Opinion ID: 6500434
Heading Depth: 1
Heading Rank: 1

Heading: Hearing Panel Decision

Text: ¶ 2. The panel made the following findings after a hearing.1 Respondent was admitted to the Vermont Bar in 1978 and has practiced in Vermont since that time. He provided estateplanning legal services to client L.Z. for many years until her May 2018 death. Respondent and L.Z. lived in the same community and attended the same church; respondent considered L.Z. a family friend. ¶ 3. Respondent drafted a series of wills for L.Z. L.Z. had no children and her husband predeceased her. Her 2006 will left her assets to a niece, her niece’s two children, and three children of L.Z.’s nephew. At L.Z.’s request, respondent prepared a new will in February 2011 that left L.Z.’s house and its contents to her nephew and his wife; any remaining bonds to her nephew’s three children; and the remainder of her estate to her sister. ¶ 4. In 2014, respondent met with L.Z. to discuss estate planning, nursing care, and Medicaid issues, given her declining health. Because L.Z. wanted to remain in her home, respondent advised L.Z. to use a so-called “enhanced life estate” (ELE) deed to prevent the value of her house from being counted as a financial asset with respect to Medicaid coverage. An ELE deed allows a grantor to convey real estate to a third party while reserving a life-estate interest in the property along with the right to sell or mortgage the property. Respondent further advised L.Z. that she could bequeath her real and personal property via a trust agreement. ¶ 5. Under the trust arrangement purportedly discussed by the parties, L.Z. would convey her real property via an ELE deed to someone who would serve as trustee of the trust and, upon L.Z.’s death, the trustee would sell the real property and distribute the proceeds to the trust 1 In his brief, respondent’s counsel discusses “findings” that were not made by the panel and that appear to rest primarily on respondent’s own testimony. These are not findings of fact and we do not treat them as such. 2 beneficiaries. A new will would also be prepared naming the trustee as the executor and sole beneficiary of L.Z.’s estate with the understanding that any of her other property that might require the filing of a probate estate would go to the trustee, who would then distribute the property (or funds from the sale of the property) to the trust beneficiaries. ¶ 6. Respondent testified that L.Z. accepted his advice with respect to this arrangement. According to respondent, L.Z. wanted him to receive the ownership interest in her real property and perform the roles described above. Respondent then drafted an ELE deed and a new will along these lines. The ELE deed provided for the conveyance of L.Z.’s ownership interest in her home to respondent and his heirs and assigns and the new will left “all of [her] estate” to respondent and appointed him as the executor of her estate. ¶ 7. Respondent briefed a partner at his law firm on his discussions with L.Z. and asked the partner to have L.Z. execute the ELE deed and will. The partner had concerns about the proposed transfer but ultimately agreed to respondent’s request. L.Z. executed the documents in 2014 and the partner concluded that she was of sound mind and “comfortable” conveying her property to respondent. At the PRB hearing, the partner had a vague recollection of his meeting with L.Z. and he relied heavily on cursory notes that contained unexplained discrepancies. ¶ 8. The panel found that respondent’s drafting of these documents created a conflict of interest on respondent’s part. L.Z. did not sign any document that disclosed this conflict of interest to her or that described the nature of the risks associated with conveying her home to respondent and designating respondent as the beneficiary of her estate. ¶ 9. Respondent did not file the ELE deed in the land records or the will in the Probate Division. Before L.Z.’s death, respondent generated no written record that set forth or otherwise contemporaneously memorialized the terms of the trust including identifying the corpus of a trust and its scope, the identity of the trustee and his related powers and duties, the identity of the beneficiaries of the trust, or a formula for distribution to the beneficiaries. 3 ¶ 10. L.Z. eventually moved into a nursing home in New York and executed a durable power of attorney, drafted by respondent, designating respondent as her agent. During this time, L.Z.’s assets were used for her care and maintenance. L.Z. died at the nursing home in May 2018. ¶ 11. In the months following L.Z.’s death, respondent did not file her will with the Probate Division or otherwise seek an appointment as the executor of L.Z.’s estate. He did not advise any potential beneficiary that a trust was set up by L.Z. and that he was serving as trustee, or describe to any potential beneficiary his authority or intentions. He did not generate or provide any inventory of L.Z.’s personal and real property to any beneficiary or heir at law. ¶ 12. Respondent did secure L.Z.’s former residence, including her furniture, and took her jewelry and photographs into his possession. He had the jewelry appraised (approximately a $2000 value) but took no steps to sell it or make it available to any beneficiary for viewing. He donated L.Z.’s clothing to her nursing home. At the time of the PRB hearing, respondent still had L.Z.’s jewelry and photographs in his possession. With respect to the house, respondent paid for utilities, property taxes, and homeowner’s insurance, as well as a water system repair, using his own funds. ¶ 13. At some point in 2018, the widow of L.Z.’s nephew (a beneficiary in an earlier will) asked respondent about L.Z.’s estate. Respondent replied, “there is no estate.” He did not tell nephew’s widow that L.Z.’s remaining assets would be distributed pursuant to a trust agreement, and he provided no further information to her. Nephew’s widow eventually obtained an attorney to assist her. In October 2019, the attorney contacted respondent, who provided some additional information but did not send copies of the 2014 will or 2014 ELE deed as requested. The attorney followed up again with respondent, seeking these items and requesting information regarding L.Z.’s bank accounts, personal effects, and an accounting with respect to rent based on his understanding that someone was living in L.Z.’s house. 