September 26, 2012

Online Legal Documentation Services

Using an online site is an automated process, just like bottling beer
People who are cost-conscious or short on time, often resort to self-directed websites to draft estate planning documents. The most popular website where people can create legal documents is probably Legalzoom.  

My main critique of using websites to create documents is that the client is given no legal advice when completing the process. These websites have explicit disclaimers stating that the website is offering no legal advice whatsoever. Hence, the client is left with figuring out the legalities themselves. 

In terms of estate planning, figuring out the legalities yourself is not the ideal circumstance.

One of the principal reasons why a person with a home writes a trust is to avoid probate. Probate is quite expensive and lengthy so most people try to avert it. The key step is to transfer the settlor's home to the trust. Herein lies the problem of using an online document-drafting site, it cannot personally advise you to transfer the home into the trust nor can it actually effect transferring the home into the trust, i.e. a trust transfer deed. Both of these would constitute rendering legal advice, which it is prohibited from doing. Ultimately, the client has a trust but not funded with the home. When the client passes away, the home will need to be transferred through probate or via a Heggstad petition if certain facts are present. The upshot is that the client's goal of having a fluid transfer of assets from themselves to their beneficiaries has not been achieved. In terms of real-world application, the following example has occurred to a couple of client I have had over the years.

My non-attorney friends occasionally ask me if I am threatened by Legalzoom and other online document drafting sites, that is it is a competitor of mine. I tell them that these sites are actually beneficial to attorneys, albeit in a perverse way. Usually clients that use these sites botch the estate planning process because they are not given competent legal advice. When they come to me, I have to rectify the shortcomings so that the person's original intentions are met. Whereas, if they had just come to me in the first place, they start anew so there is less work involved that dictates a lower fee.

On a side note, Legalzoom does recognize my work. An article I wrote about modifying irrevocable trusts is cited in a Legalzoom article on the topic. While I appreciate the recognition, I am not about to give a ringing endorsement of Legalzoom because it mentioned an article I wrote.