Our previous post illustrated ethical quagmires that can result when a staff attorney of a family office tries to negotiate the potentially conflicting interests of the family’s members. This post explains how a well-crafted engagement letter can help an attorney navigate such quagmires through clarity in who is the intended client and who is not. It also considers using non-client letters to keep things sorted out.

Family offices continue to multiply and the industry professionals who provide services to them have grown. The typical single-family office has president, a chief operations officer, a chief investment officer and a chief financial officer. In many cases, the office may employ one or more lawyers on staff. Those lawyers may serve the needs of a number of persons and entities advised by the family office, including:

  • the family office as a legal organization;
  • members of the family in their personal capacity, as shareholders of an operating company from which wealth was created, or as beneficiaries of a trust;
  • members of the family acting as trustees of trusts;
  • investment entities created by the family, i.e., passive and active investment vehicles such as LLCs and partnerships and private or public foundations; and
  • members of the family acting as trustees or directors for the boards of those investment entities.

The evolving best practice is to treat each of the above five situations as a different “client” for purposes of evaluating potential conflicts of interests, maintaining confidentiality and other ethical issues. This is the first of two blog posts intended to help attorneys employed by a family manage their relationships with their family office clients.