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April 09, 2015 Asked and Answered

Would your practice be prepared if something happened to you? (podcast with transcript)

By Stephanie Francis Ward

If the unthinkable happens, will your practice be ready for an intermediary to take over or help with a transition?  Do you know what would happen if you–-or one of your colleagues–-should suddenly die or become incapacitated? The ABA Journal’s Stephanie Francis Ward speaks with two experts about tools and systems you can put in place to give you and your clients peace of mind.

ABA Journal: “Death of a Practice: After lawyer dies, her friend is faced with closing down her firm”

Podcast Transcript

Stephanie Francis Ward: What happens to your law practice when you can no longer run it? That’s a question many lawyers may not want to think about but they probably should.

I’m Stephanie Francis Ward, and on today’s Asked and Answered, we’re discussing preparations that can help the shutdown of a practice run as smoothly as possible. Joining me is Steve Crossland, an estate planning lawyer and former president of the Washington State Bar Association. He also chaired the group’s Task Force on Attorney Succession Planning.

Our other guest, Barbara Fishleder, serves as the Oregon Attorney Assistance Program’s Executive Director. She’s also the author of a widely read book that tells lawyers basically everything they need to know about protecting clients’ interest in the event that they can no longer practice. Barbara, what is the name of your book?

Barbara Fishleder: The name of the book is quite long. It’s Planning Ahead: A Guide to Protecting your Client’s Interest in the Event of your Disability or Death. We tried to shorten but couldn’t really come up with something that was descriptive and accurate.

Stephanie Francis Ward: I see. What prompted you to write it? Was it you’re getting questions about it a lot so you decided to put everything in one place? It seems like it’s very helpful for lawyers.

Barbara Fishleder: I would say that in this case, necessity really was the mother of invention. We had a string of situations where lawyers unexpectedly were unable to tend to their practice. Either they passed away unexpectedly or they became otherwise unable to function.

And it became really clear to me that if lawyers just took a few, small steps it would really be a great service to their clients, and boy, would they really save their family members a lot of aggravation and distress.

Because what we found in those circumstances—and this actually—our first handbook was written 15 years ago and the patterns haven’t changed over the last 15 years.

When people don’t make a plan, a true level of chaos results, which results in lawyers’ office receiving frantic calls from clients who are trying to locate their files and determine the status of their cases, and are quite concerned about getting especially unearned retainers back. So that was really the inspiration.

We could see the chaos. We had stepped in to help close down these offices because there was no one else to do it, and it was kind of a dream: What if lawyers made a plan and they had a buddy come in and help do this if they suddenly died or if they became unable to practice for whatever reasons?

Stephanie Francis Ward: So Steve, in your experience, how often do you see situations where lawyers do have a plan, and I mean a legitimate plan, as opposed to: “Well, I’m just going to tell my friend that if something happens to me, you take over.”

Steve Crossland: Well, unfortunately I wish it was more—I wish everyone had one. But I think with the awareness, like Maureen has in Barbara’s book and the plan that Oregon developed and the plan that we developed about 10 years ago, I think solo and small firm lawyers are much more aware of the need. Mostly demographics are pretty startling that, at least in our state, and probably true throughout the nation, that at least half of our lawyers are at least 50 years of age or older.

So the reality statistically of death or disability visiting a significant number of our lawyers is pretty significant. So the awareness has been raised significantly in Washington.

Stephanie Francis Ward: So would you say that they do have a pretty good—you’ve seen in most cases they do have a pretty good, reasonable plan that will work in case they can’t practice anymore? Or is it more: No, they don’t really do everything that they should.

Steve Crossland: I think, unfortunately, it’s the latter. I think there’s an increasing awareness of it but I wish it were universal.

Stephanie Francis Ward: And what do you think, Barbara?

Barbara Fishleder: I’d say I agree with Steve that most lawyers don’t have—or not enough lawyers have—a full plan. But I do believe that the concept of making a plan, whether it be small and informal or extremely formal and clear, really is gaining a lot of momentum both with older lawyers and newer lawyers. Certainly there are people in each group who never get around to it, who have the best intention of doing it either because they’re busy or they don’t want to face mortality, or they feel like, “oh, it’s just not necessary at this time.”

