Legal Form Generators: Cost Savings or False Sense of Security?

By: Michael B. Shapiro, Esq. and Elizabeth Conklin

A quick Internet search for “Legal Form Generator” returns dozens of websites that allow someone to download a form for a contract or lease agreement or to purchase a service to input information to generate estate planning documents, such as Wills and Powers of Attorney.  These do-it-yourself solutions generally fall short by not addressing issues that commonly arise or simply not being the correct legal document.

In the latter half of 2022, the Estate Planning Department at Falcon Rappaport & Berkman LLP encountered several examples as to why a layperson’s reliance on legal form generators and downloaded forms is often a penny-wise-pound-foolish decision.

We often come across self-prepared Powers of Attorney.  In short, a Power of Attorney allows you, as the principal, to appoint an agent to handle financial matters on your behalf if you are unable to do so yourself, as in the case of mental incapacity or illness. 

Examples of Potential Issues

Practically speaking, you may not know if there is a problem with a Power of Attorney form until it is too late to remedy the problem. Most states, including New York, utilize a statutory Power of Attorney form, which is based upon a format set forth in the laws of that state.  In New York, deviation from its statutory short-form Power of Attorney form may result in the document not being accepted by a third-party or the agent having limited authority, since a third-party, such as a financial institution, is not required to accept as valid a Power of Attorney form that is not a statutory short-form Power of Attorney.[1] To make things more complicated for New York residents, the State changed its statutory form three times between 2009 and 2021. Unless you are otherwise familiar with the current statutory Power of Attorney form, it may not be readily apparent that the form you plan to sign as the principal is outdated. 

We often see New York Powers of Attorney that fail to grant comprehensive authority to the appointed agents; specifically, the do-it-yourself forms tend to limit—or, in some cases, completely omit—the agent’s ability to handle asset transfers.  Since 2009, New York has required language in its Powers of Attorney form that grants an agent the ability to transfer assets out of the name of the principal.[2] The power to transfer assets is particularly important for Medicaid and Long Term Care Planning, so if a Power of Attorney fails to give the agent this power, the execution of such a document is essentially rendered moot with respect to such advanced planning needs. 

Other common self-prepared documents are entity governance forms, like partnership and shareholders’ agreements.  These types of self-prepared forms often fail to address the more complicated scenarios that cause issues down the line, including, for example, what happens on the death of an owner and in what circumstances an owner may sell or transfer his or her interest in the entity.  Until a more complicated situation presents itself, business owners are often under the impression everything is addressed by the simple governance document obtained from the internet or by completing the fill-in-the-blanks agreement included with the company formation documents.

Some less common, but no less concerning, examples recently encountered include a lifetime transfer of New York real property by a gift letter rather than by a real property Deed and a Revocable Trust for married New York residents governed by and prepared based upon California law.  The former was a completely ineffective transfer of the real property; the latter very likely would have resulted in estate administration issues, especially in the case of an estate contest.  In both cases, the clients were unaware that the documents in their possession were troublesome.

How Can We Help?

If you sourced your legal documents from someone other than an attorney, consider having the documents reviewed by counsel who specializes in the relevant area of law. To contact the experienced attorneys at Falcon Rappaport & Berkman, please call (516) 599-0888 or submit the contact form below. 

[1] N.Y. Gen. Oblig. Law § 5-1504(8) (2022).

[2] Unless a Power of Attorney grants the agents a specific authority to transfer or gift assets of the principal, the ability to the agent is limited to continuing gifts that the principal customarily made to individuals and charitable organizations prior to the creation of the agency, provided that, in any one calendar year, all such gifts do not exceed five thousand dollars in the aggregate. N.Y. Gen. Oblig. Law § 5-1502I(14) (2022).

DISCLAIMER: This summary is not legal advice and does not create any attorney-client relationship.  This summary does not provide a definitive legal opinion for any factual situation. Before the firm can provide legal advice or opinion to any person or entity, the specific facts at issue must be reviewed by the firm.  Before an attorney-client relationship is formed, the firm must have a signed engagement letter with a client setting forth the Firm’s scope and terms of representation. The information contained herein is based upon the law at the time of publication.