The free lunch seminar scam

Let's face it: if we keep living, we are going to get old. Maybe you are already old. 


There is a growing class of predators who, instead of working and making money, look to those who have worked their whole lives and maybe saved a little up for their golden years. These people are some of the lowest of the low, and they really make me sick. And it happens every day. 


Enter the free lunch seminar. Targeting those of us who may be objectively classified as "old" and often held at your community's finest all-you-can-eat buffet, swindlers and con-men have been peddling unnecessary and often useless "products" for years. 


Companies now are claiming they are "estate planners" and "retirement specialists," and can prevent you from the costs of expensive lawyers, probate, medicaid recovery, etc.  They will try and sell you annuities. They might try and sell you life insurance or other insurance products. See a theme here? 


Much like the ongoing legalzoom travesty, I see many unnecessary "living trusts" sold at a lunch seminar or on a front porch. Next, the same people who paid these guys in order to not pay a high priced lawyer to have their affairs taken care of, pay a lawyer to fix this mess they bought into from the con-man. 


Here is the basic pitch: 


Either on your porch or at the seminar, the "salesman" tells you how you are going to lose all  your property because of future taxes, medical bills, or attorney's fees. To "save" you and have something to leave to your heirs, you need a living trust. They sell you a couple pieces of paper, that may or not be a trust, and convince you to transfer all your stuff (your house, cars, land, money, EVERYTHING) into that trust. They tell you it is safe, and you are protected. They might say "you have access to a lawyer for follow up." 


In a recent CLE lecture, the statistics that I do not have any basis for were, on average, 50% of these seminars openly distribute false information, and 13% openly perform fraudulent transactions. The same lecture told of the two-hour training that is all these "salesmen" have taken. Two key points:
1.     “treat them as if they are blind 12 year olds,” and 
2.      “scare them by telling them you can save their life savings from nursing homes and Medicaid seizures”


This is not how I want to be treated, or how anyone should be treated. Think of these the same as a telemarketer who is trying to sell you, well anything. Skeptical? You should be. Why are people not more skeptical of someone who buys them lunch?


People are taking notice, however. Several states have enacted legislation providing harsher penalties for taking advantage of the elderly. I'm not the first to write about this, and I won't be the last. 


The take away:

• -Living Trusts are garbage for all but 5% of folks. You probably  don't need one, and it absolutely will not save you money.
• -When placing assets in trust, to have any real benefits, it has to be irrevocable, meaning you DO NOT have control over it anymore. Is this what you really want?
• -Placing your house in trust can cause gift tax consequences, and you can forfeit a step-up in basis that you would otherwise get upon your death if not executed properly. 
• -Most do not help you qualify for medicaid and can disqualify you for VA benefits.
• -Trusts pay much higher taxes than individuals. 
• -If you have income producing assets, you likely don't want them in a trust. 
• -Annuities are usually a bad bet. If you're 75, you have to live until you are 110 to see any benefit.
• -There is no such thing as a free lunch. Be wary. 

Texas Comptroller Announces Business Tax Amnesty

Have back or delinquent business taxes? Fines and interest mounting up?

 Don't worry about it. You are about to get a free pass.

The Texas Comptrollers office has just announced a Business Tax Amnesty program, where by you can have your ledger marked clean by filing your non/under/incorrectly reported return, but you only have the window from June 12 through August 17, 2012 to do it.

Not a bad deal, right?

The amnesty is good for any thing the Comptroller assesses, except property tax, PUC Commission Gross Receipts Assessments, Sports/Community Venue tax, and taxes under audit or where a settlement has already been done.
But wait, why are they doing this?

A couple reasons. They did it last in 2007, and raised about $100 million in unpaid taxes. Not a bad deal for them.

Ok, is it too good to be true?

Not really. If you have back taxes or have under reported, it can put you out of business. The fact your can waive 100% of penalties and interest is really remarkable, and you shouldn't let this chance get away as it might not come back again for 5 years.

