Which engagement letters and legal documents should family counsel review before signing?
Before signing, have family counsel review documents that define legal scope, authority, fees, conflicts, confidentiality, or personal liability. These may include lawyer engagement letters, investment advisory agreements, trust and estate documents, entity agreements, powers of attorney, lending papers, and philanthropic documents. The exact list depends on your family’s structure and transactions.
Start with the engagement letters
Review each lawyer’s engagement letter before work begins. It should identify the client, describe the work covered, state who may rely on the advice, explain fees and expenses, and describe how the relationship can end. ABA Model Rule 1.5 says the scope of representation and fee basis should be communicated, preferably in writing. 1 Ask whether the lawyer represents an individual, a trust, a company, a foundation, or several family members. Those are different clients. If a firm represents more than one related person or entity, ask for a written conflict analysis and any proposed consent. ABA Model Rule 1.7 requires informed consent, confirmed in writing, when a conflict is permitted. 2 Clarify who receives updates, who may give instructions, and how confidential information will be handled.
Review documents that grant authority or create obligations
For investment relationships, review the advisory agreement, Form ADV Part 2 brochure, fee schedule, custody terms, trading authority, and any power of attorney. Investor.gov advises clients to read and understand the contract and Form ADV brochure because they describe services and fees. 3 Confirm whether anyone may withdraw funds, deduct fees, direct trades, or appoint another manager. Those powers affect control and custody of assets. 4 For estate planning, review wills, revocable and irrevocable trusts, beneficiary designations, health care directives, financial powers of attorney, and any family governance memorandum together. Check that names, successor fiduciaries, trustee powers, distribution standards, and instructions match. For family businesses and investment entities, review operating agreements, shareholder agreements, partnership agreements, buy-sell terms, guarantees, and subscription documents. Confirm voting rights, transfer limits, capital calls, indemnification, and exit provisions. For charitable vehicles, review formation documents, bylaws, grant agreements, and related-party transactions. The IRS treats certain transactions between a private foundation and disqualified persons as self-dealing. 5
You should never replace conducting in-person due diligence, working with a real attorney, a real accountant for any meaningful amount of money that's more than a thousand or couple thousand dollars.
Use a written signing checklist
Before signing, ask counsel to prepare a short issue list. It should show the parties, authority granted, payment terms, renewal or termination rights, conflicts, indemnities, governing law, dispute terms, and missing exhibits. Keep a final signed copy with the family’s records. Revisit documents after a marriage, divorce, death, business sale, relocation, major gift, or change in trustees or advisers.
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