Involvement as Trustee in Parents' Estate Plan
February 26, 2003
CJE Opinion No. 2003-2
Because of health concerns of your father, you and your parents, who are both in their eighties, consulted with a certified public accountant. Based on the advice of the accountant, you created a family limited partnership agreement, an irrevocable trust, and a corporate entity. The documents were drafted around the time of your nomination as a judge. Because it was your understanding that partnerships must have at least one general partner, you created a Massachusetts corporation to serve as the general partner, with all the management and operational responsibility and the resulting legal liability. The partners are your parents, the Massachusetts corporation created as part of this estate plan, and the irrevocable trust. You and a close friend are trustees of the irrevocable trust. The corporation is the sole general partner, and all the others are limited partners, who have no part in and no vote in the partnership's management and operations.
The beneficiaries of the trust are your parents, yourself, your children (all of whom are minors and full-time students), your sister, and her children. The assets of the limited partnership consist of three single family houses used by various beneficiaries, some certificates of deposit, promissory notes, and mortgages.
Your mother is the president, treasurer, and sole director of the corporation. You initially were designated as the clerk of the corporation, but resigned in 2001, although formal notice of the resignation may not have been communicated to the Secretary of State's office until the Spring of 2002. You are not compensated for being a trustee. You no longer advise your parents on operational matters. In addition, you do not envision any litigation ever occurring with the family limited partnership or the irrevocable trust.
You request an opinion whether your involvement in this family estate plan violates the Code of Judicial Conduct. We render this opinion based on the following inferences from your description: (i) the corporation was created for purposes of holding investments and to facilitate the estate planning, and does not actively engage in a business offering sales or services; (ii) the family limited partnership was created for purposes of holding investments and to facilitate the estate planning, and does not actively engage in a business offering sales or services; (iii) the trust was created for purposes of holding investments and to facilitate the estate planning, and does not actively engage in a business offering sales or services. See generally R. Madoff, C. Tenney, M. Hall, Practical Guide to Estate Planning, § 8.07 [B] (Aspen 2001).
Canon 5 admonishes that "A Judge Should Regulate His Extra-Judicial Activities to Minimize the Risk of Conflict with His Judicial Duties." One aspect of this requirement is that, under Canon 5 (C) (2), "subject to the requirements of subsection (1), a judge may hold and manage investments, including real estate, and engage in other remunerative activity permitted by Canon 4, but should not serve as an officer, director, manager, advisor, or employee of any business." Three factors indicate that your role in your parents' estate plan does not violate the Code of Judicial Conduct.
First, your role as trustee does not appear to fall within the language of "officer, director, manager, advisor, or employee." As a trustee, you have no part in and no vote in the partnership's management and operations. A passive role such as the trust's limited partnership is more akin to holding investments, which is expressly allowed under the Code of Judicial Conduct.
Second, it does not appear that the activities you describe constitute a "business" within the meaning of Canon 5 (C) (2). Because the Code of Judicial Conduct does not define "business," we must extrapolate its meaning from the underlying purpose of this provision. The intent of this provision is to avoid real or apparent exploitation of the judicial office on behalf of a business. See J. Shaman, S. Lubet & J. Alfini,Judicial Conduct and Ethics, § 7.14 (3d ed. 2000). It is evident from the purpose of the per se business prohibition and the structure and language of other provisions of Canon 5 that the word "business" does not prohibit a judge's involvement in estate planning that incidentally uses the corporate form. The limited partnership and trust do not actively engage in a business offering sales or services. Your involvement in your parents' estate planning is not likely to result in litigation and does not raise the specter of inappropriate exploitation of your judicial office. Nor does it typically involve distraction from the judicial role beyond that which any family member would experience from coping with the needs of family members.
Finally, it appears that your trust activity is expressly allowed under Canon 5 (D), which states that a judge may serve as an "executor, administrator, trustee, guardian, or other fiduciary" if that service is for "the estate, trust, or person of a member of his family, and then only if such service will not then interfere with the proper performance of his judicial duties." This provision makes clear that the Code envisions that judges may appropriately be called upon to use their judgment on behalf of the affairs of immediate family in the course of estate planning and administration, with the caveat noted that the activity will not interfere with the performance of judicial duties. See generally CJE Opinion 97-3.
As noted in CJE Opinion 2000-2, your financial activities with regard to your service are restricted to the same extent as your personal financial activities. (1) When serving in these fiduciary capacities:
•you must cease your service "if it is likely that . . . [you] will be engaged in proceedings that would ordinarily come before [you]" or if the trust, partnership or corporation became "involved in adversary proceedings in the court on which [you] serve . . .," see Canon 5 (D) (1);
•you must "refrain from financial and business dealings that tend to reflect adversely on [your] impartiality, interfere with the proper performance of [your] judicial position, or involve [you] in frequent transactions with lawyers or persons likely to come before the court on which [you] serve . . .," see Canon 5 (C) (1);
•you may not "serve as an officer, director, manager, advisor, or employee of any business," see Canon 5 (C) (2); and
•you may not practice law, see Canon 5 (F).
We note that, should you receive any compensation for your activities, you would be required to comply with any reporting requirements of Canon 6.
1. Opinion 2000-2 advised that a judge could accept a durable power of attorney and serve as co-executor of a will for a member of the judge's family.