So, what's the catch?

The only downside I see is that if you tell on yourself for not/under reporting, without a good excuse, this might increase your likelihood of future audit. That's all I can really see.

To see if this is right for you, contact your accountant or a business attorney, but do it quickly.  

More LegalZoom fun.

Get your will on the internet! Don't pay overpriced lawyers! Trust me! I defended OJ!!!

Lets take a snippet from a recently produced LegalZoom Will. And I quote:



"A. Appointment of my Personal Representative. I appoint _____________ as Executor of my estate. It is my intention, with clear knowledge of the consequences, that under no circumstances shall there be any independent administration of my estate." (emphasis added)



Let's think about this. You write a will, appoint an executor, but you do not want an independent administration. Why, ever, would this make sense? The whole point of having a will and naming an executor is FOR an independent, or un-court-supervised (read, CHEAPER) administration.

Before I get ahead of myself, yes, you can say whatever you want in a will. Yes, section 145 subparagraph O of the Texas probate code says:

 (o)  Notwithstanding anything to the contrary in this
section, a person capable of making a will may provide in his will
that no independent administration of his estate may be allowed.  In
such case, his estate, if administered, shall be administered and
settled under the direction of the county court as other estates are
required to be settled.

What that means is that you can request a court-supervised, or "dependent" administration. Always an option. This can be useful in circumstances if you have Hatfield vs. McCoy type heirs, or if you have large debts and creditors, that can often be wiped out through the dependent administration process. But who knows this? Not many. Certainly not legal zoom consumers.

Kudos to legal zoom to being extensive enough in including this as an option. Shame on legalzoom for including this as an option that sounds like a good thing, without explaining that dependent administrations are more expensive, time consuming, and generally unadvisable.

Shame on me, for not inventing LegalZoom, making a better product, and reaping the ungodly profits. I will, however, continue to pick up the pieces of rubble from the chaos LegalZoom leaves behind.

Lottery Fever, and how to fix the IRS

Have you bought your ticket yet?!!?!

If I had a dime for every time I'd heard that in the last week or so, I'd have several dozen dimes.

In case you have not interacted with common folk or watched news media, the mega millions multistate lottery has risen to an all time world record amount of $540 million dollars, at current press time. This number will likely increase as well. Everyone is talking about it.

Everyone has advice. From winning strategies, to personal self-image advice, to investments once you hit it big. I have a deal going with my brother, my buddy, my other buddy, and one guy I don't even like that much. But in reality, the lottery is what it has always been. A tax on the poor, dumb, and stupid, and I admittedly throw myself into this group.

Or is it? So what if it is more likely that you will be struck by lightning 50 times than hit the jackpot. Someone has to win it, right? When I spend that $1, the next 20 minutes I look at the numbers, and wonder, what if? What would I do? What would I buy? Who would I help? Would it change me? That is worth $1 to me. It really is.

But there is something bigger here. People I know that don't have much money are spending serious cash on this silly game. I know, because they tell me.  Why? For the thrill of the game. The chance at victory. The chance of beating someone, getting a good deal, and the  chance to get rich quick. Most folks would risk it all just for a silly thing called hope.

More powerful than fear, hope is what drives this train. Which brings me to my point.

According to one report, underreporting of taxes costs the IRS some $350 BILLION a year, last calculated in 2005. That's a lot more than $540 million. According to the IRS, there were about 144 million tax returns filled in the US in 2009, roughly a million gift/estate/excise taxes combined, 30 million employment returns, and 2.5 million corporate returns.

That's a lot of players. What if you made it a game? What if you made it a lottery style game? For every valid, non-fraudulent tax return filled, you get an entry into the game. For every year you don't get audited, you get an entry. For every gift tax return, you get an entry, and so on.

