Beware of Trust Mills

What is Unauthorized Practice of Law? California Business & Professions Code 6125 states, “No person shall practice law in California unless the person is an active member of the State Bar.”

California today defines law practice as providing “legal advice and legal instrument and contract preparation, whether or not these subjects were rendered in the course of litigation.” Birbower, Montalban, Condo & Frank, P.C . v Superior Court., P.C. v. Superior Court (1998) 17 Cal.4th 119, 127-128.Providing legal advice or service is a violation of the State Bar Act if done by an unlicensed person, even if the advice or service does not relate to any matter pending before a court. (Mickel v. Murphy (1957) 147 Cal.App.2d 718, 721.)

Beware of trust mills, or people who are not attorneys and are giving trust seminars and legal advice.  They are breaking the law simply by giving you legal advice. If someone gives you information about the benefits of estate planning, and/or claims to be simply helping you “fill out forms,” consider whether that person has given you any advice on how to fill the forms out—suggesting how you should hold title on your property, the legal effect of your choices, giving you an explanation of what will happen if you choose to fill out or not to fill out the paperwork—if so, the person giving you advice is breaking the law unless they are a lawyer in active good standing with the state bar.With limited exception, the lawyer you retain should be licensed to practice in your state.

The courts are shutting trust mills down all across the nation

  • Cleveland Bar Assn. v. Sharp Estate Serv., Inc. held that using a review attorney does not cure the Unauthorized Practice of Law violation.  In other words, having an attorney reviewing the final document does not make legal the work which the non-attorneys are doing.
  • California Attorney General Bill Lockyer and Insurance Commissioner John Garamendi filed a $110 million-plus lawsuit against a living trust mill that tricked senior citizens into using their retirement investments to buy annuities that often made less financial sense for the elderly victims but earned the con artists substantial commissions and other income.

Defendants in the case were all of the following:

1) Family First Advanced Estate Planning and Family First Insurance Services of Woodland Hills;

2) Nick A. Michaels, president of Family First Advanced Estate Planning;

3) John Owen, president of Family First Insurance Services;

4) American Investors Life Insurance of Kansas;

5) Group Legal Services of San Diego;

6) Senior Law Practice Group; and

7) Attorney Thomas R. Lee of Woodland Hills.

Consumers who believe they have been victimized by the Family First defendants–or by another living trust mill or annuity fraud–should report it to their local district attorney.

How did the lawsuit turn out?  The state of California reached a $7.2 million settlement with American Investors Life Insurance Company, Family First Insurance Services, and Family First Advanced Estate Planning

  • Minnesota Attorney General Lori Swanson sued two California companies, American Family Legal Plan and Heritage Marketing and Insurance Services, Inc., for operating a “trust mill” that preys upon Minnesota senior citizens

How did the lawsuit turn out?  The Court Imposed a $6.3 Million Civil Penalty on ‘Trust Mill’ Companies and Owners 2005-0422. Columbus Bar Assn. v. Am. Family Prepaid Legal Corp., Slip Opinion No. 2009-Ohio-5336.

  • LegalZoom has been sued repeatedly, both for Unauthorized Practice of Law in various states, and for misleading and deceptive business practices.

The distinction between practicing law and simply providing forms is drawn as follows: Where a person downloads and/or purchases forms, the seller is not liable for Unauthorized Practice of Law—a person (with or without the necessary knowledge) can to represent him or herself in any matter. But where a non-attorney person gives advice on how to fill out those forms, the line is crossed. LegalZoom’s legal document preparation service goes beyond self-help because of the role played by its human employees, not because of the internet medium LegalZoom employees intervene at numerous stages of the so-called “self-help services.”

In one case, Katherine Webster sued as executor of the estate of Anthony Ferrantino and trustee of the Anthony J. Ferrantino Living Trust. Webster claims that LegalZoom’s website and advertising are premised on the misleading claim that “virtually anyone” can create a valid legal document through the site, and that the “customized” documents made by nonlawyers would be reviewed for “accuracy and reliability,” imbuing customers with a false sense of security. “Nowhere in the manual do defendants explain that using LegalZoom is not the same as using an attorney and that its documents are only ‘customized’ to the extent that the LegalZoom computer program inputs your name and identifying information, but not tailored to your specific circumstances,” the complaint states. Plaintiffs say they bought a living trust through LegalZoom, which was to include a revocable living trust, a will and a durable power of attorney. But Webster says the documents were flawed as a result of LegalZoom’s failures, and Ferrantino’s estate had to hire an attorney to correct the problems. Webster claims Shapiro and co-founders/co-defendants Brian Lee and Charles Rampenthal made misrepresentations to advance their business, buried disclaimers in LegalZoom’s website, and omitted relevant facts.Webster claims that LegalZoom advertises by claiming: “Remember: Your order comes with unlimited customer support.” But in reality, “There is absolutely zero attorney support,” the class claims, adding that “the customer service representatives are not lawyers and cannot by law provide legal advice.”

The bottom line:

  • Take time when making your decision. Do not fall victim to high-pressure, “act immediately” sales tactics.
  • Seek the advice of a trustworthy and knowledgeable estate planning attorney.
  • Not using an attorney (or using an attorney involved in questionable ethical practices–such as assisting unlicensed people in the Unauthorized Practice of Law) can compromise your personal, confidential information, and it may also create a risk of not having your estate planning objectives met.