5 musts for an effective succession plan

Lawyers who don’t have a succession plan for their practice in the event of death or disability leave their clients and firms in jeopardy. This happens more often than you think, particularly with small and solo law firms, and it shouldn’t, according to the legal experts who participated in the  webinar, “So It’s Time: Responsible Planning for Closing the Law Office.”

Ted Waggoner, a partner at Peterson Waggoner & Perkins LLP in Rochester, Ind., chaired the Special Committee on the Indiana Attorney Surrogate Rule, which the Indiana Supreme Court enacted. He discussed the guidebook the Indiana State Bar adopted that walks you through the process of protecting clients when a firm is forced to close due to a death, disability or disbarment.

Waggoner says the Attorney Surrogate Rule kicks in for the solo practicing lawyer because they do not have partners, who would otherwise assume the fiduciary duty to the clients of the firm. The solo practicing attorney might have an associate, who, because he or she is not a partner, would not have fiduciary duty. In that case, an attorney surrogate would have to be appointed.

The attorney surrogate must be registered annually and, in the event there isn’t one, the state supreme court can appoint a senior judge as the surrogate. Waggoner said there are three advantages of a state Supreme Court rule:

1. Appointment by the court gives access to trust funds, office and files;
2. Gives a 120-day extension to all pending cases for motions and statues of limitations;
3. Surrogate is provided with immunity for good faith actions taken as surrogate; and
4. Handing out cases is good for clients.

“The goal of the Surrogate Attorney Rule is to provide assistance to the clients of a lawyer involuntarily leaving the practice,” Waggoner said.

Succession planning is an essential part of your estate plan, said panelist Joan M. Burda, an attorney in Lakewood, Ohio.

“You want to ask yourself, what will happen to your practice if you die suddenly or become disabled?” Burda said.  “Not all of us can plan what is going to happen in the future but you can be prepared.”

She lists five keys to succession planning:

1. Identify a triage lawyer
   1. Someone you authorize to close, sell or transfer the practice
   2. Execute a detailed, written agreement defining the relationship and duties.
   3. Spell out whose interest the attorney will represent – yours or your clients
   4. Consider potential conflicts of interest
   5. Authorize the lawyer in writing to contact clients for instructions on transferring files
   6. Draft letters for contacting clients and obtaining authorization to release files. Also, notify your malpractice carrier to let them know that you are doing this
2. Create a checklist 
   1. Include all your clients and contact info, type of case, status, type of fee agreement, current status of fees, which files have client documents in them
   2. List all passwords and login information for all electronic devices
   3. Bank accounts and credit cards; business and IOLTA; make them payable on death or transfer on death
   4. Malpractice insurance information
   5. Leases and vendor information; other business records
   6. Digital assets: websites, email, social media – and make sure everyone knows who’s running these.
3. IOLTA accounts
   1. Execute bank forms to authorize another signatory who is allowed access to the account, because an order from a bar disciplinary committee is not enough to grant access.
   2. Check state disciplinary rules regarding adding a second signatory.
      
      “Know what the rules are in your state,” Burda said. “Each state is different and if they have no rules, if they have not done anything, then do it on your own and you’ll be ahead of the game. You can always tweak it later if something comes up.”
4. Business records
   1. Create a spreadsheet listing:
      1. All leases/contracts (office, equipment, utilities, office services, etc.)
      2. Business insurance policies
      3. Custodial services (you may have a contract and need to know how to terminate the service)
      4. Names and contact information for staff, including who has best handle on the practice and who is authorized to access secured/encrypted/password protected files.
      5. Signature cards for bank accounts (go to the bank and take a picture of them)
      6. Login and passwords; info on accessing encrypted/password protected records
         
         “I know a lot of older lawyers might not be comfortable working with Excel, but you can hire somebody to help you put it together,” Burda said. “This can be tedious because you are looking at the back end of it and going back in time and making a list of it.” She also recommends having both electronic and hard copy files of this information. “Put them in different places so that somebody can gain access to them.”
5. Estate plan documents
   1. Update your will and include a clause regarding the succession planning for your practice
   2. Update General Durable Power of Attorney (GPOA) to include information on succession plan
   3. Draft instructions for your family and executor about the triage attorney’s duties and include contact information for that lawyer
   4. Let people know where the will, POAs, bank info, safe deposit boxes and stored files and other assets/records are located – be specific.

“Write down all of this information for your family and the executor about what the triage attorney is going to do and how they can help,’’ Burda said. “Your family is going to be concerned about your death or disability and they are going to be in an emotional state and not looking out for your clients. That’s what this triage lawyer is going to do.”

Burda said by putting a succession plan in place you protect your family from being burdened with the legal fallout of your death or disability. She recommended adding to your resource material the ABA-published book “Being Prepared: A Lawyer’s Guide for Dealing with Disability or Unexpected Events,” by Lloyd D. Cohen and Debra Cohen.

“We all need to look at how we are going to be handling our practices as we get older. This also applies to younger lawyers as well. This is not age-specific because our practices can end at any time due to death and disability. So, we need to plan,” she said.

Edgar W. Pugh, Jr., partner at Pugh Moak PC in Bloomfield Hills, Mich., was also on the panel, which was moderated by Richard C. Goodwin, chair of the Senior Lawyers Division CLE Program Committee and past chair of the Seniors Lawyers Division in Fresno, Calif. The program was co-sponsored by the ABA Senior Lawyers Division, Law Practice Division, Solo, Small Firm and General Practice Division, Commission on Law and Aging and Center for Professional Development.