4 ¶ 14. Respondent replied in a December 2019 letter and provided copies of the 2014 will and ELE deed. Respondent said that the assets L.Z. had intended to convey to her sister and “other relatives” had been spent on L.Z.’s long-term care; the rental payments had been used to cover expenses associated with the house; and when L.Z.’s house was sold, he would distribute the proceeds to “those she had intended to benefit before her declining health required her to use her assets for her end-of-life care.” Respondent did not tell the attorney that a trust had been put in place, identify any beneficiaries by name, or tell the attorney that nephew’s widow was not an intended beneficiary. He did not provide the attorney with the requested accounting. The attorney again followed up with respondent, seeking clarification and additional information, without success. In January 2020, a PRB complaint was filed against respondent. ¶ 15. Meanwhile, in the summer of 2019, more than one year after L.Z.’s death, respondent sold L.Z.’s car for $1000 to a friend with whom he also had a business relationship and who was also a former client. Respondent deposited the funds from the sale of the car in his personal bank account. Respondent also advised this friend that he planned to sell L.Z.’s house. The friend was going through a divorce and respondent knew that the friend’s wife was looking for a house. Respondent neither had the property appraised nor did he retain a real estate agent to determine an appropriate listing price. He relied on the property’s value in the town’s grand list and his own opinion to establish a sale price. ¶ 16. In the fall of 2019, respondent entered into a “rent-to-own” agreement with his friend’s wife. She made a down payment of $10,000, to be applied retroactively to rent if she opted not to purchase the home. The parties also agreed that the friend’s wife would receive credits against the purchase price for payments made to vendors to repair and improve the house. While the house was structurally sound, it needed major repairs to the furnace and septic system. The wife moved into L.Z.’s former residence in December 2019. 5 ¶ 17. Respondent placed the $10,000 down payment in his personal bank account. Respondent testified that he did so to reimburse himself for expenses incurred in maintaining the house. The panel found that respondent failed to provide a definitive accounting concerning reimbursement or any other evidence regarding the precise amount of expenses claimed or the current location of the remaining balancing of the $11,000 (representing the down payment and the car payment). ¶ 18. The friend’s wife closed on the home in May 2020. Respondent was listed as the seller on the closing documents with no indication that he was acting as a trustee. The wife received approximately $43,000 in credits for improvements she made, which included remodeling the kitchen. As a result of her purchase, the wife lived in the house rent-free for six months. ¶ 19. Respondent received approximately $153,000 from the sale, including the $10,000 deposit. This was significantly lower than the property’s value in the town’s grand list of $197,000. Respondent argued that the improvements made by the wife were necessary to satisfy a lender that the property would have sufficient value to support a bank loan for the purchase of the property. Respondent placed the money he received at closing ($143,000) into his client trust account. He did not provide notice of the sale to anyone as a beneficiary either before or after the closing. He did not give anyone as a beneficiary the opportunity to view the contents of the house before the sale. Respondent concluded that the contents of the house (aside from the jewelry and photographs) had no value, and he left them in the house at closing. At the time of the panel’s September 2021 decision, respondent had not provided any heir or beneficiary an accounting of the various expenditures and receipts related to the sale of the house. ¶ 20. Respondent conceded that the trust arrangement he claimed to have set up was “a little unusual,” but he considered it legal and appropriate. He stated that he had not previously structured an estate with conveyances to himself with an oral trust agreement, but he claimed to have done so because L.Z. insisted that he was the only person she could trust to effectuate her 6 wishes. He also claimed to have advised L.Z. to use someone else as trustee and grantee, as well as to consult with another lawyer, and that she “adamantly declined to do so.” Respondent was aware of the danger inherent in using an ELE deed for estate planning, and specifically, the risk that the person granted an ownership interest via an ELE deed would elect not to fulfill the grantor’s wishes following the grantor’s death. ¶ 21. According to respondent, L.Z. wanted her property to be distributed as if she died intestate. Respondent acknowledged that L.Z.’s car was subject to the terms of her will but maintained that, had he opened a probate estate, creditors’ claims would have been far greater than the car’s value. Respondent testified that he did not distribute any property because of the pending PRB proceedings; he was contacted by Bar Counsel in January 2020 prior to the May 2020 closing on the sale of L.Z.’s home. Respondent stated that, at some unspecified point in time, he intended to provide notice by statute of a proposed distribution of the funds from the sale of L.Z.’s home, along with an accounting of expenses and receipts. He had not prepared any comprehensive accounting by the date of the PRB hearing.
