Can a lawyer take will-and-trust referrals from a financial planning organization and accept part of the fee paid by the organization?

Plain-English summary

A financial planning organization offered members seminars and individual counseling on financial goals, wills, insurance, and investments. It rendered no legal services, but it told members that $150 of the membership fee went toward preparing a will and living trust for the member and spouse. Members already represented by counsel could have $150 forwarded to their own lawyer; members without counsel received a list of attorneys who had agreed to prepare two simple wills and one living trust for $150. The organization sent the chosen attorney the member's financial information and a pro-forma copy of its recommended documents, but left the actual drafting to the attorney, promised the attorneys no work or referrals, and kept the $150 if a member never had the documents prepared.

The Committee analyzed the arrangement under DR 2-103, DR 2-106, DR 3-102, and DR 5-107. It explained that DR 2-103(E)(5) allows an attorney to cooperate in a dignified manner with the legal-services activities of a bona fide organization that recommends, furnishes, or pays for legal services to its members, provided the lawyer's independent professional judgment is exercised without the organization's interference or control. Here the organization derived no profit from the legal services, no lawyer had promoted its formation, and the member, not the organization, was the client. The Committee found the guidelines appeared to comport with DR 2-103(E)(5) if the description of services was not misleading and the member was free to choose or reject a recommended attorney, and it noted that to avoid violating DR 2-101(A)(1) the organization must clearly inform members that the $150 might not cover the entire fee.

The opinion added that DR 2-106 requires the attorney to ensure the fee is not excessive, and that the attorney must not underprice his services so the organization profits through an indirect fee-sharing arrangement (DR 3-102) or otherwise compensate the organization for the recommendation (DR 2-103(C)). It read DR 5-107 as preserving the lawyer's freedom from third-party influence, observing that the client knew the organization paid $150 and that nothing indicated the organization tried to regulate the attorney's judgment. The Committee concluded no violation of the disciplinary rules results from the arrangement on these facts.

Currency note

This opinion was issued in 1987, under the former Texas Code of Professional Responsibility, which the Texas Disciplinary Rules of Professional Conduct replaced effective January 1, 1990. The Disciplinary Rules have since been amended, and Texas never adopted the ABA's Ethics 2000 framework. The current Texas rules on third-party payment of fees, sharing fees with a nonlawyer, and lawyer referral arrangements are Rules 1.08(e), 5.04, and 7.03, with closest ABA analogs Model Rules 1.8(f), 5.4, and 7.2. Subsequent rule changes or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule, deadline, or requirement mentioned here.

Common questions

Q: Can a lawyer take referrals from a financial planning organization for wills and trusts?

A: Per the opinion, yes, on these facts. The Committee found the arrangement comported with DR 2-103(E)(5) because the organization was a bona fide group recommending legal services, it earned no profit from the legal work, and the member was the client.

Q: Can the lawyer accept part of his fee directly from the organization?

A: The Committee concluded the attorney could accept payment of part or all of the fee from the organization, where the client knew of the payment and the organization did not attempt to direct the attorney's professional judgment (DR 5-107).

Q: What conditions did the Committee attach?

A: The description of services must not be misleading, the member must be told the $150 might not cover the full fee (DR 2-101(A)(1)), the fee must not be excessive (DR 2-106), and the lawyer must not underprice to let the organization profit through indirect fee-sharing (DR 3-102, DR 2-103(C)).

Background and rules framework

The opinion interprets several rules of the former Texas Code of Professional Responsibility: DR 2-103 (recommendation of professional employment, including cooperation with a bona fide legal-services organization under DR 2-103(E)(5)), DR 2-106 (reasonable fees), DR 3-102 (sharing legal fees with a nonlawyer), DR 5-107 (avoiding influence by a third-party payor), and DR 2-101(A)(1) (against misleading communications). The closest current concepts are Texas Rules 1.08(e), 5.04, and 7.03 and Model Rules 1.8(f), 5.4, and 7.2. The analysis turns on whether the organization profits from the legal work, whether the member is the client, and whether the lawyer's independent judgment stays free of the organization's control.

Citations and references

Rules of Professional Conduct:

• MR 1.8 (compensation from someone other than the client)
• MR 5.4 (sharing legal fees with a nonlawyer)
• MR 7.2 (recommendation of a lawyer's services)
• DR 2-103(E)(5), DR 5-107, DR 3-102, DR 2-106, DR 2-101(A)(1), Texas Code of Professional Responsibility

See also

• TX Ethics Op. 503: Sharing Fees With a Nonprofit Referrer
• TX Ethics Op. 507: Targeted Ads and Referral-Swap Letters

Source

• Landing page: https://www.legalethicstexas.com/resources/opinions/opinion-446/
• Original PDF: https://tcle-web.s3.amazonaws.com/public/documents/Opinion_446.pdf

Original opinion text

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

QUESTION PRESENTED

May an attorney allow a financial planning organization to refer its members to him for preparation of wills and trusts and accept payment of part or all of his fee from the organization?

