Updating and cleaning out estate plan files

After practicing for a while, there will be files for clients that you have not heard from since the day you had them sign documents. Are the files any good? Have clients gone elsewhere? Are the clients alive? Here are some thoughts as to retroactive and proactive planning. Several useful links to ISBA articles are included at the end of this article.

Illinois law regarding cleaning out files

There are at least a couple of caveats to remember when you start to clean house.

Caveat #1: Who may destroy a will? 755 ILCS 5/4-7 (a) says a will may be revoked only: (1) by burning, cancelling, tearing or obliterating it by the testator himself or by some person in his presence and by his direction and consent, (2) by the execution of a later will declaring the revocation, (3) by a later will to the extent that it is inconsistent with the prior will or (4) by the execution of an instrument declaring the revocation and signed and attested in the manner prescribed by this Article for the signing and attestation of a will. Comment: For whatever reason, you held onto a will that you prepared years ago. The now ex-client doesn’t want it because he had a new one prepared elsewhere and says to destroy it. The law requires the testator’s presence. It does not provide it to be done by proxy. But is it still a will covered by this statute if the new will revoked it.

Caveat #2:Maintaining Records. Illinois Supreme Court Rule 769 says: It shall be the duty of every attorney to maintain originals, copies or computer-generated images of the following: (1) records which identify the name and last known address of each of the attorney’s clients and which reflect whether the representation of the client is ongoing or concluded; and (2) all financial records related to the attorney’s practice, for a period of not less than seven years, including but not limited to bank statements, time and billing records, checks, check stubs, journals, ledgers, audits, financial statements, tax returns and tax reports. Comments: A refreshing update to this rule came in 2003. The change allows the use of digital copies to meet the rule. However, the rule does not address the situation where competent parties would otherwise agree to a shorter time period and it does not seem to allow the transfer of a client’s file to another attorney or to the client for example if the client moves out of state and can no longer be represented by the Illinois attorney.

Put your right to destroy the file in writing

If you do not use a written fee agreement or at least an engagement letter which outlines the terms and scope of your engagement, please consider using them such even if it is only a couple of sentences long (although you might consider visiting ACTEC (www.actec.org) for a very nice set of estate planning engagement letters). Below are some considerations for your engagement letters.

• File destruction. Even though Illinois Supreme Court requires a minimum time to hold files, that does not necessarily overrule or shorten the time you should or must hold on to a file for a client or ex-client. Prudence may dictate a much longer time or as short a time as possible. For example, I was involved in an IRS audit where the auditor requested all the depreciation records going back to inception (30+ years prior). Unfortunately for us, we had the files but no longer had the accountant who had his own peculiar method of calculating depreciation. It was an interesting week that will not happen again with any more of my clients.

Consider including language such as “We reserve the right at any time to destroy our records and files.” In the December 2002 Illinois Bar Journal, attorney Karen Dilibert provided us with a more detailed suggested language that is included below. My only real difference from her approach is the last sentence. Why use an excuse as to space limits that may or may not be true, but can only be used if you can show there were space limitations? Why tie yourself to a ten year schedule when the Illinois Supreme Court only requires seven years? And if the Supreme Court ever shortens this period, why not be ready to use the shorter length?

During the representation, we will supply you with copies of all substantive correspondence and pleadings concerning your matter. We suggest that you store these documents in the file folder that we have provided to you. After the matter is closed, you may obtain copies of your file by paying our standard photocopying charges and a minimum fee to compensate us for the staff time necessary to duplicate the file. Due to storage constraints, the file will be destroyed after ten years.

Disclosure of the file to the family. If you like going to court and not getting paid, make sure you leave this out. See the Vince Foster case Swidler & Berlin v. United States, 524 U.S. 399 (1998). In this case, the US Supreme Court ruled that the death of a client does not end the attorney-client privilege. Instead you may want your client to waive privilege effective at the client’s death or incompetency. Below is some suggested wording for your engagement letters:

If you become incompetent or die, may we give copies of any documents in our file on you to any beneficiary that requests it? If yes, please initial: __________

• Use deadlines. Do you want to keep as a client someone who can never commit to completing the work? Do you like having all the liability of an incomplete estate plan and none of the pay? If not, then omit any provision that allows you to end an engagement that is going no where. Below is some suggested wording for your engagement letters:

If we have not received an adequate response to the draft we send you within 90 days of sending it to you, we reserve the right to end the engagement and destroy all papers and work we have on hand for you. You will not receive a refund of your deposit.

Comment. I am not sure how to get out of the seven year file retention rules on a failed engagement but if you want to add the end of the engagement is ab initio to day one, let me know how it works.

• Contact those old clients. Periodically to clean out files, we send reminder letters to various clients. It has had the unintentional benefit of generating new business from old files. For example, we recently signed the first update to a 1993 trust because of a reminder letter. It took the client two years to call for an appointment, but it was the letter that made him do it. Here are copies of reminder letters for will clients and trust clients you may use as a basis for your own letters.

For Wills:

Dear Mr. Wayne:

Once again we are reviewing our estate plan files and updating records. We want to be certain your contact information is current. Kindly complete the information below and return in the envelope provided.

___Nothing has changed in my powers of attorney. Continue to hold the file. Below I have listed notes that should be added to my file:

-or-

___Other arrangements have been made. You may destroy the file and other records.

If you would like to discuss updating your estate plan, kindly contact us for new client information sheets and an appointment. We expect your response in a timely manner. Otherwise, we may contact you by other means.

For Trusts:

Dear Mr. & Mrs. Smith:

Once again we are updating our records and want to be certain your contact information is current. Please complete the information below and return in the envelope provided.

