute guess who may pay the price – the estate and thereby the beneficiaries.

5. Many lawyers are subject to financial pressures, including a requirement to make their financial budget. How can the community in general, and beneficiaries in particular, be satisfied that work undertaken by the legal executor’s own firm was strictly necessary and done as efficiently as possible?

Does the community really think that it is a good idea for the (conflicted) solicitor in their capacity as executor to oversee their own firm’s work, and in their capacity as an executor determine if the legal fees are reasonable and proper?  Why is that not another conflict – this time an executor’s conflict?

A far better model which would avoid executor’s conflict would be for the lawyer executor to instruct an independent firm to act for the estate.

Over the past 12 months — and indeed, throughout my career — I have encountered numerous disgruntled beneficiaries and executors. A common complaint is that the estate lawyer/executor is taking too long to complete tasks, charging excessive legal fees and/or commission, and providing legal services without an independent person instructing the lawyers.  Unless the estate is substantial, the cost of seeking a court’s intervention is prohibitive. Ironically, it’s the small to mid-sized estates that most require efficient administration — yet these are the very estates that can’t afford legal oversight, because they lack the scale to absorb the costs.

In a recent matter, professional, cooperative siblings — beneficiaries of the estate and also nominated executors—asked the lawyer executor who drafted the will to decline the role given the high levels of trust and co-operation between them. They wanted to appoint independent lawyers to act for the estate. However, the lawyer insisted on acting as executor and objected to appointing 3^rd party lawyers, asserting legal work should be handled by their firm.  The will included a remuneration clause allowing both executor and legal remuneration.

If that does not fail the smell test, then I will eat surströmming for dinner!

Courts have set high standards for solicitors who draft wills and later profit as executors in administering the estates of their deceased clients. I suspect that only a small fraction of cases involving disgruntled beneficiaries questioning solicitor’s fees and/or commissions reach the courts.  It is often too expensive for beneficiaries to take on solicitor executors.

In Walker v D’Alessandro, Justice Forrest accepted the beneficiaries’ evidence that they felt pressured to consent to a proposed 3% commission and he observed:

… the only sensible interpretation of the letter of 12 March is that each beneficiary was advised that, if they wanted a quick interim distribution, they should agree to the 3% commission, and that if they did not agree to that, then any distribution would be delayed, perhaps considerably.

Solicitors should not both draft a will and financially benefit from legal and/or executor’s remuneration from the very same will.  Rule 12.4 should be revoked.