LEGAL ZOOM: CONSUMER FRAUD

Self-help Law

There are two major sources of self-help law: Nolo Press and Legal Zoom. Both insist you do not need an attorney to do estate planning. One Nolo publication says that if you go to a lawyer, “you should be prepared for the lawyer to take a dim view of this book and what it offers.” (Special Needs Trusts, Intro, iii.) The book further insists that no good reason exists for this attitude on the part of attorneys. After all, “hundreds of thousands of people have drafted their own living trusts and wills . . . with the help of good materials written for nonlawyers.” (Special Needs Trusts, p. 170).

But Did the People Survive the Jump?

Let's read Nolo's statement again, with a few minor changes: "Hundreds of thousands of people have made and used their own homemade parachutes with the help of good written instructions!" Surely you would have a follow-up question! Did the people survive the jump? That is our question about self-help law: Did it work? Did the boilerplate trust work at the death of the person who purchased it? In how many situations did trustees ignore the document, end up confused, or resort to hiring attorneys to file probate petitions? In how many situations did beneficiaries or trustees end up hiring litigators when everything went wrong?

No Proof.

Nowhere have we seen any verifiable, independent proof as to whether LegalZoom-type documents actually work. However, we do know what courts and probate litigators say about these cheap documents.

"More Litigation Will Follow."

In a Pennsylvania probate case, the court referred to the “Form Book Declaration of Trust” at the heart of the case–in other words a LegalZoom type document--and stated “if jolly old settlors want to disdain legal counsel and use fill-in-the-blank forms, more litigation and unpredictable results will follow.” Scalfaro v. Rudloff, 934 A.2d 1254 (Pa., 2007) (analyzed in Estate Planning, May 2008, p. 40).

Just one case? No. As probate litigators, we have seen hundreds of cases involving form book documents. Since these documents are so obviously cheap (and where they came from is ultimately irrelevant to the case), attorneys and courts most often do not make a point of where they came from. But as probate litigators, we know from first-hand experience that LegalZoom-type documents are filling the probate courts.

Further, a reason there are not more cases referring to these cheap internet forms is that the heirs of Mom or Dad who purchased the documents are often embarrassed to admit the fact or are not in a financial position to sue LegalZoom for perpetrating fraud against Mom or Dad . . . even if they could. After all, LegalZoom and Nolo and other purveyors of cheap forms are quick to protect themselves.

How LegalZoom and Others Leave You Holding the Bag.

Notice how often and emphatically LegalZoom and Nolo point out that their products are not a substitute for good lawyers. The following LegalZoom disclaimer is typical: "LegalZoom is not a law firm, and the employees of LegalZoom are not acting as your attorney. LegalZoom does not practice law and does not give legal advice. This site does not create in attorney-client relationship, and by using LegalZoom, no attorney-client relationship will be created."

Nolo has the same disclaimers, but also adds the statement that their books are not a substitute for good lawyers. (Special Needs Trusts, page xx.)

Why do they do this? Simple. To protect themselves from the damages families suffer when people use their products! When their cheap documents end up in probate court, angry heirs want to blame the purveyors of the products. But as it pays for multimillion dollar superbowl ads, LegalZoom can always say with a straight and serious face, "we are not attorneys: the consumers were warned." And indeed they were!

As a side note, when you retain your local attorney, you are in an attorney-client relationship; your attorney is giving you legal advice; and you and your heirs do have the right to come after the attorney if documents are invalid or inadequate or the source of problems. You enter a contract: you pay for services, and the attorney provides those services correctly. This is one of the great advantages of hiring an attorney: there is a living, local person or firm ultimately responsible. Not so with Legal Zoom, Suzy Orman, Dave Ramsey, Nolo, or Office Depot. Any problem, you are on your own!

The Ego Scam.

LegalZoom and Nolo state that setting up your own trust is quite easy, that trusts are “not as complicated as most lawyers think.” This is the "Ego Scam." Consider the following story:

Larry Hillblom, one of the three founders of the worldwide corporation, DHL (courier services), was a successful and accomplished appellate attorney, judge, pilot, and business owner . . . who also drafted his own trust. He left out one sentence in his trust that cost his beneficiaries $150 million in taxes, $40 million in probate costs, and completely undermined his charitable distribution desires to the California state university medical system. Smart, yes. Wise, no! For accounts from The Wall Street Journal about Hillblom's blooper, click here and here.

Wise people recognize that they could--if properly trained, educated, and experienced--create their own parachute. But in their wisdom (intelligence, experience, and humility), they realize things are never as simple as they appear. They also admit they have better things to do than spend the ten thousand hours necessary to become an expert (see Malcom Gladwell's Outliers). Wise people recognize and avoid the Ego Scam.

Consumer Fraud.

In our opinion LegalZoom-type marketing and boilerplate forms border on consumer fraud, taking advantage of not just the ego scam, but all the confidence tricks in the book to defraud you:

•	appeal to authority ("our documents are reviewed by attorneys and approved in fifty states"; you are supposed to believe the documents will protect you from probate (wrong); this kind of language is meaningless nonsense; besides we thought attorneys were unnecessary, so why should it matter whether the documents were reviewed by attorneys?),
•	your anxiety, fear, or anger (anger at attorneys, taxes, courts, and anxiety and fear that something needs to be done now),
•	your desire for simplicity and quick fixes ("planning with us is a simple, easy, fun three-click process" and other such vapidities),
•	your ego (again, "thousands have done it, you can do it!"),
•	your pride at getting a deal (ego again at being smarter than everyone else, especially those greedy attorneys: "why spend thousands?")

Ultimately, the purchasers are embarrassed to admit their gullibility, and their beneficiaries have no recourse to go after LegalZoom.

The Better Approach.

Now, if you are cynical, you will think this article is just about money or turf. LegalZoom on one hand making millions versus the attorney on the other hand making an exorbitant living. That’s the cynical approach. The better approach is to honestly ask yourself three questions:

(1)	What is best for me–financially, emotionally, and in terms of comfort and security in knowing things are done right–what is best for me–LegalZoom/Nolo or a competent, local attorney I can interview and look in the eyes?
(2)	I will pay more now for an attorney, but do I want to take the chance that my money at my death may end up paying an attorney fifty or a hundred times the amount I paid LegalZoom/Nolo just to fix the mistakes found throughout LegalZoom-type documents?
(3)	Who will finally and honestly be most concerned about me: LegalZoom/Nolo or my local attorney?

Ultimately, LegalZoom/Nolo sell a commodity: a book or document. The profits go to shareholders and to radio talk shows and tv networks for expensive ads. As competent estate planning attorneys we are not selling a product; we are providing a customized service. And you see us at the grocery store and at the movies and theater and games. We are in your community. We are your neighbors. You and your children know where to find us!

The best way to avoid problems–even in situations that may seem so simple on the surface–the best way to ensure effective planning is to retain a competent, local estate planning attorney, someone who enjoys the professional gratification of personally serving you, someone with whom you can talk and develop a relationship of trust.

You are not going to build a relationship of trust with LegalZoom’s corporate headquarters or a computer or book.

Call or Email Us today.