Robert (he’s the guy who defended OJ!) Shapiro’s LegalZoom, an active seller of do-it-yourself wills and other estate planning documents, is the target of a class action lawsuit in California charging that the company engages in deceptive business practices and is practicing law without a license. The lawsuit arose after an estate plan using LegalZoom documents fell apart.
Also, LegalZoom has been under orders not to sell any documents in North Carolina since 2008. The Cease and Desist letter advises LegalZoom that it is subject to prosecution if it continues to sell legal documents within the state. On October 3, 2011, LegalZoom filed suit against the North Carolina State Bar.
Online sites selling do-it-yourself wills and other estate planning documents might seem to offer a cost-effective and convenient alternative to visiting an estate planning attorney.
After all, even a simple will, durable power of attorney and health care advance directive prepared by an attorney can cost several hundred dollars per person. Online services promise the same basic estate planning documents for a fraction of that.
But is online estate planning worth the initial cost savings? Are the documents created an adequate replacement for a consultation with a qualified attorney?
Attorneys don’t sell documents, they sell legal advice tailored to individual circumstances. Estate planning attorneys generally have detailed discussions with their clients about their situation, hopes and goals, including their relationships with their children. If a child has problems with debt, or is anticipating a divorce, or has special needs, certain portions of the estate plan must be adjusted. Online programs don’t ask these questions or address these potentially crucial issues.
Online services never offer advice about who would be appropriate to name as trustee or executor. Not good.
Also, most estate planning programs do not address complicated and often inflexible variations in state law. Because there is no national probate code, a computer program or web site cannot hope to replicate the knowledge of a qualified local estate planning attorney who knows the intricacies of state law.
Tax issues also play a part in any decision about whether to incorporate trusts into an estate plan. If planning software addresses trusts at all, it inevitably produces a rudimentary and risky document. Well-off families, or even families without many liquid assets but with substantial real estate holdings, farms or businesses must engage in far more complicated tax planning.
Further, online programs will not offer parents the opportunity to protect their adult children from some of the financial consequences of divorce, bankruptcy and illness. Rather than giving an inheritance to a child outright and risk the child’s later losing it to creditors or in a divorce settlement, parents can create “spendthrift” or “family protection” trusts that hold assets for the child. This shields the inherited assets from most creditors.
Finally. one of the trickiest areas of estate planning involves families of children with special needs. In most cases, especially when the child with special needs receives or anticipates receiving government benefits, leaving money directly to the child can be devastating. An entire category of trusts, known as supplemental needs or special needs trusts, are designed to work within the arcane rules and restrictions of the rules governing disability benefits. None of the online estate planning sites account for these special, and very complicated, rules.