Do these professionals fit into your ‘asset privacy’ plan?
Not really – here’s why:
- Institutional Mindset
- Statutory Entities
- Law School & Bar Exam
The legal profession offers guidance to clients based upon standard beliefs, the institutional mindset. This thinking includes being able to assess what’s visible to determine possible outcomes. Visibility comes with assets that are easily identifiable in public records.
Standard beliefs are associated with statutory entities. These include Corporations, Limited Liability Companies and Asset Protection Trusts. Each one of these entities requires government permission and registration to formally exist.
Current standards in law school and the bar exam exclude common law trusts – also called non-statutory entities. Without an understanding of these trusts, asset privacy is a foreign mindset.
Invisible assets are a major challenge for legal professionals. State governments who claim secrecy are beyond your control. Professional credentials do not equal expertise or competence.
Stanford and Harvard Law Schools decided in the early 1960’s that students and practitioners could graduate without learning the laws of Agency, Equity, Trusts or Fiduciary Principle.
Since then over 180 other law schools approved by the ABA have followed these leaders.
Trust law which encompasses agency, fiduciary and equity is virtually nonexistent in American law school curriculum these days. Required courses eliminated and few elective courses remain. But law schools in the UK, Wales and N Ireland still require Equity and Trusts.
All trust instruments for estate planning and commercial transactions remain vital tools.
National Bar Exam:
Given the revised academic requirements, trust law is now absent from the Bar exam. Licensed attorneys practice without knowing common law trust fundamentals.
Our financial society has clearly embraced more fiduciary agency relationships.
Examples include – insurance agents, real estate brokers, travel agents, accountants, lawyers, power of attorneys, mortgage brokers, mortgage servicers, and securities brokers that act on your behalf.
(Agency explains why people obey your instructions even if against their will. Think of politicians and the military or police.)
Yet the US law community decided common law legal relationships (trusts) are unworthy of study. Corporate, criminal, or tax law offer them greater financial rewards and prestige.
So individuals with legal issues such as agency, contracts, torts, property (equity interests) and trusts are at a disadvantage. If you have a problem or just a probing question regarding your rights about an insurance policy, mortgage, or mutual fund its difficult to find a lawyer with expertise.
Judges are lawyers too. This means everyone in the American legal system that might impact your “trust” affairs has the same knowledge handicap.
The shortage becomes more acute once you start asking about commercial trusts. These include Mutual Funds, REITS, Bond Financings, SPACs, etc. So who can represent your equitable rights?
Asset Protection Trusts:
These attorneys went to law school and sat for the bar exam described earlier. So they’re also missing common law trust fundamentals. Their expertise is statutory trust laws of individual states that require government permission and registration.
Lawyers and Trustees:
Appointing a garden variety lawyer as your trustee can be risky. Malfeasance and remedies for errors are difficult because not only lawyers, but judges and courts are out of touch with common law trust concepts.
If a lawyer advisor causes economic harm to the trust, it is the trustee who is liable. No matter if trustee acted in good faith on advice of counsel. The lawyer might be civilly liable, but rarely faces any professional disciplinary actions. Make certain your lawyer has malpractice insurance.
Competent estate planning living trust lawyers do exist. Just be careful.
Living Trust Story:
A man on marriage #2 made his attorney successor trustee with instructions. The man died. Heirs challenged the distributions. Trial court said the lawyer did everything right according to the terms of the trust. Appeals court reasoned the man was under duress from wife #2 to amend his trust. She lost. Heirs won.
This is a perfect example of ruling on statutory law without knowing common law of trusts.
A lawyer’s highest allegiance is to the state bar, judges, and fellow attorneys. Clients come afterwards. But no matter if a client wins or loses, they still pay legal fees.
Attorney Client Privilege:
It’s a one-way street. Anything you tell your attorney is ‘meant to be’ confidential. Anything they advise you is not.
Common Law vs Statute Law:
Statutory law fills in common law voids, e.g., the will and the corporation. It amends common law with the health care proxy. Or it enhances common law with the tax qualified employee benefit plan.
Yet common law remains the underlying foundation.
In the United States because many legal professionals never studied trust law you will see judges, lawyers and attorneys reference two publications.
Restatement of Law of Property – this publication provides information about family wealth transfers, e.g., wills and trust substitutes, probate, gifts, along with taxes and business organizations.
Uniform Trust Code – this codifies and standardizes trust laws among multiple US states. The focus includes personal trusts, trust funds, investors, custodians, institutional funds, and probate code.
Both publications explain structure and compliance issues. The material is 95% focused on estate planning which is also called ‘donative transfers.” Broader topics including strategy, title vesting, and decisions about participants are external factors.
Hague Trust Convention – this was an international agreement for wealthy countries with civil law systems to recognize the common law trust institution. The focus is inter-vivos living trusts.
If you need an estate planning lawyer, then seek out those with expertise. It’s difficult when the website for a law firm reads like a food buffet. Find a specialist with malpractice insurance.
Or consider ‘professional trustee’ services. If you have family conflicts or are a single individual, a pro trustee is a viable solution. These are lawyers with niche expertise. Look them up on google.
It you just need help completing living trust paperwork or recording a real estate deed then you might use a legal document assistant. The California website is here. They don’t offer advice but can make certain your paperwork is technically correct.
Legal professionals in the United States have scant academic knowledge of trusts (agency & equity) based upon modern law school curriculum and national bar exam.
You can study the walls, roof, and windows of a building – statutory law. But you’re more competent by first knowing how to design a foundation with concrete and rebar – common law.
You need both.