In this article:
What is Unauthorized Practice of Law (UPL)?
For Financial Advisors, Is Creating and Coordinating Estate Plans Considered Unauthorized Practice of Law?
What is Considered Unauthorized Practice of Law for Financial Advisors?
How to Avoid Unauthorized Practice of Law as a Financial Advisor?
Why Choose Estate Planning Software Instead of Referring It Out?
When someone practices law without a license. Doing so is illegal. Note: every state has different specific definitions of UPL.
Financial professionals look at legal documents all day.
Your clients have sought financial advice from you in the past, so reminding them of your non-attorney status will not come as a shock (they know you're not an attorney).
Tushar Kumar of Twin Peaks Wealth Advisors put it best when letting clients know he can’t provide legal advice:
"I always position myself as ‘I'm not an attorney. We have this firm [EncorEstate Plans] that are the ones that are actually going to draft the documents. My job is really to help you more clearly understand what your estate planning goals are and then put them down on paper. Someone else is going to do the actual legal document drafting.’
I make it very clear that I’m not practicing law. I rarely get pushback on that. There was one instance that I can remember where I had to explain to someone exactly who Encore is and how it all works. But for the most part, [clients are] okay with having someone that we trust that we subcontract the document drafting to."
Related: How to Provide General Legal Information (and Not Legal Advice)
When financial advisors start giving specific advice to clients’ highly specific questions, instead of general information.
Joel Top of PlanWiser Financial has a pro tip for advisors on how to navigate the estate planning conversation without giving legal advice:
“Education instead of advice. I talk to [clients] about what their options are and let them know we're just helping them [understand] the questions and speak to what's common with other clients, and ‘Here's why.’”
Follow these 3 steps to avoid unauthorized practice of law:
Before creating an estate plan, having this disclosure agreement with clients sets expectations upfront and gets both you and your clients on the same page (literally and figuratively).
These example client estate planning agreements are downloadable (you can also copypaste them into a Word or Google doc).
Disqualification questions will help you avoid UPL. And, they'll help you determine if a client only needs a "basic" estate plan (which is what 75% to 80% of all clients need).
You can use Encore’s disqualifying questionnaire.
This requires their confirmation that all submitted answers are theirs and 100% accurate.
Upon their approval, Encore adds a time and date stamp on the plan tracking clients' confirmation. You also receive a follow-up email when they have done so.
You should consider using estate planning software instead of referring your clients out when:
Note: there will always be clients in your practice that should be sent to your local attorney (both you and your clients will need them from time to time). And, make sure you work with a local attorney who will provide assistance regarding the funding of the trust.