The following article appeared in the April 2nd, 2012 edition of Northern Nevada Business Weekly:
The Internet has altered numerous industries including the legal market. Despite the many advantages of online services, there are considerable drawbacks when comparing the use of Web-based legal services versus hiring a competent attorney. Budding entrepreneurs and successful business owners may look to online service providers as a low-cost alternative to hiring an attorney. There is no refuting that the online document providers offer very low advertised prices. Yet, the use of an Internet legal provider may be a shortsighted and potentially very costly long-term choice. It seems that each day the online legal providers increase their advertising and thereby heighten the expectations surrounding their products and services. The online providers promise to create effective legal entities, whether limited liability companies or corporations. Similarly, the Internet-based companies claim to produce valid estate planning documents, contracts and other legal agreements.
Recently, our office has seen several clients suffer from reliance upon documents produced by Internet legal providers. Some attorneys quip that these online offerings are a roundabout boon for business. How is this so? The computer-created documents rarely achieve the users’ intended goals. Attorneys regularly profit from correcting mistakes in poorly-drafted documents originating from online legal providers. Belatedly, program users seek attorneys to redeem the improper documentation. As with most technology, the quality of the output matches the quality of the input.
A common claim among all of these online companies is that their documents are “accepted by courts in all 50 states.” The mere “acceptance” by a court should not persuade you. Courts routinely accept handwritten documents, whether contracts, pleadings, or wills. The threshold for having a document accepted into court is extremely low. More importantly, the goal for most practical business people is to avoid court at all costs. So, the most widely-used claim the online legal providers use to bolster their offerings is counterproductive to users’ ultimate objective.
Moreover, the online companies’ “acceptance” claim may be untrue. Our office has encountered several documents which do not meet the statutory requirements under Nevada law. For example, Nevada has a self-proving affidavit for wills. We have seen several of the supposed self-proving affidavits generated by software programs which do not comply with Nevada requirements. Without the proper affidavit form, you (and most likely an attorney) must track down the original witnesses to the will to get statements verifying what they witnessed.
Prospective users should be aware that these legal providers do not adequately represent their offerings. Many claim to be “self-help” centers. Yet, a company providing legal documents and recommendations to individuals is providing legal services. The online companies may try to couch their product in a creative fashion to avoid accusations that the online providers engage in the unauthorized practice of law. You must see through their mirage and recognize what these online companies truly provide — legal help. As a consumer, you must understand that the legal help offered is generalized, vague, and even misplaced. Consumer Reports recently tested three software and Internet products designed to assist in estate planning. Consumer Reports warned that “among the problems we found in one or more of these products: outdated information, insufficient customization, incompleteness, inability to handle some tax issues, and lack of flexibility.” One benefit of the online planning packages is for educating yourself regarding the choices to be made. The planning process can be assisted as couples consider who should fill the various roles in an estate planning package such as guardians for minor children. Yet, these same choices can and will be discussed with your real, live attorney.
Online service providers will not assure that a matter is completed to its conclusion. In creating business entities, such as S-corporations or LLCs, we have seen serious holes in the packages provided by online or software programs. Recently, I have seen corporations created without bylaws and LLCs lacking operating agreements. Regularly, we encounter entities lacking corporate minutes. The absence of these foundational documents leaves business entities without a rulebook and the business owners exposed to personal liability. If you have a corporation or LLC and do not possess bylaws or operating agreement and fail to maintain minutes, you should feel troubled. The online service providers are adept at providing an impressive stack of papers, albeit the vast majority will be blank and require further action. What is the sense in receiving a half-baked product?
In the estate planning context, a common issue arises with online service providers because they offer little, if any, assistance in funding a revocable living trust. If a trust is not funded, or, the assets are not titled in the name of the trust, the trust is ineffective. The primary purpose of creating a revocable living trust is probate avoidance. If the trust is not properly funded, a probate will be required. Attorneys assist clients in re-titling assets into the name of the trust and assuring that probate will be avoided. Online providers plug you into standard provisions, or “one size fits all” documents. These providers do not tailor estate planning documents, contracts, agreements or entities to meet your specific legal needs. There are no longer generalists in the law. Attorneys spend years developing expertise in given fields of law. Firms possess experts in various areas of the law. Real attorneys can assist with tangential issues more readily. If you are serious about planning for your business, entering a legal agreement or planning your estate, I urge you to contact a reputable attorney. Or, you may choose the temporary, low-cost alternative, but please remember the age-old maxim “you get what you pay for.”