__ Nothing has changed in the estate plan or powers of attorney. Continue to hold the estate plan file. Below I have listed notes that should be added to my file:

-or-

___ Other arrangements have been made. You may destroy the file and other records.

As for the operation of the trust, by now the following should be done:

- IRAs, pension and other retirement plans, annuities, and life insurance: The living trust should be a beneficiary not the owner. You should have received confirmation from the institution of the beneficiary change.

- Bank and brokerage accounts (except IRAs), savings bonds, new cars, and stock: Your living trust should be listed in the title. Please check your statements.

- Real estate: All real estate holdings should be titled in the name of your trust. The only exceptions are for married couples who may have titled their homes in tenancy by the entirety either directly or through a land trust. If you buy new real estate, it is important that it is purchased directly in the name of your trust to preserve the title insurance. Also, your homeowners or other insurance on the real estate should list your trust and the trustee(s) as “additional insureds.”

If you are uncertain that all assets are in your trust, we will review your accounts at no charge. However, if we find holdings in need of transfer, the assistance provided will be billed at our normal hourly rate. Please call for an appointment if you desire a review.

Finally, if you would like to discuss updating your estate plan, kindly contact us for new client information sheets and an appointment. We expect your response in a timely manner. Otherwise, we may contact you by another means of communication.

• Possibly unintended changes to file retention rules. Sometimes the real world intrudes. A couple of interesting events that may not fit the rules as the Illinois Supreme Court may like. From the Chicago Tribune legal notices for May 20, 2012:

Please be advised that the law firm of Schwartz Cooper Chartered (the “Firm”) is in dissolution. As a result of the dissolution, the Firm is preparing to commence destruction of certain of its closed client files on July 1, 2012. It you were ever a client of the Firm or its predecessors - including Schwartz Cooper, Greenberger & Krauss; Schwartz Cooper, Kolb & Gaynor, and Greenberger, Krauss & Jacobs and you have not received and responded to correspondence from the Firm concerning your files, you may have a file or files, including original documents, that are in danger of being destroyed. The Firm will provide these files to you, at your cost, upon written request. If you wish to obtain your file(s), please contact the Firm in writing at the address set forth below within 30 days of the publication date of this notice.

Conclusion

At some point every attorney that does estate planning will need to clean house, so to speak. Hopefully, the suggested pointers in this article will provide you with a starting point. If you have additional tips on the same, then please contact me via e-mail as I’d entertain any novel thoughts on the subject. Moreover, below is a list of some useful resources regarding this topic. ■

“Bankruptcy Court Authorizes Destruction of Client Files.”

From the IICLE Flash Points (Ethics & Professional Responsibility IICLE Flashpoints May 2012)

<http://www.iicle.com/articles/Article.aspx?ID=170>

From the Bankruptcy Court Northern District of California, the trustee of a bankrupt law firm was allowed to destroy client files that remained in the firm’s possession. The clients were given notice and an opportunity to claim their files.

Secretary of State establishes procedures for depositing wills

<http://www.isba.org/ibj/2010/10/lawupdate/secretaryofstateestablishesprocedur>

Should You Store Your Client’s Will?

By Helen W. Gunnarsson

<http://www.isba.org/ibj/2006/10/shouldyoustoreyourclientswill>

A list of file retention and management articles put together by the ISBA

<http://www.isba.org/practiceresourcecenter/files>

Who does the file belong to?

By Donald E. Weihl, ISBA Law Office Management and Economics Newsletter, December 2010

There are many questions arising from clients who believe that the file an attorney creates for an engagement on behalf of the client is the property of the client.

Retention of E-Mail: Why Bother?

By Michael D, Gifford, ISBA Law Office Economics Newsletter, February 2009

Cover Me: Documentation Is More than CYA

By Karen J. Dilibert, Illinois Bar Journal, June 2008

Thoughtful documentation can promote good lawyer-client communication, keep clients from making horrible decisions, and work other magic.

Filing System Basics for Solo and Small-Firm Lawyers

By Carl R. Draper, Illinois Bar Journal, February 2006

Law Firm Document Retention Policies

By Sharon D. Nelson and John W. Simek, ISBA Corporate Law Departments Newsletter, June 2004

How Long Must Illinois Lawyers Retain Case Files?

By Anton F. Mikel, Illinois Bar Journal, February 2004

A look at Illinois’ murky law dealing with who owns the contents of a client’s files and how long attorneys have to preserve them.

When Can You Retain Client Files for Failure to Pay Fees?

By Patrick Sean Ginty, Illinois Bar Journal, February 2004

While retaining liens can be effective, you should understand their scope and effect before you use them.

File Retention: Preventing Brownfields in Your Storage Room

By Karen J. Dilibert, Illinois Bar Journal, December 2002

How can you avoid a massive, Superfund-style client-file cleanup down the road? Here are some pointers.

Spring Cleaning -- A Dozen Pointers for Purging Files

By Scott Mittman, ISBA Young Lawyers Division Newsletter, March 1999

ISBA Advisory Opinions on Professional Conduct

01-02, 94-14 Disposal of case files

01-01, 94-13 Access to lawyer files

95-02 Lawyer’s access to closed files at former firm

Other Resources

Illinois Rules of Professional Conduct, Rule 1.15(a) – Safekeeping Property

Illinois Rules of Professional Conduct, 7.2(a)(1) - Advertising

Supreme Court Rule 769 – Maintenance of Records

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John Ahern is an attorney and CPA that practices in Chicago, Illinois and can be reached at jea2pc@aol.com or at 773-779-1982.