James H. Beauchamp
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SEPTEMBER, 1999
TRUST SEMINARS: PRACTICING LAW WITHOUT A LICENSE?

 

One of my friends from Missouri, who has given seminars on estate planning, mentioned the case of In re: Mid-America Living Trust, (927 SW 2nd 855, 1996). Her concern was whether her employer, a charitable organization, might be charged with practicing law without a license in Missouri, if she gave trust seminars. The Missouri Supreme Court issued an injunction against Mid-America Living Trust Association for doing that very thing.

The overview of the case is that Mid-America Living Trust Association was engaged in the unauthorized practice of law. Mid-America was a closely held Missouri corporation which prepared trusts, pour-over wills, and durable and general powers of attorney. The corporation was owned and controlled by a non-lawyer, and worked through insurance agents, stock brokers and financial planners (the “trust associates”). Paralegals at Mid-America prepared the documents, which were mailed to a review attorney, who sometimes communicated directly with the client. After changes were made, the documents were mailed to the trust associates, who then deliver them to the client for execution.

Mid-America prepared approximately 125 to 200 estate planning packages each month, for execution in the states of Florida, Texas, Arizona, California and Hawaii. There were some trusts prepared for execution Missouri.

Although the phase “practice of law” has been defined in Missouri by statute, the key to the court holding is found in the statutory definition of “the law business”, which is defined to mean:

“the advising or counseling for valuable consideration of any person, firm, association or corporation as to any secular law, or the drawing or the procuring of or assisting in the drawing for a valuable consideration of any paper, document, or instrument affecting or relating to secular rights or the doing of any act for a valuable consideration in a representative capacity, obtaining or tending to obtain, or securing or tending to secure for any person, firm, association or corporation any property or property rights whatsoever”. (page 859 at 927 SW 2nd)

The court first noted that non-attorneys are permitted to perform routine services ancillary to other activities, such as filling in blanks in approved real estate forms, and that activity is not the unauthorized practice of law. The court noted, however, that the need for public protection for the unauthorized practice of law demands the strictest scrutiny when the exercise of judgment and discretion apply to the particular needs of an individual.

The court then turned to marketing and drafting living trusts by non-lawyers. The court listed cases from Colorado, Florida, Oregon and Ohio, and articles written by legal commentators, on the practice of marketing trusts and estate planning documents.

Though it is difficult to find a single “key” to the holding, perhaps the combination of the marketing practices of Mid-America, coupled with the notion that trust agreements do affect the legal rights of their clients, and if those instruments are prepared by non-lawyers, the practice would amount to the unauthorized practice of law. The court stated that attorneys who participated in such “schemes” have been disciplined for assisting non-lawyers in the unauthorized practice of law and for creating a conflict of interest. For example, the court cited with approval a Colorado case, where the Colorado lawyer was suspended for aiding a company in the unauthorized practice of law. The court pointed out that attorneys were regulated by disciplinary rules, but that these disciplinary rules are not applicable to non-lawyers. For this reason, I suppose the only remedy available against Mid-America was an injunction.

Specifically, the Missouri Supreme Court found the following violations:

(1) Mid-America rendered legal advice to individuals concerning the need for various types of living trusts.

(2) Mid-America gathered information from individuals for use in determining what type of trust was appropriate for those individuals (gathering information does not necessary constitute the unauthorized practice of law, but the advice given did constitute the practice of law).

(3) Mid-America prepared trust documents for individuals.

(4) Using an attorney to review what was done by paralegals did not “cure” Mid-America’s unauthorized practice of law.

This, then, is the state of the law in Missouri.

The unauthorized practice of law is governed by Title 5 of the Oklahoma Statutes. Title 5, Chapter 1, Appendix 1-A, Article 2, Section 7, sets forth the following rule:

No person, corporation, partnership, nor other entity (hereinafter collectively referred to as “person”) shall practice law in the state of Oklahoma who is not an active member of the association, except as herein provided. . . .

Based on this section, the General Counsel’s office could seek an injunction for the unauthorized practice of law. See Edwards vs. Hert, 504 P2d 407 (Okl., 1972), which is Oklahoma's leading case on the unauthorized practice of law.

Though I don’t want to appear critical of the Missouri case, some general observations ought to be made. First, estate planning ought not to be limited to the legal profession. Lawyers are not experts in investments, insurance products, and the nuts and bolts of tax accounting work. Stated differently, in some instances more than one set of eyes is required to see the playing field, and estate planning ought not be restricted to the legal profession. Second, estate planning seminars, whether conducted by lawyers or non-lawyers, are generally beneficial to the public at large. We know that most people do no estate planning at all, and die without wills. If these seminars do nothing more than bring the public’s attention to the need for estate planning, then some good is done. Third, persons who attend these seminars usually “shop” for lawyers to do their legal work, rather than sign up for what might be a rather handsome trust preparation fee. Thus, the attendees will suffer no harm, if they seek an attorney of their own choice. And finally, such seminars, when conducted by churches or charities, might cause a gift to be made for a charitable purpose – and that is not necessarily a wrongful purpose.

I wish I had answers to the Missouri holding. If the case is limited to the preparation of trust instruments by non-lawyers, it probably isn't a bad decision. If it is to be construed as including estate planning in general, then lawyers will be required to know the ins and outs of insurance products, all types of investments, the breadth and depth of all IRS tax forms, and so forth -- and quite frankly, no lawyer knows it all.

To date, this case has not been adopted as being the law in Oklahoma.

©1999 James H. Beauchamp

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