Fleming & Curti, P.L.C. - Non-Lawyer Trust Preparation Group Fined Over $1 Million

DECEMBER 19, 2005 VOLUME 13, NUMBER 25

Non-Lawyer Trust Preparation Group Fined Over $1 Million

Sharp Estate Services, an Ohio group of non-lawyers, was in the business of preparing living trusts for its clients. For $1995 to $2195, Sharp’s employees would complete the paperwork, determine whether a trust was appropriate, and help with the execution of the documents. The problem for Sharp—and its customers, the Nevada organization that provided forms and training, and the Ohio lawyers who "reviewed" the documents before execution—was that it was engaged in the unauthorized practice of law. The Ohio Supreme Court enjoined Sharp and related businesses, and then levied a fine of $1,027,260.

Sharp’s customers were solicited at seminars held by its advisors. After signing up for estate planning services, customers were directed to write two checks—one to Sharp and the other to an attorney affiliated with The Estate Plan, a Nevada corporation. In most cases, this "review" attorney would not meet with the customer, but would complete documents using The Estate Plan’s forms. The documents were then returned to the Sharp advisor for signing.

According to news reports, the Sharp advisors also had another purpose. Once they had compiled information on customers they could also market insurance products—especially annuities—to them. And although the Supreme Court opinion does not discuss costs, it is likely that most customers did not even save money on the document preparation, since the cost for The Estate Plan is about what competent legal advice might cost in most cases.

Neither Mr. Abts nor The Estate Plan maintained offices in Ohio, but the Supreme Court had no difficulty determining that both were doing business in the state. Advisors were instructed to send customers’ questionnaires to review attorneys selected by The Estate Plan; advisors received marketing training, and were allowed to identify themselves as representatives of The Estate Plan.

Sharp and The Estate Plan insisted that they could not be charged with the unauthorized practice of law since they engaged a reviewing attorney in each case. The Supreme Court was unpersuaded by that argument, since the attorney did not make the decision that a trust was appropriate (and in fact the Court found that many of the customers would not benefit from a living trust) and was not permitted to prepare any documents other than those created by The Estate Plan.

After finding that Sharp, The Estate Plan and Abts had engaged in the unauthorized practice of law, the Ohio court levied a fine of $2195 for each of the 468 known violations. It also ordered release of the names of all Ohio customers, and imposed an additional daily fine of $25,000 if that information is delayed beyond eight days. Sharp, its owners, Mr. Abts and The Estate Plan were all enjoined from marketing or selling living trusts in Ohio. Cleveland Bar Association v. Sharp Estate Services, Inc., December 14, 2005.

While Ohio has been more aggressive than some states in efforts to prevent the unauthorized practice of law, the same principles should apply in other states. Arizona’s approach, like that of Ohio, is to leave regulation of the practice of law to the state’s high court. The Arizona Supreme Court and the State Bar of Arizona have not been as assertive as their Ohio counterparts in protecting the public from misleading, oversold and sometimes downright dangerous non-lawyer estate planning practices.

A simple web search for Henry Abts III and The Estate Plan reveals the misleading and high-pressure tactics utilized by his and similar sales organizations. "Did you know that having a will guarantees that your estate will go through probate?" asks the scrolling banner on Mr. Abts' website (having a will is no such guarantee). "Did you know that your probate cost is unknown, but the average cost of probate is 4% to 10% of the gross estate?" (No citation for this absurd statistic is given, and an "average" cost with a 250% variation from low to high ought to be a little suspect on its face) "Did you know that the average length of probate throughout the country is 13 months?" (Again no citation to authority, and no indication of how long the average trust resolution takes for comparison—but most practitioners would likely estimate the average for both trust and probate to be more like 6 months) "Did you know that 90% of the estates of all single widowed adults go through probate?" (Really? Did you know that Arizona recorded 42,736 deaths in 2004, and 7,363 probates filed? Can Mr. Abts provide a source for his remarkable assertion?) "Did you know that failing to utilize each spouse's federal estate tax exclusion equivalent can cost an estate up to $410,000 in unnecessary taxes?" (Well, actually, Mr. Abts, a more accurate figure would be $705,000 for 2005 and $920,000 for 2006--but neither figure is very helpful in analyzing the need for a living trust and use of a living trust is not the only way to reduce or eliminate the "unnecessary" tax in either case.)

Footnote: In late 2006 the Nebraska Supreme Court's Lawyers' Advisory Committee issued its Ethics Advisory Opinion #06-10. A Nebraska lawyer had asked the Committee for direction as to whether participation in The Estate Plan's program was ethically permissible. The Committee's answer: no--The Estate Plan impermissibly encourages non-lawyers to practice law, interferes with the lawyer's duty to give independent legal advice, and proposes "fee-splitting" between lawyers and non-lawyers.