Kovel Letter to Maintain Attorney-Client Privilege

If you are engaging in complex tax or estate planning consider having your attorney take steps at the planning phase to limit the IRS access to your confidential planning and strategy discussions. The same concept can be useful when you are dealing with an IRS audit. The approach is for your attorney to retain other non-legal consultants, such as your accountant (CPA) or appraiser, and perhaps others, instead of you. If your attorney retains these experts under a so-called Kovel letter or arrangement then the communications with that other expert may be protected by extending the attorney-client privilege to communications with them. If this approach is not used you will have attorney-client privilege for your communications with your attorney that were not shared with others, but if you or your attorney forward a memorandum or letter to your CPA or appraiser that information may no longer be protected. That would give the IRS the right to access that information. If you attorney retains the other experts under a Kovel letter, it is not impervious to IRS attack but may provide an argument to safeguard communications with that non-lawyer expert. Conceptually, if your attorney had a document in another language they did not speak that was essential to your case they could hire a translator to translate that document and that communication would remain privileged because the translator’s work was essential for your attorney to be able to perform their representation of you. That is a similar concept as to what may be protected. This may require that you bifurcate your CPAs activities with appropriate ones being under the Kovel arrangement and non-qualifying activities being between you and the CPA directly.