STATEMENT OF FACTS

An organization that provides financial planning services to individuals conducts seminars which, among others things stress the importance of setting financial goals, making a will, choosing the right type of insurance, etc. Individual counseling and advice is also available to participants. The individual services consist of a review of a member's income tax returns for the last three years, insurance review and advice, and investment counseling. No legal advice or legal services are rendered by the organization but in explaining to prospective members the services that are offered, a member is advised that $150.00 of his membership fee goes towards the preparation of a will and living trust for the member and his spouse. Prospective members are told that if they are represented by local counsel, the organization will forward $150.00 of the membership fee to their local counsel after the member consults with the attorney of his choice concerning terms and provisions which the financial planning group deems to be advantageous for the member. If the attorney's fee exceeds the $150.00 paid by the organization, that fee is billed to the member by the attorney.

If a prospective member is not represented by counsel, the organization provides the member with a list of attorneys with whom it has communicated and informs the member that the attorneys on the list have agreed to prepare two fairly simple wills and one living trust for $150.00. The organization then forwards to an attorney in the area pertinent financial information pertaining to the member and the member is told that the attorney will contact the member to verify the financial information and ask any additional questions the attorney deems advisable.

The organization contacts attorneys to inquire as to whether they are willing to make their services available to members of the financial planning group at the rate specified but promises no work and no referrals to attorneys. The organization does submit to the prospective attorneys a pro-forma copy of the simple wills and living trust recommended by the organization to its members, but the drafting of the wills and trust agreements for a member are left entirely to the attorney.

If a member does not have a will and trust agreement prepared, a refund or adjustment in his membership fee is not made. In other words, the organization retains the $150.00 that it would have been paid to an attorney.

DISCUSSION

The relevant disciplinary rules are DR 2-103, DR 2-106, DR 3-102 and DR 5-107. DR 2-103(E)(5) expressly allows an attorney to cooperate in a dignified manner with the legal services activities of a bona fide organization that recommends, furnishes or pays for legal services to its members or beneficiaries provided the conditions therein are satisfied. This is conditioned, of course, upon the fact that the lawyer's independent professional judgment is exercised in behalf of his client without interference or control by the organization.

The financial planning organization described above derives no profit from the legal services rendered by lawyers to whom its members are referred. There is no indication that any lawyer to whom referrals are made initiated or promoted the formation of the organization or that it is operated for the purpose of procuring legal work or financial benefit for any lawyer as a private practitioner. The inquiry upon which this opinion is based clearly indicates that the member of the organization, and not the organization, is recognized as the client of the lawyer. If the statement of the services to be rendered for the flat fee of $150.00 is not misleading or deceptive and the member is free to select an attorney of his choice, or reject an attorney whose name has been recommended by the organization, the guidelines under which the organization is operated appear to comport with the requirements of DR 2- 103(E)(5). To eliminate the possibility of a violation of DR 2-101(A)(1), the organization must clearly inform its members that the $150.00 does not necessarily cover the entire fee of an attorney for preparing the wills and trust agreement.
DR 2-106 prohibits an attorney from entering into an agreement for, charging or collecting illegal or clearly excessive fees. Any attorney who accepts a referral from the organization must satisfy himself that the fee charged is not excessive for the services rendered. Further, an attorney who accepts a referral must not so "underprice" his services to enable an organization to profit from them by an indirect fee-sharing arrangement (DR 3-102), or by underpricing or otherwise, compensate the organization for recommending the lawyer's services (DR 2-103(C)).

DR 5-107 is intended to prohibit a lawyer from being influenced by others than his client. Under the facts presented, the client has full knowledge that $150.00 of the attorney's fee is being paid by the financial planning organization and there is no indication that the organization attempts to direct or regulate the attorney's professional judgment in rendering legal services to one of its members.

No violation of the disciplinary rules results from an attorney allowing a financial planning organization to recommend him to a member of the organization who has no attorney or accepting payment for part or all of his fee for services rendered to a member under the facts set out above.

CONCLUSION

No violation of the disciplinary rules results from an attorney allowing a financial planning organization to recommend him to a member of the organization who has no attorney or accepting payment for part or all of his fee for services rendered to a member under the facts set out above.

Tex. Comm. On Professional Ethics, Op. 446 (1987)