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.
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