ILNews

Indiana State Bar Association files new trust mill suit: Indianapolis company accused of unauthorized practice of law

Back to TopCommentsE-mailPrintBookmark and Share
A decade ago, Vesser and Helen Davis met with an estate planning company representative about how to divvy up their assets and their Hamilton County farm.

That representative drew on a flipchart, illustrated ways a partnership and corporation could be set up, outlined differences between wills and trusts, explained the probate process, and advised the pair how they could arrange their finances and establish a corporate structure for the family farm business. In the end, they paid thousands of dollars for an estate planning package they thought would be best for the family.

The elderly couple thought the person they met with was an attorney.

He wasn't. Their estate planning purchase was secured with inadequate and invalid paperwork, forced them to pay out even more money to redo the documents, and the couple ended up losing out on a $4 million offer for their farmland that had been put into a corporation and would have meant double taxation if a sale had happened.

Now that company - United Financial Systems in Indianapolis - is the defendant in an action filed with the Indiana Supreme Court on Oct. 9, accused of operating a trust mill that engaged in the unauthorized practice of law and wrongly collected more than $1 million from at least five families throughout the state. While not common in Indiana, this type of trust mill action follows a string of similar actions seen in courts nationally as the country's population ages and companies look to cater to those growing estate planning needs.

The case is brought on behalf of the Indiana State Bar Association, which with the state Attorney General's Office and the Indiana Supreme Court's Disciplinary Commission are the only three groups allowed to bring unauthorized practice of law actions. Indianapolis attorneys Kevin McGoff and Rafael Sanchez with Bingham McHale are representing the bar association.

In the 36-page filing, the ISBA outlines the background of the 26-year-old United Financial, located on the northwest side of the city. The company advertises itself as providing "suitable estate & financial planning solutions" and selling estate planning documents that include wills, trusts, and powers of attorney. The company also sells securities and insurance products such as annuities.

According to the complaint, an estate planning assistant who is not a lawyer contacts and sells the services; that information is passed on to a licensed lawyer who contacts the client by phone and crafts the documents before returning them to United Financial for review and delivery to the client. The salespeople are encouraged to educate clients about the need for estate planning, and are specifically told, "not to apply any legal principles to a client's specific circumstances." The fee for a basic living trust is $2,495 while a will preparation fee is $695, according to the complaint.

A disclaimer on its Web site says that the corporation is not engaged in the practice of law and isn't a lawyer or law firm, though exhibits presented by the ISBA point out that clients had very limited contact with the licensed attorneys and most of the individuals who advised them were non-attorneys.

A total of five counts are made in the ISBA's action - one for each person or couple who bought into an estate planning package with United Financial.

One victim is a 78-year-old Allen County woman who never married. She had 12,000 shares of Exxon Mobile stock estimated in value at $520,000. A previous will from 1987 would have given her six nieces and nephew 200 shares each, while the remaining shares would be evenly divided between her brother and sister. The complaint details how United Financial advised her to liquidate her stock and purchase annuities in February 2002, which ended up with her relatives receiving $5,000 instead of the stock shares and her getting hit with more than $130,000 in tax liability.

For the Davis family, their decision revolved mostly around their Westfield farm that encompassed more than 80 acres. They started meeting with a United Financial representative in January 1997, and within a few months had paid $5,150 for document preparation and to create a limited family partnership for their family farm business.

"The Davises' estate planning documents were inadequate and contained provisions that are invalid in Indiana," the complaint says. "In addition, the corporate documents sold to the Davises and prepared by United Financial in 1997 were deficient and ultimately resulted in gain being subject to double taxation due to the corporate structure, which United Financial recommended and then established for them."

As a result, the Davises ended up paying the family attorney $8,336 to redo the estate planning and corporate documents prepared through United Financial, and they were unable to accept a $4 million offer for their farm because the corporate structure setup through United Financial would have resulted in double taxation.

Vess Davis died in January and won't see the result of this action, but the ISBA hopes United Financial will be permanently enjoined from continuing this practice. The bar association also requests the court order the company to reimburse about $1 million in fees collected for the unauthorized practice of law, and to consider ordering United Financial to release all the names and address of clients and other employees who might be affected by the court's decision.
 Attorney Ron Elberger with Bose McKinney & Evans in Indianapolis, who is representing United Financial along with attorney Peyton Berg, says the company has taken substantial steps in the past and presently to make sure they are complying with state law.

"That's occurring and is ongoing," Elberger said, declining to elaborate because of the current case. "They have engaged counsel to assist them by adjusting their program so they're in compliance with Indiana law. The company looks forward to the opportunity to present its case in court."

While not common in Indiana, this issue is one that courts across the country are addressing more frequently. One of the two unauthorized practice of law actions filed in Indiana in recent years - State ex. Rel Indiana State Bar Assoc. v. Northouse, 848 N.E.2d 668, 672 (Ind. 2006) - did have a trust mill component, McGoff said.

In Northouse, the court addressed a case where two northern Indiana men had been engaging in the unauthorized practice of law by advising people on wills, trusts, and other documents without having law licenses. In a per curiam opinion, the court stated unequivocally that preparing and drafting a will and advising others on the legal consequences of specific estate-planning decisions constitutes the practice of law.

"Taking an action like this is not a common action within the legal community, but it's an action that's essential to protect elderly citizens from this type of practice," said ISBA president Bill Jonas of South Bend. "This is a consumer protection issue, and one we have to address because the legal community is often called upon to clean up what took place in these actions." •    
ADVERTISEMENT

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in Indiana Lawyer editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by

facebook - twitter on Facebook & Twitter

Indiana State Bar Association

Indianapolis Bar Association

Evansville Bar Association

Allen County Bar Association

Indiana Lawyer on Facebook

facebook
ADVERTISEMENT
Subscribe to Indiana Lawyer
  1. KUDOS to the Indiana Supreme Court for realizing that some bureacracies need to go to the stake. Recall what RWR said: "No government ever voluntarily reduces itself in size. Government programs, once launched, never disappear. Actually, a government bureau is the nearest thing to eternal life we'll ever see on this earth!" NOW ... what next to this rare and inspiring chopping block? Well, the Commission on Gender and Race (but not religion!?!) is way overdue. And some other Board's could be cut with a positive for State and the reputation of the Indiana judiciary.

  2. During a visit where an informant with police wears audio and video, does the video necessary have to show hand to hand transaction of money and narcotics?

  3. I will agree with that as soon as law schools stop lying to prospective students about salaries and employment opportunities in the legal profession. There is no defense to the fraudulent numbers first year salaries they post to mislead people into going to law school.

  4. The sad thing is that no fish were thrown overboard The "greenhorn" who had never fished before those 5 days was interrogated for over 4 hours by 5 officers until his statement was illicited, "I don't want to go to prison....." The truth is that these fish were measured frozen off shore and thawed on shore. The FWC (state) officer did not know fish shrink, so the only reason that these fish could be bigger was a swap. There is no difference between a 19 1/2 fish or 19 3/4 fish, short fish is short fish, the ticket was written. In addition the FWC officer testified at trial, he does not measure fish in accordance with federal law. There was a document prepared by the FWC expert that said yes, fish shrink and if these had been measured correctly they averaged over 20 inches (offshore frozen). This was a smoke and mirror prosecution.

  5. I love this, Dave! Many congrats to you! We've come a long way from studying for the bar together! :)

ADVERTISEMENT