State Bar Would Curb Bequests to Attorneys : Estates: O.C. case leads to proposed rule forbidding lawyers to prepare wills or trusts that benefit them.

The State Bar of California, reacting to disclosures that a Laguna Hills lawyer prepared numerous wills making himself the recipient of millions of dollars from his clients’ estates, is formally proposing a strict new rule forbidding lawyers to prepare wills or trusts that bequeath them gifts.

State Bar officials said the newly proposed rule, released Wednesday for public comment, resulted from a report in The Times that Orange County lawyer James D. Gunderson had enriched himself by preparing wills and trusts that gave him millions of dollars in cash, stock and property from the estates of elderly and in some cases senile clients.

Gunderson, who has generally denied any wrongdoing, has since become the target of at least four official investigations.

“This new (proposed) rule offers the best consumer protection yet,” said Harvey I. Saferstein, president of the State Bar, which is legally charged with disciplining the 135,000 lawyers in the state. “It will make it impossible for a lawyer, even one who doesn’t exert undue influence (on his clients), to benefit unfairly from their estates.”

The proposed rule is almost identical to one in the American Bar Assn.’s model rules, which states that a lawyer “shall not prepare an instrument giving the lawyer or a person related to the lawyer . . . any substantial gift from a client, including a testamentary gift.”

That rule or one similar has been adopted in 38 states but not in California, where the State Bar considered and then rejected the rule during an overhaul of the state’s code of conduct for lawyers in 1988.

The California rule in force simply states that “a lawyer shall not induce a client to make a substantial gift.” The rule says California lawyers may accept gifts from their clients, and lawyers “who participate in the preparation of an instrument memorializing a gift . . . ought not to be subject to professional discipline.”

If the proposed rule is approved by the state Supreme Court and placed among the State Bar’s Rules of Professional Conduct, lawyers who draft wills and trusts in their own favor could face stiff disciplinary action, and even disbarment.

Saferstein, a partner in the Century City law firm of Irell & Manella, said The Times investigation of Gunderson convinced members of the State Bar’s committee on admissions and competence that they should propose “a harsher, more absolute prohibition” against attorneys drawing wills and trusts that leave them gifts.

Some members of the legal profession on Wednesday welcomed the State Bar recommendation.

“It’s about time,” said Ron Talmo, dean of the Irvine campus of Western State University College of Law. “It will finally put us in line with most of the jurisdictions in the United States.”

Orange County Superior Court Judge Tully H. Seymour, whose two-year assignment as the county’s chief probate court judge ended only last month, described the State Bar’s action as “long overdue.”

“It’s unfortunate that we need such a rule, but I’m happy that the State Bar has acted,” Seymour said. “This should only be the beginning in the quest to shore up protection for the public in estate planning matters.”

Saferstein said State Bar officials are also studying two pieces of legislation that were introduced in the state Legislature in recent months in the wake of the Times articles.

One of the proposed bills, introduced by Assemblyman Tom Umberg (D-Garden Grove), would invalidate “no-contest” clauses in wills, a device that Gunderson used to discourage legal challenges to the wills he drafted.

Another bill proposed by Assemblyman Bill Morrow (R-Oceanside) and state Sen. Marian Bergeson (R-Newport Beach) would invalidate provisions of any will or trust that bequeathed a gift to the attorney drafting the instrument, make it illegal for guardians of estates to deposit client funds in a financial institution in which the guardian had a substantial interest, prohibit the payment of any additional compensation to the attorney in the form of attorney or conservator’s fees, and outlaw payment of attorney fees to law partners or family members of guardian-conservators.

Umberg said Wednesday that he is hopeful that the Assembly’s Judiciary Committee will begin hearings on his bill as early as next week. “But I’m certainly glad to see that the bar has recognized that there is a problem out there,” said Umberg, himself a lawyer.

James Birnberg, a Los Angeles lawyer who is a member of the State Bar’s committee now studying the proposed legislation, said committee members agreed in principle to the proposed changes, but “we’re trying to tighten up a lot of the language to make it workable.”

“All of us who are lawyers can live with these rules,” Birnberg said. “Most of us who are lawyers and are ethical live with them anyway.”

The Times investigation last November reported that Gunderson, 68, in one instance arranged for the execution of a will and trust that together bequeathed him stock valued at $3.5 million, and made the other beneficiaries liable for an estimated $2 million in inheritance taxes he normally would have incurred.

That will, the final version of which Gunderson had his blind, bedridden, 98-year-old client sign only six weeks before his death, included a “no-contest” provision that would deprive any other beneficiary of his or her share of the man’s $18-million estate, if that person challenged any part of the will, including the bequest to Gunderson.

In another case, Gunderson persuaded a judge to name him legal guardian of a Canadian woman “suffering from . . . senile dementia” and thus incapable of managing her assets. Once in control of her affairs, Gunderson drafted a new will that gave him the lion’s share of her estate--nearly $250,000 worth of AT&T; stock. Another heir reluctantly abandoned her court challenge when Gunderson offered her $60,000 in exchange for dropping the court action.