One “trust mill” is on its way out of Ohio, thanks to a recent ruling by the Ohio Supreme Court. On October 14, 2009, the Court issued a hefty $6.4 million penalty against American Family Prepaid Legal Corp. and its affiliate, Heritage Marketing and Insurance Services, Inc. The Court barred the companies from doing business in Ohio.
The California-based companies targeted elderly Ohioans by offering a full array of estate planning services that would allegedly minimize estate probate costs. Non-attorney salespeople contacted elderly persons and marketed a $1,995 prepaid estate plan, which essentially amounted to one living trust. Upon delivery of the living trust to client homes, the salespersons also marketed insurance products. The sales were high-pressure, according to the Court.
Credit must be given to the Columbus Bar Association for pursuing the case. After receiving repeated complaints about the companies, the CBA investigated and determined that the companies were condoning the unauthorized practice of law. While an attorney in California drafted the trust documents, non-attorney salespersons interacted with the clients, provided legal information, and answered legal questions.
The Supreme Court had no sympathy for the companies and their sales scheme, and accurately described the “trust mill” issue that causes much frustration and concern in the legal profession. Said the court:
“A living-trust package is often not needed and may even be harmful for persons who are without significant assets, who have simple estates, or whose estates may need court supervision. A basic living-trust package…may even be insufficient and completely inappropriate for those having more substantial assets and who may need specific legal advice and even tax advice to meet their needs. … [t]hese enterprises, in which the laypersons associate with licensed practitioners in various minimally distinguishable ways as a means to superficially legitimize sales of living-trust packages, are engaged in the unauthorized practice of law…by facilitating such sales, licensed lawyers violate professional standards of competence and ethics.”
A misfortune of the case is that the companies have declared bankruptcy and ceased operations. The Columbus Bar Association is exploring whether it can collect the fine from another insurance company owned by the father-son team behind the defunct companies. The CBA hopes to distribute any amounts it collects back to victims of the trust scam. To read the court’s opinion, visit here.