self-help law: January 2008 Archives

January 18, 2008

Special Needs Trusts for the People

A few years ago, I taught a "distance learning" estate planning course for Barnes and I created an online curricula, assigned reading in the designated textbook (Nolo's excellent Plan Your Estate, by Denis Clifford and Cora Jordan), and answered questions via an email bulletin board. The course was fun, but I kept getting questions about special needs trusts about which I was clueless.

Intrepid instructor that I was, I turned to the textbook (Plan Your Estate), confident I would be enlightened. At the time there was one small paragraph on the subject, to this effect: Special needs trusts are too complex to do yourself. Get a lawyer. Hmm. Every Nolo book has statements like this when the author believes self-help is inappropriate for the circumstance. Fair enough. However, since I was teaching the Barnes and Noble course, I had to do better than that, so I set out to research the topic. But before I continue, I should bring everyone up to speed about what I'm talking about.

Special needs trusts are devices that allow people with disabilities to enjoy the benefits of gifts, inheritances, and personal injury awards without running afoul of the stringent resource limits imposed on recipients by the Supplemental Security Income and Medicaid programs. The property in the trust can be used for a variety of purposes beneficial to the disabled person (for example: vacations, college tuition, caretakers, periodicals), as long as the trust property isn't spent on items already provided by those government programs.

The first thing I learned from my research is that special needs trusts are commonly thought to be so complex that only a lawyer should draft them. And the complexity is thought to be so great that it's okay for lawyers to typically charge $1500 and up for the pleasure. The next thing I learned (and this won't come as surprise to those who know the history of Nolo) is that the type of special needs trust most needed by the populace, and most often prepared by lawyers in the field, is not at all complex and can easily be done without a lawyer's tender ministrations.

The simple type of trust is where a third party, for instance a parent or grandparent, leaves property directly to the trust rather than to the child. In this way, the trust owns the property and the child continues to receive the government benefits. The reason this type of trust doesn't need a lawyer's tender ministrations is that since the trust property never belongs to the beneficiary in the first place, it is virtually impossible for the government to break the trust, unless the trust has language that gives the trustee the wrong type of discretion. "Aha," the lawyers might say, "it's just that type of technicality that requires a lawyer to do the drafting." But the language that makes a special needs trust airtight is just a few sentences that are the same type of boilerplate that is found in wills, living trusts, and other estate planning documents -- documents that people have been preparing without lawyers for the past half-century.

In case you're wondering, there are some situations where the lawyers are right and it's worthwhile to pay a lawyer to draft a special needs trust. This is when the money going into the trust belongs to the beneficiary from the get go. The reason why this is more complex than when property goes directly to the trust is that you are transferring the recipient's property to the trust to make him or her eligible for government benefits. Understandably, broke state governments are suspicious of these transfers and do everything in their power to break them. And if they are broken, the money will be considered a resource that will force the beneficiary to spend down the money before he or she can once again be eligible for SSI and Medicaid.

Anyway, back to my story. Part of my research disclosed that the hundreds of thousands of parents of children with disabilities who would benefit from a simple special needs trust couldn't afford to pay for one (or maybe just wouldn't because they didn't trust lawyers). Since this type of simple trust is easy to draft, involves less choices and variables than do wills and living trusts, and can be explained in plain English, I decided to write a book on the subject (Special Needs Trusts: Protect Your Child's Financial Future, by Stephen R. Elias (Nolo)). The book is now in its second edition and doing well.

I expected to be attacked by the special needs trust cartel when the first edition came out, but no such luck. Maybe I'll take on the more complex type of trust in my third edition, just to get the goat of all those lawyers who grossly overcharge their clients for the simple type of special needs trust.

January 2, 2008

Independent Paralegals Improve Access to Justice

Paralegals who directly help consumers prepare their own divorce, estate planning, name change, and guardianship papers have been around for a long time. Usually, these paralegals gain their expertise from having worked for lawyers or having attended formal paralegal schools. Yet many lawyers have sought to drive these independent paralegals out of business by charging them with "unauthorized practice of law"--a criminal offense in many states. While some of us believe that a thriving independent paralegal industry would vastly increase access to the justice system for the many millions of people who can't afford lawyers, others--especially many lawyers--believe that only lawyers can be trusted to help people with their legal problems.

In October 2007, a Massachusetts statewide commission examining barriers to access to justice recommended that independent paralegals be allowed to speak on behalf of low-income parties embroiled in certain civil matters. According to the Massachusetts Lawyers Weekly, the Massachusetts Bar Association predictably shot the concept down, arguing that poor people deserve legal representation just the same as rich people and that non-lawyer paralegals could not be expected to deliver competent representation. Their answer to the access problem? More court-based assistance to self-represented litigants, more lawyers, and more pro-bono legal services.

This reminded me of an experience I had in California some 20 years ago. I was a member of an ad hoc California State Bar committee (called the Public Protection Committee) that was charged with investigating what role California independent paralegals might play in facilitating access to justice for people who couldn't afford lawyers. We held three public hearings in addition to collecting a ton of information from consumer protection agencies, courts, and other entities that could provide us with a factual basis for making recommendations.

At one of the hearings, a lawyer employed by the Los Angeles legal services program testified that under no circumstances should non-lawyers be allowed to help people fill out the paperwork necessary to fight their evictions. She went on to say that her agency turned away 40,000 eviction cases every year because there weren't enough lawyers to help. I asked her why it wouldn't be better to authorize independent paralegals to assist in these cases. With considerable passion she responded that allowing non-lawyers to help the poor would create a two-tier justice system--which was unacceptable to her--and that the only appropriate way to help the Los Angeles poor fight their evictions was to petition Congress to authorize more money to hire more lawyers. I was so shocked that to this day I vividly remember every detail of the encounter.

Our Committee--four lawyers and four non-lawyers--went on some months later to unanimously recommend the repeal of the California unauthorized practice laws and the creation of a system in which independent paralegals could help people with their legal paperwork. Not unexpectedly, the California State Bar president immediately showed up on local TV condemning our report and literally calling us "brain dead" for thinking the Bar association would ever agree to such a "cockamanie" scheme.

He wasn't far off the mark. It took another 10 years before the California legislature (with no help from the Bar Association) authorized independent paralegals to provide the same kind of assistance our committee had recommended earlier. There are now many hundreds of registered independent paralegals in California (called Legal Document Assistants) that help people prepare the forms they need to handle their own legal work. For more information about Legal Document Assistants, visit the California Association of Legal Document Assistants' website. Independent paralegals are also authorized to prepare legal forms in Arizona and Florida (and perhaps a couple of other states)

What's my point? That lawyers fight tooth and nail to maintain their monopoly and that legal consumers in Massachusetts probably will have a long and rocky road ahead before the Massachusetts powers-that-be finally accept the obvious facts: there are lots of legal tasks that don't require a law school education, and access to justice in Massachusetts would be vastly improved by bringing non-lawyers into the mix of legal service providers.