LegalZoom Sued in California

7.10.2010

A woman who botched the estate plan of her father using online legal documents firm LegalZoom is now suing the firm for deception and misleading statements:

LegalZoom Suit

From the article:

The lawsuit claims that Ms. Webster and others like her relied on misleading statements by LegalZoom, including that LegalZoom carefully reviews customer documents, that it guarantees its customers 100 percent satisfaction with its services, that its documents are the same quality as those prepared by an attorney, and that the documents are effective and dependable.

“Nowhere in the [company’s] manual do defendants explain that using LegalZoom is not the same as using an attorney and that its documents are only ‘customized’ to the extent that the LegalZoom computer program inputs your name and identifying information, but not tailored to your specific circumstances,” the lawsuit states, adding that “the customer service representatives are not lawyers and cannot by law provide legal advice.”

Says Webster’s attorney:

“LegalZoom preys on people when they’re at their most vulnerable, when they are of advanced age or poor health and need a will or a living trust,” adds San Francisco elder abuse attorney Kathryn Stebner, Ms. Webster’s lead counsel.

From my experience, I think online legal documents prey on people when they are most “cheap” – when they squeeze a quarter so hard they make the eagle scream, as in they’re too stingy to pay for proper advice. For example, in my planning practice, when I recommend that someone sit down with a qualified estate planning attorney familiar with the laws in the state in question, I sometimes get clients asking me about saving money using online documents. I tell them that they may not be customized enough. Knowing some people however, saving money on something that they would only screw up if a problem arose (that’s the trouble with legal, tax and financial planning – you only know you messed up after the fact so it’s difficult to justify paying fees in your mind) is most important.

Perhaps Ms Webster is smarting because she knew she is partly to blame – I don’t know that’s just conjecture – but people often want to blame others when they make mistakes. Perhaps she is feeling guilty about not advising her father properly?

The following quote from the article seems a bit more objective and makes sense to me from my experiences with do it yourself legal docs (not necessarily LegalZoom since I have not dealt with them):

“LegalZoom’s business is based on nurturing the false sense of security that people do not need to hire a traditional attorney,” says San Francisco attorney Robert Arns, one of the attorneys who filed the lawsuit. “The complaint points out that LegalZoom advertises that you don’t need a real attorney because its work is legally binding and reliable. That’s misleading. Improperly prepared estate planning documents are a ticking time bomb that can result in improper tax consequences and other items that could cost the estate and heirs huge sums.”

In this era of the ubiquitous internet, and do it yourself solutions, many people are tempted to do things themselves to “save money.” Mistakes in certain arenas can end up costing a lot more money in the future and care should be taken when making decisions in the legal arena. Consult with a qualified attorney if you are not sure what to do. Most attorneys will sit down for no initial fee to explain your options.


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