Can a Tennessee lawyer be employed by a nonlawyer company that markets and sells living-trust packages to the public, reviewing the trusts the company prepares?

Plain-English summary

The Board was asked whether a lawyer could be employed by an estate-planning service company that sold living-trust packages to the public through independent sales agents. In the described arrangement, an agent met with the customer, presented the company's revocable-living-trust product, and helped complete a trust application; the customer paid the company a package price of roughly $1,100 to $3,500. The application then went to the lawyer, who telephoned the customer to confirm the information and answer questions, returned the application to the company for drafting, conducted a final review of the completed package, and forwarded it for delivery. The lawyer was paid $50 to $125 per trust reviewed, plus $500 per month from the company to be available to answer questions.

The opinion concluded that participation would violate the Code. It first noted DR 3-101(A) (a lawyer may not aid a nonlawyer in the unauthorized practice of law) and DR 3-103 (a lawyer may not form a partnership with a nonlawyer if any of its activities consist of the practice of law), while observing that whether the company's or its agents' activities actually constituted unauthorized practice was a legal question beyond the scope of the opinion; if they did, the lawyer's participation would be prohibited.

The opinion then identified ethical problems independent of the unauthorized-practice question. Because contact with the customer ran through the sales agents and by telephone, there was no direct attorney-client relationship, raising concerns about the lawyer's independent professional judgment under DR 5-107(B) (a lawyer must not let a person who recommends, employs, or pays the lawyer direct or regulate the lawyer's judgment). The opinion reasoned that the agent's commission rose with the package price, that by the time the lawyer saw the application the customer had already been sold a package without a lawyer's independent evaluation, and that the lawyer's financial interest in promoting the package could deter the lawyer from questioning whether a living trust served the customer's needs. The opinion further found that the customer made a single payment to the company, which then paid the lawyer, amounting to sharing legal fees with a nonlawyer in violation of DR 3-102(A); and because the fee bore no relation to the lawyer's time or quality of work, and an independent lawyer could likely prepare the same documents for less, the fee might be excessive under DR 2-106(A).

Currency note

This opinion was issued in 1996, before Tennessee's adoption of the 2003 Rules of Professional Conduct, which replaced the former Code of Professional Responsibility (including DR 3-101(A), DR 3-103, DR 5-107(B), DR 3-102(A), and DR 2-106(A)) on which it relied, and before the ABA's 2002 Ethics 2000 revisions. The modern analogs are RPC 5.5 (unauthorized practice), RPC 5.4 (professional independence and fee-sharing with nonlawyers), and RPC 1.5 (fees). Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance, and verify against the current rules before relying on any specific requirement mentioned here.

Common questions

Q: Could a Tennessee lawyer take a salary or per-trust fee from a company that sells living trusts to the public?

A: Per the opinion, no, in the arrangement described. It concluded that the customer's single payment to the company, from which the lawyer was paid, constituted sharing legal fees with a nonlawyer in violation of DR 3-102(A), among other problems.

Q: Why was the lawyer's independent judgment a concern when the lawyer reviewed each trust?

A: The opinion reasoned that the customer had already been sold a package by a commissioned agent before the lawyer was involved, and that the lawyer's financial stake in the product could deter the lawyer from questioning whether a living trust suited the customer, implicating DR 5-107(B).

Q: Did the Board decide that selling living trusts this way was the unauthorized practice of law?

A: No. The opinion said whether the company's or its agents' activities constituted unauthorized practice was a legal question beyond its scope, but added that if they did, the lawyer's participation would be prohibited under DR 3-101(A) and DR 3-103.

Background and rules framework

The opinion interpreted the former Code of Professional Responsibility: DR 3-101(A) (aiding unauthorized practice), DR 3-103 (partnership with a nonlawyer involving the practice of law), DR 5-107(B) (a third party directing the lawyer's professional judgment), DR 3-102(A) (sharing legal fees with a nonlawyer), and DR 2-106(A) (excessive fees). The modern analogs are Model Rule 5.5 / Tennessee RPC 5.5 (unauthorized practice), Model Rule 5.4 / Tennessee RPC 5.4 (professional independence, including the bars on fee-sharing with and partnership or direction by nonlawyers), and Model Rule 1.5 / Tennessee RPC 1.5 (reasonable fees).

