Can a lawyer take part in a living-trust program where a non-lawyer company gathers client information and drafts the documents, leaving the lawyer to review and execute?

Plain-English summary

A firm was considering joining a living-trust program offered by ABC Co., a subsidiary of a non-South Carolina corporation. ABC's independent agents solicited customers through seminars and meetings, gathered information on questionnaires, and ABC staff attorneys in regional offices drafted the trust documents. A local attorney chosen by the customer would review the draft for compliance with state law, then submit it back to the ABC staff attorney (with whom the local attorney "associates") for review; the agent walked the documents through with the client and arranged execution with the local attorney, and the staff attorney paid the local attorney's delivery fee. The questions were whether this violates Rules 1.8(f) and 5.4 (professional independence), Rule 5.5(b) (assisting unauthorized practice), and the pending Unauthorized Law Practice Rule 5.

The committee said that unless all of ABC's shareholders and officers are attorneys, the arrangement results in the local attorney assisting the unauthorized practice of law, because creating an estate-planning instrument like a living trust is the practice of law (ABA Formal Ethics Opinion 122 (1934)), and Rule 5.4(d) bars practicing in a for-profit corporation in which a non-lawyer owns an interest or is an officer or director; a lawyer may provide legal services to such a corporation but may not assist it in acting as attorney for third parties. Alternatively, if the local attorney claims to serve only the client and not the corporation, the standards of Rules 1.8(f) and 5.4(c) for independent judgment are invoked: with no contact with the client until execution, the local attorney is reduced to a legal assistant checking local law and a functionary assuring proper execution, unable to consult on the client's particular situation or to recognize that an alternative estate plan not offered by ABC might better serve the client. The committee found the high-volume, single-source, corporation-paid referral structure creates exactly the conflict Rule 1.8(f) forbids (compensation from a third party only where there is no interference with independent judgment or the client relationship), and quoted ABA Informal Ethics Opinion 1254 (1972) that deciding which facts are relevant and the appropriate type of will is the lawyer's legal work, neither of which is necessarily performed by the lawyer here, with even greater force where the attorney plays no role in initial drafting. Finally, the committee addressed the pending draft Unauthorized Law Practice Rule (UPR 5.3), which would bar a non-lawyer from drafting legal instruments for another except submitting specimen language to the customer's lawyer; because ABC drafts the entire document and contemplates only conformity review by the local attorney (with no real attorney-client relationship), the scheme would violate that rule if adopted.

Currency note

This opinion was issued in 1991, before the South Carolina Bar's adoption of the 2005 revisions to the Rules of Professional Conduct. It also turns on a draft Unauthorized Law Practice Rule that had not been finally adopted. Subsequent rule amendments 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 join a living-trust program run by a non-lawyer company?

A: The committee said no on these facts. Unless all the company's owners and officers are attorneys, the local attorney would be assisting the unauthorized practice of law, since creating a living trust is the practice of law.

Q: What if the lawyer says he represents only the customer, not the company?

A: The committee said that triggers Rules 1.8(f) and 5.4(c): with no client contact until execution and only a document-review role, the lawyer cannot exercise independent judgment, so the third-party-paid, single-source structure creates a prohibited conflict.

Q: Why is drafting the trust the lawyer's job, not the company's?

A: Quoting ABA Informal Opinion 1254, the committee said deciding which facts are relevant and the appropriate type of instrument is the lawyer's legal work, and neither is performed by the lawyer where the company drafts the documents.

Q: Would the program violate the proposed unauthorized-practice rule?

A: The committee said yes if the draft UPR 5.3 is adopted, because the company drafts the entire document and the local attorney only checks conformity, without the attorney-client relationship the rule contemplates.

Background and rules framework

The opinion applied Rule 1.8(f) (compensation from a third party), Rule 5.4(b), (c), and (d) (professional independence; non-lawyer ownership of a law practice), and Rule 5.5(b) (assisting unauthorized practice), each corresponding to the like-numbered Model Rule, plus the draft Unauthorized Law Practice Rule then pending. The analysis turned on the local attorney having no meaningful client relationship and on a non-lawyer corporation performing the legal work.

Citations and references

Rules of Professional Conduct:

• South Carolina RPC 1.8(f) / Model Rule 1.8(f): a lawyer may accept third-party compensation only with no interference with independent judgment or the client relationship.
• South Carolina RPC 5.4(b), (c), (d) / Model Rule 5.4: professional independence; no non-lawyer ownership, officer, or director of a for-profit law practice.
• South Carolina RPC 5.5(b) / Model Rule 5.5: a lawyer shall not assist a non-lawyer in the unauthorized practice of law.