¶ 22. Based on these and other findings, the panel concluded that respondent violated Vermont Rules of Professional Conduct 1.7 and 1.8. Rule 1.7 allows an attorney to represent a client notwithstanding the existence of a concurrent conflict of interest under certain specified circumstances, including that “each affected client gives informed consent, confirmed in writing.” V.R.Pr.C. 1.7(b)(4); see also V.R.Pr.C. 1.0(b), (e) (defining “confirmed in writing” and “informed consent”). “A concurrent conflict of interest exists if: . . . there is significant risk that the representation of one or more clients will be materially limited by . . . a personal interest of the lawyer.” V.R.Pr.C. 1.7(a)(2); see also V.R.Pr.C. 1.7 cmt. [10] (“The lawyer’s own interests should not be permitted to have an adverse effect on representation of a client.”). 7 ¶ 23. The panel found that respondent’s representation of L.Z. gave rise to a concurrent conflict of interest on his part because he drafted documents that advanced his personal interests. He had a duty to provide L.Z. with completely independent advice but instead placed himself in a position where he was advising her to convey her property to him and make him the sole beneficiary of her estate under a will. The panel found a significant risk under these circumstances that respondent’s advice would be colored by his personal interests. It also found a significant risk in using an ELE deed for estate-planning purposes. Even assuming that respondent did not intend to keep the money for himself, he placed himself in a position where he could do so. ¶ 24. The panel emphasized that, to fulfill his ethical duties, respondent needed to advise L.Z. to obtain legal representation from a disinterested attorney and inform her that he could not represent her in making those decisions or in drafting documents that conveyed property to him and made him the sole beneficiary of her estate. The panel rejected respondent’s attempt to blame L.Z. for his violation of the rules and noted that, because L.Z. had died, there was no meaningful way to verify respondent’s version of events. ¶ 25. The panel then turned to Rule 1.8(c), which provides that “A lawyer shall not solicit any substantial gift from a client, including a testamentary gift, or prepare on behalf of a client an instrument giving the lawyer or a person related to the lawyer any substantial gift unless the lawyer or other recipient of the gift is related to the client.” V.R.Pr.C. 1.8(c) (emphasis added). This prohibition is based on “concerns about overreaching and imposition on clients,” and a client cannot provide informed consent to such a transaction. V.R.Pr.C. 1.8, cmt. [6]. Even if a lawyer does not “solicit” a gift, moreover, “such a gift may be voidable by the client under the doctrine of undue influence, which treats client gifts as presumptively fraudulent.” Id. ¶ 26. Given the conflicting evidence, the panel could not conclude by the required standard of proof that respondent violated Rule 1.8(c) by “soliciting” a substantial gift from L.Z. when he recommended that she bequeath and devise her personal and real property to him. It did 8 conclude, however, that respondent violated Rule 1.8(c) by “prepar[ing] on behalf of a client an instrument”—here, the 2014 ELE deed and will—“giving the lawyer . . . [a] substantial gift.” ¶ 27. The panel explained that violations of the prohibition against preparing an instrument giving a substantial gift to a lawyer were routinely found when a lawyer drafted a will that conferred beneficiary status on the lawyer or a person related to the lawyer. It concluded that the prohibition in Rule 1.8(c) was plainly worded and without exception. It rejected respondent’s assertion that he did not understand the documents to confer a gift to him, concluding that it provided no defense to the rule violation and that other courts had reached similar conclusions. Regardless of his intent, the panel held that respondent placed himself in a position to keep L.Z.’s real property or to claim her property under the will following her death. ¶ 28. The panel then considered the appropriate sanction, looking to the American Bar Association’s Standards for Imposing Lawyer Sanctions. See In re Wysolmerski, 2020 VT 54, ¶ 27, 212 Vt. 394, 237 A.3d 706 (“Where a violation of the Rules of Professional Conduct has occurred, the American Bar Association’s Standards for Imposing Lawyer Sanctions guide our sanctions determinations.”); ABA Ctr. for Pro. Resp., Standards for Imposing Lawyer Sanctions (1986) (amended 1992) [hereinafter ABA Standards]. It found that respondent violated a duty of loyalty to his client; he acted knowingly, i.e., “[w]ith conscious awareness of the nature or attendant circumstances of his . . . conduct both without the conscious objective or purpose to accomplish a particular result,” ABA Standards, Part II, Theoretical Framework, and his conduct caused serious actual harm to L.Z., her potential beneficiaries, and the legal profession. The panel found its assessment of harm somewhat tempered by the fact that respondent secured the client’s house, paid expenses necessary to maintain the house, sold the house, did not dissipate the funds from the sale of the home or car (apparently because he used the funds to reimburse himself for home maintenance costs and placed the remaining funds from the home sale into his client trust account), and eventually disclaimed any interest in the client’s property through the will and deed. 9 ¶ 29. The presumptive sanction was a suspension, and the panel determined that the aggravating and mitigating factors, discussed below, did not warrant a departure from this presumptive sanction. The panel looked to In re Bowen, 2021 VT 7, __ Vt. __, 252 A.3d 300, in determining the appropriate length of the suspension. The Bowen Court upheld a three-month suspension for several conflict-of-interest violations. While the cases involved different aggravating factors, the panel concluded that the Bowen sanction analysis was comparable and determined that a three-month sanction was appropriate here. That sanction was imposed during the pendency of this appeal.