Citations and references

Rules of Professional Conduct (former Code):

• DR 3-101(A) (aiding unauthorized practice); DR 3-103 (partnership with a nonlawyer). Modern analog: Model Rule 5.5 and 5.4(b) / Tennessee RPC 5.5, 5.4(b)
• DR 5-107(B) (third party directing professional judgment); DR 3-102(A) (sharing fees with a nonlawyer). Modern analog: Model Rule 5.4(c) and 5.4(a) / Tennessee RPC 5.4(c), 5.4(a)
• DR 2-106(A) (excessive fee). Modern analog: Model Rule 1.5 / Tennessee RPC 1.5

See also

• ISBA Ethics Op. 90-20: Lawyer Employed by a Living-Trust Business
• CA Op. 1997-148: Lawyers and Nonlawyer Living-Trust Marketers
• ISBA Ethics Op. 96-04: Practice Within a Nonlawyer-Owned Corporation

Source

• Landing page: https://www.tbpr.org/ethic_opinions/96-f-139

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

96-F-139 - Estate Planning Company

BOARD OF PROFESSIONAL RESPONSIBILITY OF THE SUPREME COURT OF TENNESSEE

FORMAL ETHICS OPINION 96-F-139

Inquiry is made as to the propriety of a lawyer vbeing employed by an estate planning service company which specializes in selling living trusts to the public.

The estate planning service company (the Company) is in the business of selling living trust packages to the public. The Company's product is marketed to potential clients by independent sales agents. The agents meet with a person (the client) who requests information regarding estate planning services. That person is the client. The agent conducts a presentation on revocable living trusts offered by the Company. If the client is interested, the agent assists in completing a Trust Application, which compiles the necessary information for drafting a revocable living trust. The cost for the living trust ranges from approximately $1,100 to $3,500 depending on the type of package purchased. The client pays the fee to the Company.

The Trust Application is forwarded to the lawyer, who calls the client to confirm the information on the Trust Application and answer any questions the client has concerning the revocable living trust. Once the Application is confirmed, the lawyer forwards it to the Company, which prepares the revocable living trust and related documents. The completed package is sent back to the lawyer, who conducts a final review. If the documents are all in proper order, the lawyer forwards the package to the local office of the Company, where it is delivered to the client. The lawyer is paid between $50 to $125 per trust reviewed. In addition, the lawyer receives $500 per month from the Company to be available to answer questions from the client.

DR 3-101(A) prohibits a lawyer from aiding a non-lawyer in the unauthorized practice of law. DR 3-103 states a lawyer shall not form a partnership with a non-lawyer if any of the activities consist of the practice of law. However, whether the Company's or its agents' activities constitute the unauthorized practice of law is a legal question beyond the scope of this opinion. If it is determined that their activates do constitute the unauthorized practice of law, the lawyer's participation in these activities would be prohibited under DR 3-101(A) and 3-103.

There are other ethical issues raised by the lawyer's employment by the Company. First and foremost is the impact on the lawyer's independent professional judgment. 96-F-139 Opinion. There is no direct attorney-client relationship between the lawyer and the client. Contact with the client is conducted through the sales agents and by telephone.

DR 5-107(B) states a lawyer "shall not permit a person who recommends, employs, or pays the lawyer to render legal services for another to direct or regulate the lawyer's professional judgment in rendering such legal services". The Company is in the business of selling living trust packages. The higher the price is for the package the agent sells to the client, the more commission he earns. By the time the lawyer receives the Trust Application, the client has been sold a living trust package without the benefit of a lawyer's independent evaluation of their estate planning needs. The lawyer is paid by the Company to set up a living trust for the client; therefore, the lawyer has a financial interest in promoting the living trust package over other estate planning services. This arrangement could deter the lawyer from questioning whether the client's needs are best served by a living trust package.

DR 3-102(A) states "A lawyer or law firm shall not share legal fees with a nonlawyer...". The client makes one payment to the Company and the Company pays the lawyer from those funds. Furthermore, the fee paid by the client is not related to the lawyer's time or quality of work. It is very likely that an independent lawyer could draw up the same documents for a lower fee. Considering these factors, the fee paid to the lawyer may be excessive in violation of DR 2-106(A). For these reasons, it is the opinion of the Board of Professional Responsibility that the lawyer's participation in the scenario as outlined would violate the Code of Professional Responsibility.

This 8th day of March, 1996.

ETHICS COMMITTEE:

Donna Simpson Massa, Chair

Barbara J. Moss

Larry D. Wilks

APPROVED AND ADOPTED BY THE BOARD