Other authority:

• Draft Unauthorized Law Practice Rule 5 (UPR 5.3), then pending before the South Carolina Supreme Court.

Other opinions cited:

• ABA Formal Ethics Opinion 122 (1934): creating an estate-planning instrument is the practice of law.
• ABA Informal Ethics Opinion 1254 (1972): a referral arrangement where a non-lawyer gathers facts and decides the type of will is improper.

See also

• SC Bar Ethics Op. 92-28: Two Group Legal-Services Plans Compared
• SC Bar Ethics Op. 92-26: Employing a Convicted Felon as Staff or Investigator

Source

• Landing page: https://www.scbar.org/for-lawyers/quicklinks/legal-resources/ethics-advisory-opinions/ethics-advisory-opinion-91-36/

Original opinion text

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

UPON THE REQUEST OF A MEMBER OF THE SOUTH CAROLINA BAR, THE ETHICS ADVISORY COMMITTEE HAS RENDERED THIS OPINION ON THE ETHICAL PROPRIETY OF THE INQUIRER’S CONTEMPLATED CONDUCT. THIS COMMITTEE HAS NO DISCIPLINARY AUTHORITY. LAWYER DISCIPLINE IS ADMINISTERED SOLELY BY THE SOUTH CAROLINA SUPREME COURT THROUGH ITS COMMISSION ON LAWYER CONDUCT.

Ethics Advisory Opinion 91-36

A firm has been contacted by ABC Co. (ABC) for consideration as one of the firms that may be selected for participation in a program that ABC plans to offer in South Carolina. In view of the proposed Unauthorized Law Practice Rule 5: Estate Planning and Settlement, an advisory opinion on the proposed arrangement is requested.

Independent agents of ABC solicit potential clients through seminars, speaking at civic groups, church groups, association and other types of speaking opportunities available. The seminar is educational in nature, and the materials used are to make the audience aware of what a living trust is and how it works in comparison to a will.

People in the group are given a questionnaire. If they desire more information, a personal consultation is held. The agent arranges to see the prospect one-on-one and answers only general questions. If the prospect expresses an interest in a living trust, the agent fills out the information forms the ABC staff attorney needs to draft a trust and other documents desired by the prospect. The drafts are reviewed by the client for accuracy and finalized. The final draft is then submitted to a local attorney chosen by the prospect for review in accordance with applicable state laws.

When the final draft is completed by the local attorney, the local attorney submits the final draft to the ABC staff attorney with whom the local attorney is associated to have the final documents reviewed. The ABC staff attorney returns the documents to the local attorney who checks the final documents and forwards them to the agent who reviews them with the client.

Once the client has approved the documents, the documents are returned to the local attorney. The agent then sets an appointment for the local attorney and the client to execute and deliver the trust documents. The agent then follows through to make certain all assets are transferred. When all the assets are transferred, the agent then notifies the local attorney as to the date all of the matters were completed. ABC, a subsidiary of XYZ Corp., a non-SC based corporation, presently has three attorneys on its staff located in regional offices. The trust documents are initially prepared by these staff attorneys for the nine states where ABC presently does business. As indicated above, these offices prepare the initial trust documents from information obtained by the agent.

The draft of the trust is then checked and corrected by the client and the agent for accuracy and returned to the local attorney for the final document to be completed. The final document is then sent to the four local attorneys or the attorney the client has specifically named. The staff attorney that prepared the initial document associates with the local delivery attorney and pays the fee for the delivery made by the local attorney.

When the volume of trust activity reaches the point that it will support a local attorney, ABC will select a local attorney to replace the existing regional attorney. Local attorneys are provided the manuals that are used by the agent.

Questions:
A. Does the proposed arrangement violate South Carolina Rules of Professional Conduct 1.8 (f) and 5.4 by unduly interfering with the attorney's professional independence?
B. Does the proposed arrangement violate South Carolina Rules of Professional Conduct 5.5 (b) prohibiting an attorney from assisting another in the unauthorized practice of law?
C. Would the proposed arrangement comply with proposed Unauthorized Law Practice Rule 5 now pending before the South Carolina Supreme Court?

Summary:
If the local attorney is representing the individual seeking to create a living trust, the proposed arrangement violates the restrictions of Rule 1.8 (f) that require an attorney when being compensated by a third party to maintain his professional independence and Rule 5.4 (c) which prohibits an attorney from allowing a third party who recommends, employs or pays the lawyer to regulate the lawyer's professional judgment in rendering services to another.