Tweak the rules to have the most interest and gain the most revenue. Tie it into the extra returns generated. Then, have a nationally televised drawing. Let the President, or one of the Kardashians do it. Make it a spectacle. Do it at the Oscars, or during the State of the Union. Do it bi-annually, quarterly, whatever. Have 50 winners. I just don't see how this plan doesn't only increase compliance, but add billions to the treasury every year.

We have national budget shortfalls everywhere. If lawmakers are still going to prevent para-mutual betting, sports betting, and casinos for whatever moral or political reason, this is a much easier pill to swallow. Give the people some hope. Make it a game. People love games,  and it gives them hope.

Have you filled out your tax return yet?!?! I can just see the fever sweeping the nation.


ADDENDUM: I'm hoping this is my last ever post. If you do not hear from me again, it is most likely because I have either won the mega millions or left this world for the next.

If you, or a loved one, or anyone you might know, happens to win the mega millions or any other lottery like prize, call a tax attorney before you do anything else. I can recommend a few. They can, and will, save you millions if they know what they are doing.

EDIT, 4/17/2012: I did not win.

Lawyer Referral Services, good or bad?

I practice in a small firm. I like that, and I choose to be here. I have had chances to go to "biglaw," (the commonly used term for big-city, big-dollar and big-number of attorney lawfirms)  but I chose then and will continue to  stay in "smalllaw" because I have not found a good enough reason($) to deal with all that comes with the aforementioned "biglaw."


However, there are trade-offs for everything. Here in smalllaw land, new clients are generated by word of mouth, family, and friends. And google. And lawyers.com. And a host of companies who, for the low fee of $500/month, promise to get YOUR name out there. All well and good.


Upon review of one nationally prominent unnamed legal referral service, I saw that my firm was paying an average of $400/month for one specific listing on a website. It generated, on average, 2 calls to the firm per month over the past 18 months. These calls led to the grand total 0 clients. Not a tough decision here to cut that expense.


The harsh reality is that in today's world, you still generally have to advertise. I wish lawyer ads were illegal, but anyone who has driven in a major city or sat at a bus stop will tell you that is not the case. The old adage used to be the lawyer on the back of the phone book got 80% of the calls. The next guy got 18%, then everyone else split up the scraps. The same is generally true of google and other search engines today. But, to be that guy, you have to pay. If there are results, great. It is a worthwhile investment. If not...


I've long wanted to start my own lawyer referral website, thinking I could just sit back and watch the advertising dollars add up. Turns out this requires a lot of work, so it is not in place yet. Until then, I am always looking for ways to generate new clients, without paying $400/month.


Enter today. While flipping through my February edition of the "Texas Bar Journal," the publication of the entity that I paid to give me a test so I could be a lawyer, then pay annually to stay a lawyer, then pay to teach me  "continuing legal education" courses that they also require to stay a lawyer, I see a page that looks like this:

Oh great, another one. But I read on. This service is sponsored by the State Bar of Texas. Interesting:  the club I joined, that should be advocating for me, that I pay to belong to. The article talks about how they can refer new clients, build your practice, etc. All good. Then the part hits me: $125/ year in fees, and if you get a case that generates more than $500, 10% goes back to the lawyer referral service. I'm sorry, what?


A referral fee that goes back to not just the "referral service," but the State Bar of Texas? Is that legal? So I did some checking.


Rule 703(b) of the Texas Disciplinary Rules of Professional Conduct requires:

(b) A lawyer shall not pay, give, or offer to pay or give anything of value to a person not licensed

to practice law for soliciting prospective clients for, or referring clients or prospective clients to,
any lawyer or firm, except that a lawyer may pay reasonable fees for advertising and public
relations services rendered in accordance with this Rule and may pay the usual charges of a
lawyer referral service that meets the requirements of Occupational Code Title 5, Subtitle B,
Chapter 952. Full text available here.

