Unauthorized Practice of Law for Estate Planning Document Preparation

DHK

RFC®, ChFC®, CLU®
5000 Post Club
The topic was brought up in the Facebook group regarding estate planning and document preparation services that were being promoted. A couple of the attorneys in the group chimed in... and I reached out to a very significant person in estate planning.

When he told me about PRISON SENTENCES... I turned off all the comments on those posts. Once prison is in the picture, I don't like to speculate on anything.

Finally, this evening, I spoke with the attorney and he gave me this case citation of the Florida Supreme Court. We'll be posting more on this topic, but I thought I'd also share the information here, just in case.

I don't want to see anyone get in trouble.


Unauthorized Practice of Law, Update #1

I spoke with my attorney friend that I had promised would chime in on this topic. He is quite busy with other deadlines, but we will be working together to bring this topic to light.

The first that I'm going to post is a Florida Supreme Court decision. Citation: 613 So. 2d 426 (Fla. 1993). (Yes, I know - some of you are going to say "I'm not IN Florida!"... we'll get to that at another date.)

I am uploading the entire case text that I have so you can all read it. I will copy/paste what I think are the key parts of this 4 page document.

Pursuant to rule 10-7.1(b) of the Rules Regulating The Florida Bar, Ira C. Hatch, on behalf of American Family Living Trust, petitioned The Florida Bar Standing Committee on the Unlicensed Practice of Law (the Standing Committee) for an advisory opinion on the following question:

Whether it constitutes the unlicensed practice of law for a corporation or other nonlawyer to draft living trusts and related documents for another where the information to be included in the living trust is gathered by nonlawyer agents of the corporation or by the nonlawyer and the completed documents are reviewed by a member of The Florida Bar prior to execution.

The Standing Committee received similar requests from a number of other parties, and responded by holding two hearings where both oral and written testimony were received. Following the hearings, the Standing Committee voted to issue the proposed opinion which finds that nonlawyer companies selling living trusts are engaging in the unlicensed practice of law and that the public is either actually being harmed or has the potential of being harmed by this practice.

The proposed opinion describes the process of creating a living trust as involving five steps:
1) gathering the necessary information;
2) assembling the document;
3) reviewing the document with the client;
4) properly executing the document; and
5) funding the trust document, plus a threshold question of whether the client needs a living trust and identifying the type required.

The Standing Committee is of the opinion that, in order to protect the public from harm, steps 1, 2, 3, and 5 should be performed by a lawyer, and that step 4, the execution of the documents, should at least be supervised by an attorney if he or she does not personally execute the documents. The proposed opinion also concludes that "attorney review as proposed by the petitioner does not render the document that of the attorney so as to remove the activity from the unlicensed practice of law."

[DHK Note: There's a paragraph regarding nonlawyer preparation of pension plans being prepared for federal agencies, but the public is protected by federal regulation and licensing.]

The proposed opinion concludes that the rationale of the pension plan case is not applicable to this case where nonlawyer sellers and drafters of living trusts are not held accountable to any governmental agency or body.

A number of interested parties filed objections to the proposed advisory opinion. Several companies which market living trust estate plans and a national public interest organization representing consumers of legal services object to the proposed opinion as being factually and legally unwarranted and constitutionally flawed. The Florida Bankers Association, several associations representing certified public accountants, and the Florida Association of Life Underwriters object to the scope of the proposed opinion.

The Standing Committee also acknowledges that it received no testimony and found no evidence of public harm caused by the activities of these professionals, and that the hearings were limited to the factual context of "corporations and nonlawyer individuals soliciting and selling individualized living trust documents to persons who were not represented by independent counsel."

After hearing oral argument, reviewing the proposed advisory opinion, and considering the comments of the interested parties, we approve that portion of the proposed opinion which concludes that the assembly, drafting, execution, and funding of a living trust document constitute the practice of law. We also agree that a lawyer must make the determination as to the client's need for a living trust and identify the type of living trust most appropriate for the client. [...] "[g]iving legal advice . . . concerning the application, preparation, advisability or quality of any legal instrument or document or forms thereof in connection with the disposition of property inter vivos or upon death" constitutes the practice of law and may not be carried on by nonlawyers. A living trust document involves the disposition of property at death, and consequently requires legal expertise. However, consistent with this Court's opinion in Raymond, James, gathering the necessary information for the living trust does not constitute the practice of law, and nonlawyers may properly perform this activity.