If, alternatively, the lawyer views the corporation preparing the trust as his client, the lawyer is in violation of Rules 5.4 (b), (d) and 5.5 (b) by assisting a non-attorney corporation in the unauthorized practice of law.

The proposed arrangements also would violate proposed Unauthorized Practice of Law Rule 5.3 (A) (1) if the consultation and primary drafting of the documents is done by the non-lawyer corporation and that violation is not cured by the fact that corporation staff attorneys draft the original document.

Opinion:
Unless all shareholders and officers of ABC are attorneys, the proposed arrangement will result in the local attorney or firm assisting in the unauthorized practice of law.

The creation of an estate planning instrument such as a living trust is the practice of law. See ABA Formal Ethics Opinion 122 (1934). South Carolina Rules of Professional Conduct 5.4 (d) states:

"A lawyer shall not practice with or in the form of a professional corporation or association authorized to practice law for profit, if:(a) A non-lawyer owns any interest therein,...(b) A non-lawyer is corporation director or officer thereof;..." If any shareholders or corporate officers of ABC are non-lawyers this would make it impermissible for an attorney to assist them in this form of practice. It is permissible for a private attorney or salaried staff attorney to provide legal services for the corporation, but not to assist that corporation acting as an attorney for third parties.

If the local attorney takes the position that he or she is rendering legal services only to the client and is not assisting the corporation, then the standards set by Rules. 1.8 (f) and 5.4 (c) for independence of professional judgment are invoked. In the contemplated scheme, the attorney has no contact with the client until the final execution of the document. The role of the local attorney is limited to reviewing documents drafted by another to insure compliance with local statutes. Unless the attorney is permitted to meet and discuss with the clients their particular situation at some point before or during the drafting of the documents, it will be impossible for the attorney to insure that the documents are in the best interest and desires of the client. The proposed scheme reduces the local attorney to the role of legal assistant researching local law and practice and a functionary to assure proper execution. It is quite conceivable that it might be in a client's best interest to have some alternative estate planning arrangement not offered by ABC. The local attorney given the proposed flow of information will never be in a position to consult with the client and make this determination. Furthermore, the limited referral list with the volume of business that is anticipated from this one source with all payment deriving from the corporation would create exactly the type of conflict of interest prohibited by Rule 1.8 (f) which states:

"A lawyer shall not accept compensation for representing a client from one other than the client unless:

...(2) There is no interference with the lawyer's independence of professional judgment or with the client-lawyer relation- ship;..." In this instance, the lawyer will have no opportunity to develop any meaningful client-lawyer relationship and will not have even rudimentary information necessary to evaluate the proffered trust documents in light of each client's situation. ABA Informal Ethics Opinion 1254 (1972) dealt with a similar problem where attorneys were being asked to draft wills on referrals from a religious organization that had obtained information from clients wishing assistance in estate planning, that opinion stated:

"A local attorney who receives such referrals is engaging in improper conduct for the following basic reasons:

To draft a will appropriate for an individual, a lawyer must obtain all relevant facts. The decision as to what facts are relevant is an important part of his legal work, as of course is the determination of the appropriate 'type of will.' Under the described arrangement neither of these functions is necessarily performed by a lawyer." The same reasons have even greater force in this instance where the attorney plays no role in the initial drafting of documents.

The issue of pending Unauthorized Law Practice Rule 5:

Estate Planning and Settlement is raised by this query. This rule exists in draft form which has been subject to public hearing by the South Carolina Supreme Court. No final rule has been issued. The draft section which is applicable to ABC is:

UPR 5.3: "Preparation of Estate Planning Documents" (A) A non-lawyer shall not, with or without compensation, prepare or draft, or cause his own lawyer to prepare or draft, for another legal instruments of any character, including the filling out of a form for any will or trust, except:

(1) A non-lawyer, as an incident to the regular course of conducting his business, may submit to his customer's lawyer specimen language for inclusion in a legal instrument to be prepared by such lawyer, subject to acceptance, modification or rejection by such lawyer." In this instance the entire document is drafted by the non-lawyer corporation and the role envisioned for the local attorney is only to assure conformity with local statues and practice. Furthermore, the rule envisions an actual attorney-client relationship between the client making the trust and the local practitioner. The proposed arrangement as noted above would not permit the type of communication necessary to form such a relationship. If the final rule adopts the provision of the draft rule, the proposed scheme would violate this rule of unauthorized practice as well.