Most financial advisors correctly assume that their estate planning discussions with clients are confidential. However, the critical distinction between confidentiality and legal privilege often goes unaddressed. This creates a silent risk: without the protection of attorney-client privilege, many of the communications about a client’s estate strategy, family dynamics, or even beneficiary rationales can be discoverable in litigation, a family dispute, or an IRS audit.
Not only that, the presence of a financial advisor or any non-attorney in a discussion between an attorney and a client about the client’s estate plan will also break the attorney-client privilege.
Herein lies a problem: by joining a conversation with an attorney to help steer the conversation on behalf of your client, are you inadvertently causing an ethical issue? And importantly, should you, the client, or the attorney care?
As the industry’s leading estate planning platform for financial institutions, Wealth.com helps firms reduce operational risk by demonstrating sophisticated practice standards. A core part of that is helping advisors understand and manage the compliance boundaries that protect both the client and the firm.
The Three-Body Problem: When Confidentiality Breaks Down
Attorney-client privilege protects confidential communications made between a client and their attorney for the purpose of obtaining or giving legal advice. This privilege is owned by the client and is meant to encourage full and candid communication.
The “three-body problem” occurs when an advisor is brought into a conversation between the client and their attorney. The presence of a non-attorney third party, the advisor, can sometimes waive the privilege over the communication, even if the attorney is leading the discussion.
- The Problem in Practice: Simply including an attorney on an email chain about an estate strategy does not automatically shield every line of text. An advisor’s input, such as meeting notes discussing family dynamics or rationale for a designation, could be exposed and used as evidence in litigation involving a contested trust, a divorce, or a tax audit.
- The Advisor with a JD Nuance: Even if an advisor holds a law degree, their communications are only privileged when they are acting as the attorney and providing legal advice. If they are acting in their capacity as a financial advisor, the privilege is likely lost. That being said, interspersing legal advice in the conversation will likely ensure that the entire conversation is protected by the attorney-client privilege.
“Attorney Work Product” Versus Privilege: Understanding Both Shields
Advisors must understand the distinction between attorney-client privilege and the attorney work product doctrine.
- Attorney-Client Privilege: Shields the confidential communication itself and requires the presence of a legal professional acting in their legal capacity.
- Attorney Work Product: Shields documents, notes, or materials prepared by an attorney or their agent in anticipation of litigation. This shield can potentially extend to an advisor’s notes or analysis if they were prepared at the direction of the client’s attorney and for a defined legal purpose.
A Practical Framework: What Advisors Can Do
Advisors cannot assume their status as a trusted expert extends automatic privilege. Protecting high-stakes planning conversations requires a proactive, structured approach to risk management. As an advisor, you can protect both your clients and your firm by implementing these best practices:
- Define Boundaries in Engagement Letters: Your firm’s engagement letters should include clear language that explicitly states you are not providing legal or tax advice, managing client expectations and setting clear privilege boundaries. This helps prevent the assumption of privilege where none exists.
- Refer Legal Counsel First: For all complex or potentially litigious matters, your first action should be to ensure the client has engaged appropriate legal counsel. Encourage the client to establish their legal goals and preferences in private consultations with their attorney. Allow the attorney to clearly establish a relationship with the client – not you – especially during the first meeting. Prepare the client for their meeting with the attorney and refrain from joining the meeting.
- Educate the Client on Third Parties: Counsel the client on the risk that inviting any third party, including adult children or even the advisor, into their private consultations with their attorney can unintentionally waive privilege.
- Consider Kovel Letters: Where the legal matter being discussed is sensitive because of pending or ongoing litigation, there are formal ways to have non-attorneys covered under the attorney-client privilege, namely having the attorney engage the advisor under a so-called Kovel agreement. These agreements are generally viewed as impractical for humdrum estate planning matters, but if the matter could lead to litigation (for example, the capacity of your client to execute new estate planning documents or during an ongoing tax audit), it may be worth the trouble of properly papering the relationship between the attorney and all of the client’s advisors who are not attorneys.
A Sample Communication Protocol for High-Stakes Planning
For high-net-worth and complex estate-planning conversations, establishing a clear internal protocol before the conversation starts helps mitigate risk and demonstrate compliance-aware practice standards.
| Stage | Advisor Action | Risk Mitigation Goal |
| I. Pre-Engagement | 1. Confirm that the client has engaged their own legal counsel for the estate matter. | Reinforce that the attorney is the source of legal advice and the advisor is providing financial services to the client, not to you. |
| 2. Review your engagement letter with the client to ensure the “No Legal Advice” clause is clear. | Prevent the client from having a reasonable expectation of attorney-client privilege with the advisor. | |
| II. Communication Structure | 1. If counsel requests the advisor’s involvement, clarify the precise purpose: Is the advisor needed to interpret financial data for the attorney, or is the advisor offering business/investment advice? | Ensure the communication’s purpose is not simply for convenience, which could break the privilege. |
| 2. Direct all written materials intended to support the legal advice to the attorney first, copying the client. | Maximize the chance that the communication is protected as part of the attorney’s service. | |
| 3. When creating documents (e.g., financial models, analysis) at the attorney’s request, use clear compliance labeling, such as “Confidential” or “Attorney Work Product.” | Assert the privilege or work product protection over the document itself. | |
| III. Documentation & Filing | 1. Segregate files for documents created specifically to assist legal counsel from general financial advisory files. | Avoid accidentally waiving privilege by co-mingling protected and non-protected information. |
| 2. Document the rationale for involving the attorney (e.g., “Client is seeking legal advice regarding a complex transfer of business ownership”). | Create an internal audit trail demonstrating a risk-aware, compliance-focused approach. |
Wealth.com modernizes estate planning for the way advisors work today. By understanding and proactively managing the delicate boundaries of legal privilege, you turn administrative housekeeping into genuine risk management, reinforcing your firm’s sophisticated practice standards.
References
- Estate Planning/Privilege: Cote Law Group. “Why Your Estate Plan Might Not Be as Private as You Think.” Cote Law Group, Jan. 7, 2025.
- Kovel Mechanics: Holland & Knight. “Maintaining Privilege with Non-Lawyer Experts Under Kovel.” Holland & Knight, Dec. 2021.
- Advisor/Privilege: Nelson Mullins. “Are the Client’s Estate Planning Consultations with Counsel Privileged?” Nelson Mullins, May 26, 2020.
- Attorney-Client Privilege Basics: Ryan, Charles J. “Kovel agreement basics for you and your client.” Journal of Accountancy, July 1, 2022.
- Agency Exception: Loeb & Loeb. “Family Office.” Loeb & Loeb, Feb. 2019.
- JD Advisor Role: North Carolina State Bar. “RPC 238.” North Carolina State Bar, 2004.
- Waiver of Privilege: Proskauer Rose LLP. “Fiduciary Exception to Attorney-Client Privilege for ERISA Plans.” Proskauer Rose LLP, 2024.
- Waiver & Confidentiality: Barron, Rosenberg, Mayoras & Mayoras P.C. “Attorney-Client Privilege and Confidentiality.” Barron, Rosenberg, Mayoras & Mayoras P.C., May 14, 2025.
- Attorney/Accountant Privilege: Marquette Law Scholarly Commons. “Privileged Communications with Accountants: The Demise of United States v. Kovel.” Marquette Law Review, 2007.
- Kovel Letter Mechanics: Bethell Law. “The Kovel Letter: Extending Attorney-Client Privilege to Accountants.” Bethell Law, Oct. 14, 2024.
- Confidentiality Practices: Thapar Law. “Confidentiality in Estate Planning.” Thapar Law, 2024.
