My name is Jonathan, and I am both a law student and an intern with Alperin Law. I am starting a second career in law, but my original training was as an engineer. One key role of an engineer is to make things simple. You may have noticed that lawyer and the law itself can most times be more than the typical person can understand on their own. In this column, I hope to use my background & recent learning to simplify some estate planning concepts you likely have heard about but may not fully understand. In this month’s column, I will address the situation where someone other than the client has agreed to pay the client’s bill. Legally that person is called a third-party payor.
First, let’s review the typical relationship between a client and a lawyer. You are likely familiar with the concept that a client and his or her lawyer share lawyer-client confidentiality privileges. This means that within certain bounds, a lawyer is not required to disclose what a client has said to the lawyer in confidence. In this typical relationship, the client pays the lawyer for the legal services they have provided to the client.
Now, let’s look at what a third-party payor is. Imagine a child who happens to be well-off financially has an elderly parent whom they are encouraging to create an estate plan after their spouse has passed, and that child is offering to pay for the parent’s legal fees. In this scenario, the parent is the client and the child is the third-party payor. It would not be surprising for the child in this scenario to say, “Since I’m paying for my father’s estate plan, I’m going to tell his lawyer how to handle things.” However, even though the child is paying for the legal services, they need to be aware that he or she does not have the right to interfere in the legal proceedings.
Before agreeing to represent the client, a responsible lawyer will ask both the client and the third-party to sign engagement letters that explain the obligations and rights of each person. What are those obligations and rights? First of all, the lawyer agrees to zealously represent the client, abide by the client’s decisions, and protect the client’s confidentiality. This means that the lawyer will not share information the client wishes to keep confidential, even with the third-party payor. In addition, all parties need to be aware of the prohibition against interfering with the lawyer’s independence of professional judgment. In other words, because the child in this scenario is not the client, the child does not have a right to instruct the lawyer in the creation of their parent’s trust.
The engagement letter between the lawyer and the third-party payor will enforce the differing statuses of the payor and the client. The payor’s letter will explain that in exchange for the lawyer providing a defined scope of legal service to the client, the third-party payor accepts the obligation to pay for the services. If there are any unused funds from the legal representation, the lawyer will return those to the payor and not to the client. Finally, the client should know that she may be liable for any fees that the third-party payor fails to pay.
If you encounter a situation where you wish to pay the legal fees for someone else (e.g., a child, other family member, or friend), be sure that you discuss and understand your obligations with the lawyer and the lawyer’s obligations to the client.
Written by Alperin Law Intern Jonathan Hughes
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