The question posed by petitioner also presents a potential conflict of interest for a lawyer employed by a corporation or other entity involved in the sale of living trusts. Loyalty is an essential element in the lawyer's relationship to a client. In advising a client about the disposition of property after death, the lawyer must first determine whether a living trust is appropriate for that client. If so, the lawyer must then ensure that the living trust meets the client's needs. If the lawyer is employed by the corporation selling the living trust rather than by the client, then the lawyer's duty of loyalty to the client could be compromised. [...] In light of this duty of loyalty to the client, a lawyer who assembles, reviews, executes, and funds a living trust document should be an independent counsel paid by the client and representing the client's interests alone.

We reject the claim by the interested parties that this opinion violates a number of constitutional guarantees. Specifically, the parties contend that a determination that the nonlawyer sale of living trusts constitutes the unlicensed practice of law would violate their First Amendment commercial speech rights, impair interstate commerce, and deny their right to liberty and property without due process. This Court has rejected similar claims regarding the unlicensed practice of law raised by nonlawyer professionals.

The life insurance agents seek to "preserve permissible existing rights (and duties) for qualified, regulated, non-lawyer insurance agents to participate in their proper roles in the creation of a living trust." We find this opinion to be consistent with the "existing rights" of life insurance agents. Life insurance agents may properly sell life insurance that will fund a living trust and may offer advice on funding the trust from a financial standpoint, as these activities do not involve legal advice or services. Although life insurance agents are regulated by chapter 626, Florida Statutes (1991), living trusts are not an insurance product, and thus, not subject to these statutory regulations that govern life insurance agents in their insurance-related activities.

Accordingly, we find that the assembly, drafting, execution, and funding of a living trust document constitute the practice of law.
As provided by the stipulations filed in this case, this opinion does not apply to the activities of corporate fiduciaries associated with financial trust departments or to the practice of public accountancy.
 

Attachments

  • Florida Bar re Advisory Opinion.pdf
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Reading this, if I employ a large CPA firm for my taxes, because the CPA preparing my taxes is employed by a CPA firm, they can not represent my interest and prepare my taxes in my best interest. Instead I should hire an independent CPA. I wish Scalia was alive, he would hate this type of liberal interpretations of special interest trying to expand administrative power. I believe Federalist society was looking at this issue from a 1st amendment professional speech. Because as a life insurance agent you have a right to express your professional opinion. It would not surprise me eventually these rulings get addressed in a future supreme court case. Also from a practical point, I can open a company in Bermuda, offer online trust services to all 50 states and hire recently graduated US law school graduates and market my services. Any of the state courts will have no power to stop me. Federalist Society and Clarence Thomas were looking at this issue from an ongoing attacks on some Doctors during Covid. If I put a video on youtube saying Orange Juice cured my flu, am I really practicing medicine. It is likely eventually there will be a supreme court decision saying state court must precisely define that trust services require a lawyer and consumers may not prepare a trust without a lawyer. And states would need to show harm for this type of regulation. The example you posted showed no harm. Conservative branch at Supreme court would throw this one out.
 
It's clear that the lawyer "industry" wants to eventually completely eliminate services provided by non-lawyers so that the "industry" protects its revenue stream.

Carried to extreme, I could be prosecuted for telling you what a phrase in your insurance policy means.

:yes:
 
However, consistent with this Court's opinion in Raymond, James, gathering the necessary information for the living trust does not constitute the practice of law, and nonlawyers may properly perform this activity.

Because as a life insurance agent you have a right to express your professional opinion.

And your professional opinion should be... get a trust drafted by an attorney licensed to practice law for your state.

 
It's clear that the lawyer "industry" wants to eventually completely eliminate services provided by non-lawyers so that the "industry" protects its revenue stream.

Carried to extreme, I could be prosecuted for telling you what a phrase in your insurance policy means.

