When the only tool at hand is a hammer, everything looks like a nail.
In the past decade, we have witnessed an increase in the sale of living trusts by non-lawyers or entities controlled by non-lawyers. The predominant sales model has been through advertising in print media and informational seminars. Increasingly, similar services are available over the Internet from entities who may be located anywhere in the world.
LIVING TRUSTS AND THE “FREE” LUNCH
Here’s how it often works. A salesperson organizes an information seminar at a local hotel or restaurant and advertises it in the newspaper. Sometimes a free meal is promised as an additional inducement. The ads often include claims about the alleged horrors of probate and promises of tax savings as part of the estate planning package. Scare tactics about “death” taxes abound—no matter that most readers can only dream about having an estate large enough to be subject to federal estate tax.
A non-lawyer typically conducts the seminar—someone who has a financial stake in selling living trust packages. The seminar reinforces the same themes: the supposed horrors of probate—lack of privacy, lengthy delays and onerous costs—and the injustices of death taxation. The meeting ends with an invitation to request a private, in-home consultation. The person who shows up at the home will often be the same person who conducted the seminar or an associate. Still no lawyers involved. The goal of this meeting is to make a sale. No sale, no money. As with the car salesman, success is defined by a sale. All else is failure. Can you recall a car salesperson trying to talk you into suppressing your new car fantasies and keeping you old car because it will be more economical?
A FLAWED PRODUCT IN A PRETTY PACKAGE
One of the universal characteristics about these living trust packages is that they look good. There is a lot of paper; maybe even in an elegant, off-white color that conveys gravity and substance. There are nice tabs that separate the various documents. And to top it off, it comes in a real impressive looking leatherette binder. The sales person collects information from the customer, enters it into a document assembly program and produces a sheaf of estate planning documents, typically including a revocable living trust, a will, a living will, a durable power of attorney, and a health care power of attorney. Soon, the sales person returns with the documents tidily organized in the nifty leatherette binder and presents them for execution.
In one recent case handled by the Disciplinary Commission, the sales person acted as a witness to execution of a married couple’s wills and assured them, incorrectly, that they could secure the signature of a second witness at their leisure. The wills included a non-contestability clause, which is void under Indiana law. While such a clause does not render the will itself void, it leaves the testator with the false impression that it will be effective in the event of a will contest.
UNAUTHORIZED PRACTICE OF LAW
Are living trust sellers engaged in the unauthorized practice of law? A growing body of case law from other jurisdictions holds that they are. Recently, the Indiana Supreme Court reiterated the time-tested definition of the practice of law as “the giving of legal advice to a client and placing of oneself in the very sensitive relationship involving the confidence of the client and the management of his affairs.” Charter One Mortgage Corporation v. Condra, 865 N.E.2d 602 (Ind. 2007) (internal quotation marks and citation omitted.) If entrusting the disposition of all of one’s earthly wealth upon one’s death to the control of another doesn’t place them in a sensitive relationship involving confidence and management of important affairs, I don’t know what does.
To avoid allegations of unauthorized practice of law, many living trust vendors secure the services of a lawyer to review each package of documents before the customer executes them. The cost of lawyer review is typically part of the overall cost of the living trust package—there is usually not a separate charge. The lawyer is supposed to receive the living trust package from the seller and contact the customer to verify that the trust and related documents accomplish what the customer wants to achieve. For that service, the lawyer receives a payment from the proceeds of the sale. There may or may not be language in the sales contract that assures purchasers that they are free to seek advice of other counsel at their own expense.
WHERE’S WALDO, THE LAWYER?
Is this an attorney-client relationship? The lawyer is certainly rendering legal advice based upon the specific needs of the customers. But the way the relationship comes about is flawed. Supreme Court Guidelines 9.3(a) and (b) on the Use of Non-Lawyer Assistants provide that a lawyer may not delegate responsibility for the formation of an attorney-client relationship or establishment of the amount of fee to be charged for a legal service.
The behind-the-scenes lawyer is compensated much like the living trust seller is. The lawyer will only get paid if there is a sale. And the money comes, not from the customer, but from the seller. Rule of Professional Conduct 1.8(f) tells lawyers they shouldn’t take a fee from someone other than their client unless the client consents after consultation and unless the lawyer’s independent professional judgment is not affected. See also Rule of Professional Conduct 5.4(c). Perhaps the behind-the-scenes lawyer will do an adequate job of verifying that the documents accomplish what the client desires. But what about counseling with clients about their estate planning needs and candidly advising them that they might not need that living trust—that a simple will with unsupervised probate will more economically accomplish what the client wants?
And there’s the rub. Living trust companies are in the business of selling living trusts. They are not in the business of talking people out of living trusts in favor of more economical and effective estate planning strategies. Lawyers should be different. Their relationship with clients is a fiduciary one. That means being candid with them and giving them independent legal advice even when it is to the lawyer’s personal, short-term financial disadvantage. If that means telling the client there is a lower cost and simpler approach to estate planning, the lawyer is ethically bound to tell the client about it.
The last I checked there was no equivalent of Rule of Professional Conduct 2.1 for living trust sellers. They aren’t fiduciaries and owe no more allegiance to clients’ best interests than the car salesperson I mentioned earlier. Hence, my reference to everything looking like a nail if all you have is a hammer. Lawyers have more than one estate planning approach at their disposal. Their legal training and experience allow them to evaluate the several available options against the needs of the client and make recommendations as to suitability. This is the essence of practicing law. Drafting the documents to implement the client’s choices is merely the conclusion of the process of real lawyering that begins earlier.
INDEPENDENT LEGAL ADVICE
It is a problem for lawyer independence when a non-client intermediary stands between the lawyer and the client. It is sometimes pointed out in the face of this objection that this is no different than when in-house insurance defense counsel represents an insured in defending a claim against the insured. In Cincinnati Insurance Company v. Wills, 717 N.E.2d 151 (Ind. 1999), the Indiana Supreme Court held that this arrangement was not the unauthorized practice of law. But the insurance defense situation is quite different. There, absent some other basis for a conflict of interest, the insurer and the insured have a community of interest in defending against the adverse claim.
In living trust sales, the seller has no community of interest with the customer in the customer’s estate plan. He or she just wants to sell living trusts. If it is permissible for a lawyer to enable the sale of living trusts by non-lawyers, then there would seem to be nothing stopping Wal-Mart from offering a broad range of legal services to the public and assigning the actual legal work to staff lawyers or outside contractors. Our rules prohibit non-lawyers from playing such an intermediary role.
THE COST OF LEGAL SERVICES
Why is it that consumers seek estate planning services from non-lawyers in the first place, given the risks of getting bad advice? Maybe money has something to do with it. In some cases, lawyers can provide quality estate planning services for the same price or cheaper than is charged by the living trust mill that provides a free lunch at the local Holiday Inn. But potential clients now have even cheaper alternatives. The New York Times just ran a piece about the rise of quick and easy estate planning companies—many of them dealing exclusively over the Internet. The expanding market for these lawyer alternatives challenges the bar to affordably meet the legal needs of ordinary people—the ones who can afford a $70 Internet will, but not a $1000 lawyer-crafted estate plan. Complain all we like about the unauthorized practice of law, the power of market forces is such that, until lawyers are willing to provide discernable value for what they charge clients for estate planning services, potential clients of modest means will flood the alternative market for these services. This is but a microcosm of one of the major economic challenges facing the legal profession today.