Makes the above sound fishy, right? Referral fees are, subject to a few requirements, very legal and ok. They allow a lawyer who is over their head to get some help, share the love, and still get paid. All good things. However, I was always under the impression referral fees to a non-attorney were very not ok. Is that not what is going on here? And by the STATE BAR of TEXAS, who enforces and makes those same rules?

I also checked the Occupational Code, Chapter 952. See it here. Guess what it says?

Sec. 952.051. RULES; ENFORCEMENT.

(a) The state bar shall adopt reasonable rules subject to the approval of the supreme court to administer this chapter.

(b) The state bar may enforce this chapter and the rules adopted under this chapter.

 Seems like The State Bar has this one covered from both ends. The state bar sets the rules, fees, and guidelines. The pertinent rules are:

Sec. 952.151. NOTICE REQUIREMENT. (a) A lawyer referral service shall include the following statement in any advertising or other promotional effort: "This service is certified as a lawyer referral service as required by the State of Texas under Chapter 952, Occupations Code."

I don't see that anywhere on this ad.

Sec. 952.152. LAWYER PARTICIPATION. A lawyer who is licensed and in good standing in this state and who maintains an office in the geographical area served by a lawyer referral service may receive referrals of potential clients from the service if the lawyer:

(1) complies with Section 952.155; and

(2) pays a reasonable registration and membership fee not to exceed the amount set by state bar rules.

If I hit a million dollar case, is $100k reasonable? Guess who decides? The state bar.

Sec. 952.155. LIMITATIONS ON CLIENT FEES. (a) A lawyer may not charge a potential client referred to the lawyer by a referral service an amount that exceeds the total cost the client would have been required to pay, including legal fees and expenses, if a referral service had not referred the client.

(b) The combined amounts of any fee charged to a potential client by the lawyer or the referral service may not exceed $20 for the first 30 minutes of the initial office visit with the lawyer.

(c) An agreement between a lawyer and a referral service to eliminate or restrict the fee for the first 30 minutes of an initial office visit with the lawyer does not violate any statute or rule, including Chapter 15, Business & Commerce Code.

(d) A fee charged under Subsection (b) may be used only to pay:

(1) the reasonable operating expenses of the referral service; or

(2) the expenses of a public service program, including a pro bono publico legal program.

This all seems fine, but they way I read B and D, is that fees that fund this program are the $20 pops. That's it. No mention of a percent recovery and the purpose of those funds anywhere.


The more I look, the more of these type outfits there are out there. There are many, nationwide. Most that I have seen thus far have the deal where you pay to join,  you pay $20 for the consult,  and that's it. No kickback referral fee. However, some others require a percentage fee. Wisconsin has one. The City of Houston has one too, but they claim to be a non-profit. They take 15%.


The ABA has actually issued rules on referral services, which can be found here.


The one that I'm interested in is this one:


Rule IX

-- A qualified service may, in addition to any referral fee, charge a fee calculated as a percentage of legal fees earned by any lawyer panelist to whom the service has referred a matter. The income from any such percentage fee shall be used only to pay the reasonable operating expenses of the service and to fund public service activities of the service or its sponsoring organization, including the delivery of pro bono legal services.




Maybe Texas decided it was ok. However, I cannot find a rule that says it is, and Sec. 952.155 of the Occupational code seems to say otherwise, even though the Bar regulates both.  Maybe the 10% percent fee goes to legal aid, or some other good cause. But I cannot find a place that says where the money goes.  The ABA also has a list of lawyer referral services in Texas, or LRIS services, here. Some have the ABA seal of approval. The Texas State Bar LRIS program does not. I wonder why?


I am sure (really, I just hope) that there is a great, clear, explanation for this that I have totally missed. I am sure (really, I just hope) that there is some fine print I missed. I am sure (really, I just hope) that my State Bar, the group I swore allegiance to, is not trying to squeeze more money out of me and my fellow attorneys in what are tough economic times by deceptive means.


This thing has been around since 1972. I can't be the first person to ask these questions.