:yes:

And who are you going to ask to help keep you out of trouble?

Remember I said PRISON sentences for UPL.

Regarding interpreting an insurance contract phrase... by someone who has an insurance license? C'mon. You're reaching there.
 
My latest post to the Facebook group on UPL:

Unauthorized Practice of Law Update #2: Who will be harmed and due diligence you can do to protect yourself

I have three points to get across on this topic as a nonlawyer myself based on recent conversations:
  1. Who will bring up the complaint about unauthorized practice of law? It won't be the client. The client won't know if there are any errors or issues in their new estate planning documents.

    Who will know and when? It will be the beneficiaries and especially if anyone was disinherited from property, particularly because of errors in the wording of the documents.

    They will ask and find out who was a party to drafting up the will or trust. "Oh, it was done through my insurance agent. See? Here's the paperwork and everything I signed for the software package." That's when YOU have the target and be in the named party for a lawsuit for damages.

    The question will come up in the lawsuit: "Did you assist in which boxes to check (or any other influencial decisions)?"
    It won't matter what forms of waiver of liability you had signed. It's about the INFLUENCE in how the documents are prepared.

    This is why NOLO Press (the largest of all these legal form companies combined) and LegalZoom are okay: they are completely arms-length and done without anyone's influence on how they are completed. Both of those sites also have attorneys that the client can reach out to if they do have any questions.

  2. In the legal field, you CANNOT call yourself an 'expert' unless you are BOARD CERTIFIED! That is a FAR higher bar (pun intended) to pass than just passing the bar exam. It is illegal and a gross misrepresentation to the public to indicate that one is an 'expert' unless you are board certified. Google "What is a board certified attorney" for more info.

    If various software packages are saying they are created by 'experts'... ask to see their board certifications.
    (Answer: you won't get them.)

    Financial Industry trivia: There is an organization called the Institute of Business & Finance that had a designation called "Board Certified in Estate Planning." (They called ALL their designations "Board Certified" back then in the mid-2000's or so. They're still listed on FINRA's site, but they now reference the new designation titles.)

    Once they were notified that you cannot do that, they changed the name of their designation to "Certified Estate and Trust Specialist." https://www.finra.org/inves.../professional-designations/bce

    Btw, that's also a warning for us as insurance agents and financial advisors. I've posted the video before that "Calling yourself an expert may expose you to damages." It's not illegal in our case, but it does increase our exposure.


  3. When it comes to taxes and experimental tax strategies, what do accountants and wealthy clients do? They get a private letter ruling from the IRS. (Which, if you've taken an income tax course from CFP or similar, you know only applies to that specific situation, but it is public for others to reference.)

    Ask these software companies for just ONE state ABA approval for what they are doing or if it's the Unauthorized Practice of Law. You won't get a single one (we have 50 states).

There are still plenty of other nuances that I'm not familiar with. As I learn them, I will post them.

My own possible liability: Yes, there was a time when I allowed the promotion of trust and estate planning software services because I (naively) believed it was just a way to connect the public with self-completing document preparation and the agent makes a little on the transaction. Sounds like 'win-win', right?

My eyes have been certainly opened on this topic.

Imagine that one of your estate planning doc clients passes away and one or more beneficiaries was disinherited due to technicalities in the documents:
  • The beneficiaries determine that you, an insurance agent NOT an attorney, helped and influenced the document preparation.
  • The insurance agent only did it because THIS GROUP said it was a good idea.
  • Who is the primary admin and influencer of the group? Me.
"It's not paranoia if they're really out to get you." - Harold Finch, Person of Interest
 
Interesting. I wonder about the free Will software offered by various nonprofits (NPR, SPCA, etc) in hopes of being included as a beneficiary.
Wills can be easily contested (regardless of who prepared them) but influence can certainly be questioned.
 
And who are you going to ask to help keep you out of trouble?

Remember I said PRISON sentences for UPL.

Regarding interpreting an insurance contract phrase... by someone who has an insurance license? C'mon. You're reaching there.

Oh, darn, I forgot to put in my sarcasm notice. LOL.
 
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