04b – Joint Representation

(Formerly Standard 05b)

PGTS Standard

Joint Representation

North American Division (NAD) Planned Giving & Trust Services (PGTS) Standard 4b potentially generates the most discussion of all the PGTS Standards. There are two competing lines of thought when it comes to having an attorney jointly representing the donor and the organization, which, when it does occur, most often arises in the preparation of estate planning documents. One line of thought is adamantly opposed to the joint representation. In contrast, the opposing opinion believes it should be left up to local attorneys to decide how to practice law in their jurisdiction.

This article focuses on Standard 4b, and a separate article will examine Standard 4c.

Attorney Relations

Since we are on the topic of attorney relations and requirements, I want to bring the following NAD Working Policy concerning attorneys to your attention.

NAD Working Policy

S 60 32 Miscellaneous Professional Liability

3. All attorneys who are hired or retained by denominational
entities shall be required to maintain errors and omissions liability
insurance with minimum limits of $1,000,000. Evidence of
coverage should be provided to the organization prior to the
commencement of their service.

(Note: this must be verified annually with the attorney for as long as your organization retains the attorney by requesting the cover page of the policy that states the limits.)

NAD Working Policy BA 30 is where you will find the basic policies on legal counsel. In addition to these policies, NAD Working Policy S 60 32, listed above, requires organizations to confirm that all outside attorneys they retain have errors and omissions liability insurance. Please note the minimum limit required is $1,000,000.

Now back to the discussion of PGTS Standard 4b:

Levels of Service

If your organization has requested a change in its level of service,  and the Certification and Accreditation Committee (C&ACOM) has approved a service level of Planned Giving Plus (PGP) or Planned Giving Only (PGO), standard 4b will not apply to your organization since it is not involved in preparing legal documents. If a PGP or PGO organization refers an attorney to a donor, it should provide a list of multiple attorneys that the donor may choose from and should never recommend a specific attorney.

At least part of this discussion regarding Standard 4b is caused by the variance in state law on DUAL REPRESENTATION. Some states do not allow dual representation at all, while some states allow dual representation with proper disclosure of the potential conflicts that may arise to the donor.

Even if allowed in your state(s), no organization is required to facilitate DUAL LEGAL REPRESENTATION if they do not choose to do so. Dual representation is optional and is not compulsory.

Legal Counsel Interpretation

This standard must be interpreted by your local legal counsel and is subject to the laws in the jurisdiction(s) in which your organization operates. Your organization must follow the written legal opinion of your local legal counsel to implement the specifics of Standard 4b. Within this context, I step carefully into an explanation of PGTS Standard 4b, and my treatment here will be general in nature.

4b.       The denominational organization and the donor(s) are represented by separate independent legal counsel unless the attorney representing both the organization and the donor(s) has provided the organization with a legal opinion stating that the attorney may represent both parties concurrently in harmony with good professional ethics and applicable law and rulings.

The opinion, which shall be updated at least every five years, shall provide legal citations where appropriate (e.g., statutes, court opinions, ethics opinions, and rulings, etc.), and shall address the following:

Standard 4a (covered in a separate article) requires written legal opinions for the general operation and activities in which employees of the PGTS organization may engage, as well as addressing the risks inherent in these activities.

Standard 4b requires the organization and the donor to be represented by separate attorneys unless the organization’s attorney determines they may engage in joint representation, in which case the attorney must provide a specific legal opinion dealing with JOINT REPRESENTATION. The standard is very specific to the citation details that must be included in this important legal opinion. This is considered a formal legal opinion containing the attorney’s understanding of the law, not just a personal opinion about the subject based on their feelings. The attorney’s opinion on dual representation must address each of the subsections 4b.2.i – iv.

Estate Planning Documents

4b.2.i.          Estate planning documents that may be prepared under dual representation (e.g., will, trust, durable financial power of attorney, health care power of attorney, living will, etc.);

Standard 4b.2.i requires the legal opinion to include a list of all legal estate planning documents that may be prepared under dual representation. The list of documents is an example of documents that might be included in the legal opinion and should not be considered exhaustive. As stated in the body of standard 4b the donor must find the legal counsel of their choice, separate from the organization’s legal counsel, to recommend and prepare their estate planning documents unless local legal counsel cites in the legal opinion it is possible to have dual representation in the relevant jurisdiction.

Legal Fees

4b.2.ii.         Source of the legal fees for the various documents and manner of payment (e.g., partial or full payment by donor(s), partial or full payment by the organization directly to the attorney or by reimbursement to donor(s));

Standard 4b.2.ii requires the legal opinion to include who will pay the legal fees for the preparation of the legal documents, and how the payment will be made. The legal opinion must state whether the organization or the donor will pay all or part of the legal fees.  It must also state if the payment will be made directly to the attorney, or if the donor will have to pay the attorney and subsequently be reimbursed by the organization. Any reimbursement to the donor for legal fees is considered a payment to the attorney and must be addressed in the legal opinion. Although it is not part of this standard, it is regarded as a best practice to issue a disclosure of who is paying the legal fees for estate planning document preparation to the donor before the documents are prepared. This disclosure should be in writing. The attorney may often be required to disclose this information in their retention and disclosure letter.

Primary Duty

4b.2.iii.        The party to whom the attorney’s primary duty is owed; and

The legal opinion needs to clearly state whether the attorney’s primary duty is owed to the organization or the donor. The entity to whom the primary duty is owed is the one who has the final say with the attorney, and so this must be clearly defined. Again, it is considered a best practice to disclose this information in the letter the attorney sends to the donor when the attorney is retained, prior to the documents being created.

Miscellaneous Issues

4b.2.iv.        Any other issues deemed relevant by the attorney.

If the attorney determines there are other relevant issues or laws that must be addressed, those should also be included in the legal opinion. These issues may also be stated in the attorney retention and disclosure letter, copies of which should be kept in the donor file.

Summary

NAD Planned Giving & Trust Services Standard 4b is focused on the relationship that your organization chooses to have with its local legal counsel and donors. The standard recommends separate legal counsel for the donor and the organization. Still, it allows joint legal counsel when the local legal counsel provides the appropriate legal opinion citing the relevant laws and statutes. 

Notice

In many of the revised standards, you will see the phrase “legal counsel licensed to practice in the applicable jurisdiction.” This phrase requires each organization to verify that the attorneys they are using are currently and actively licensed in the states that they service.