This session of the Private Client West Coast Forum 2024 identified common types of privilege, highlighting potential pitfalls to avoid and tools to protect a client’s privileged information. Types of privilege include attorney-client privilege, IRS Section 7525 Tax Practitioner Privilege, and work product protections. The panelists acknowledged the special issues pertaining to family offices and presented best practices, including execution of a Kovel waiver.
Session panelists included Robert Barton and Elizabeth R. Glasgow.
In Depth
Key takeaways included:
- Attorney-client privilege protects communications between a lawyer and client made in confidence for the purpose of securing legal advice. Generally, the presence of a third party breaks the privilege, though certain non-lawyer third parties acting as consultants or advisors may fall within the scope of attorney-client privilege. Common exceptions and doctrines include testamentary exceptions, fiduciary exceptions, and the common interest/joint defense doctrine.
- IRS Code Section 7525 Tax Practitioner Privilege applies common law attorney-client privilege to communications between taxpayers and federally authorized tax practitioners. Kovel engagement letters can be used to protect this privilege when an expert advisor is necessary to assist an attorney/tax practitioner in rendering legal or tax advice.
- Privilege risk areas for advisors and family offices include defining the “client,” inadvertent waiver of privilege protections, and misunderstanding the limits of privilege protections. To mitigate these risks, several best practices should be considered. First, maintain documentation that establishes the legal relationship between the family office legal advisor and family members. Second, state in the initial paragraph of the engagement letter that the purpose of the engagement is to provide litigation risk analysis or assist in preparing a party in the event of litigation. Finally, educate privilege holders on the benefits of privilege and its scope with advisors and establish good habits. These should include, but are not limited to, limiting participants in calls and meetings, identifying privileged documents with headers or subject lines, and refraining from forwarding materials outside the circle of privilege.
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