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Ethics Articles: "Trust Kits" and the Unauthorized Practice of Law

Focus on Professional Responsibility
MBJ August, 1999
By: Thomas K. Byerley, Regulation Counsel and Victoria V. Kremski, Assistant Counsel

"Trust Kits" and the Unauthorized Practice of Law

    Michigan citizens, especially seniors, have recently been targeted by private non-law businesses that are selling "trust kits." Solicitations—by mail, telephone calls, seminars, newspaper advertisements and even door-to-door salespeople—encourage citizens to create living trusts to avoid probate. The solicitations often involve exaggerated or false statements about the cost and time involved in probating estates. Seniors are especially vulnerable to these businesses, as they believe that purchasing the trust kit will spare their beneficiaries a long court battle and increase the value of the estate.

    Although the practices of the trust kit companies vary in small detail, the marketing practices are remarkably similar. Usually, the potential customers are visited in their home. The salesperson interviews the customer and offers to insert information on preprinted trust forms. A return visit is then scheduled to deliver the completed documents. On the return visit, the customer is given a completed "living trust" and/or a will for signature. Many times no lawyer is involved in the preparation or review of the estate planning documents.

    Trust kits can be very expensive and may cost far more than hiring a lawyer. Costs of $5,000 to $7,000 for "trust kits" are not uncommon. As the completed trusts consist of preprinted forms, they often fail to take the purchaser's financial or personal circumstances into consideration. For example, one trust kit put a southeastern Michigan couple's $1.1 million estate into a joint trust, creating federal estate tax liability of about $200,000. Fortunately, the couple had the trust kit reviewed by a lawyer, who spotted the problem and prepared a new trust that avoided the tax.

    The Standing Committee on the Unauthorized Practice of Law has been actively monitoring the practices of trust kit salespeople and has been working to prevent the preparation of these important estate planning documents by individuals who are not licensed to practice law.

    The committee has authored and published, under the leadership of former committee member Thomas V. Trainer of Bloomfield Hills, a brochure entitled "Don't Trust Trust Kits." The brochure, targeted to seniors, has been disseminated at senior centers around the state and is being used by the Legal Hotline for Older Michiganians in public presentations. Copies of this brochure can be obtained in printed form from the State Bar of Michigan and is also available, free of charge, on the State Bar's internet site.

    The sale of trust kits in these circumstances is not only an ethically questionable business practice, it may constitute the unauthorized practice of law.

    The preparation of wills for others is the practice of law and may not be performed by individuals not licensed to practice law. Grand Rapids Bar Association v Denkema, 290 Mich 56 (1939). In that case, a loan officer drafted leases, land contracts, deeds, wills and trusts through his employment at a lending institution. The Michigan Supreme Court held that non-lawyers may not lawfully draft these documents and may not assist others in conducting probate proceedings in probate court.

    Similarly, in Detroit Bar Association v Union Guardian Trust Co., 282 Mich 216 (1937), reh den 282 Mich 707 (1938), the Supreme Court was presented with a case in which a non-lawyer was drafting wills for others. In that case, the court held that the defendant was properly enjoined from drafting wills or making outlines of wills, from soliciting wills and trusts business, from appearing in court proceedings regarding the documents prepared by nonlawyer employees, and from furnishing forms that provided for irrevocable trusts.

    Because the law on this issue is relatively clear, the Board of Commissioners of the State Bar of Michigan has authorized the committee to institute litigation against two individuals who were preparing living trusts without lawyer supervision. In both cases, the State Bar of Michigan was able to obtain permanent injunctions preventing these individuals from selling trust kits in this state.

    On December 15, 1998, the Circuit Court of Branch County entered a permanent injunction against Ronald Bess, prohibiting him from preparing estate-planning documents on behalf of other persons. Mr. Bess operated a business known as "Michigan Group Associates" and would sell trust kits, including living trusts, wills and estate plans, door-to-door to senior citizens. He would also "transfer" the assets of his "customers" to his own investment plan.

    Similarly, the State Bar of Michigan was able to obtain a permanent injunction against Robert Harden in Shiawassee County on April 16, 1999. Mr. Harden, doing business as Harden Associates, prepared living trusts, pour over wills, durable powers of attorney, and other estate planning documents for his customers, all without lawyer review or supervision. The permanent injunction prohibits Mr. Harden from giving legal advice and drafting estate documents.

    A recent trend in some of these businesses is to have an attorney "review" the trust kits prior to delivery. Merely having an attorney review the documents does not remove the business from the unauthorized practice of law. A non-lawyer may not serve as an intermediary between a lawyer and a client in the preparation of wills or trusts. Lawyers must directly establish the lawyer-client relationship and not use intermediaries for this purpose. See Hightower v. Detroit Edison Co., 262 Mich 1 (1933). A lawyer who reviews documents for such a business may be violating the Michigan Rules of Professional Conduct. See Michigan ethics opinion RI-191.

    Unfortunately, these are not the only individuals preparing and selling trust kits to Michigan citizens. Several companies hold seminars across the state claming to "educate" people about trust kits and the probate process. The Standing Committee on the Unauthorized Practice of Law continues to monitor these practices and attempts to gather sufficient evidence to recommend prosecutions in other matters. The committee would welcome any evidence that Michigan lawyers possess on the practices of non-lawyers selling trust kits to the public. That information should be forwarded to the Committee on the Unauthorized Practice of Law, 306 Townsend Street, Lansing, MI 48933.