Steve mentioned anything can happen to anyone young or old, and we certainly have seen everything from very young lawyers unexpectedly pass away from heart attacks or bike accidents, or older lawyers passing away or becoming disabled from more traditional causes. So age certainly isn’t a predictor of need, and we’re hoping that the momentum continues.

Stephanie Francis Ward: OK. And I know—I think normally when one talks about how to prepare your practice in case you can’t run it, we assume it’s going to be death. Do you see many situations where the person—maybe they—we certainly hear of situations where lawyers really shouldn’t practice but they keep doing it. Like maybe they have a senility issue, or their health is such that they can’t practice, but they’re not quite ready to give it up. But I would imagine when they do, if you’re the person that they have asked to help wind it down, that probably is a little complicated if the person is still alive and maybe is leaving reluctantly. Would you say that’s correct?

Barbara Fishleder: I would say that in most instances, the more likely situation where somebody needs a plan is the unexpected disability. You know, if somebody has been in a car accident and ends up in the hospital; or has a heart attack; or has been hit by a bike. And the reason for that is many lawyers, when they die they have some sort of other plan—a will or a trust which hopefully they also have. And so there’s a personal representative in place who can step in and appoint somebody to help close the office or can actually close the office themselves. So it’s especially important to have a plan in place for what I call “the unexpected events.”

Because anyone can become disabled at any time. And the reluctance factor that you raised, we don’t see that quite so much because most often when somebody is disabled, they either are completely unable to function, because maybe now they’re in a coma in a hospital, or they realize that they’re at a point where they just cannot function in their practice and they actually are grateful for the assistance. And that’s when a plan is especially important.

Steve Crossland: If I could add to that, there’s an additional—a different spin on succession planning that’s sort of intentional and purposeful succession planning, where the aging lawyer realizes that their career may be coming to an end and they bring a young lawyer on to transition their practice to them and mentor the young lawyer in the process. We’re seeing that being a very good and successful way of transitioning practices. And it allows the aging lawyer to more gracefully realize that it’s time to get out of the practice, but then allows them to transition the practice for the benefit of their client and their family onto the younger lawyer. So we’re finding that there are really a couple of different kinds of succession plans.

Stephanie Francis Ward: That sounds like it would work well with the right fit with the younger lawyer and the older lawyer. Is that something that you would say bar groups would encourage with more senior lawyers?

Steve Crossland: Absolutely. When I was president of the [Washington State] bar, we had a bar survey done that confirmed the demographics that I talk about, that half of our bar being 50 years of age or older, and half of our bar being solo or small term lawyers. And we thought it would be wonderful to drill up a clearinghouse relationship between the bar association and the law schools. So that coming out of law school looking for jobs, which of course is a big dynamic these days, if there could be a clearinghouse of aging lawyers who say: “I’m about ready to transition out of my practice; is there some young lawyer who’d be willing to come join and allow me to mentor them for a few years and then transition my practice to them.”

So I think it’s a real opportunity for young lawyers and aging lawyers, as well.

Stephanie Francis Ward: And say maybe you’re not an aging lawyer, but you’re planning in case you get hit by a car or something sudden happens. So once you identify the lawyer you would like to wind your practice down in case something happens to you, and you chat with him or her about it and they say yes, what would the next step be? What do you need in writing in case something happens to you, for the plan to be fulfilled?

Barbara Fishleder: Of course the best thing is to have something in writing. And the reason I say that is because it puts all of the needed information in one place, and it helps the participants kind of sort through what really are the roles. Is the lawyer who’s making a plan asking the other lawyer to take over the clients, and literally consider being their lawyer and see if the client wants to go that route? Or is the lawyer that is being asked to help going to be a transfer agent, and help with the mechanics of returning files to the clients or to the clients’ new lawyers and wind down—wrap up the practice?

So putting things in writing helps people sort through those roles. They’re really, really different roles with tremendously different responsibilities. And it also forces people to kind of think through, “What really should we be talking about, here? What information needs to be conveyed?”

Because when you start to sit down and think about it, you realize that some of the really important information is all going to have to be written down anyway: passwords, where the storage unit is—and when I say passwords, I mean passwords to your landline phone, passwords to your cell phone, passwords to your computer, passwords possibly to your software, depending on how you are using the cloud, keys to your storage facility; there’s a long list of information that people should have.

So just saying, “OK, you’re going to help close,” is a great beginning and is actually the hardest part, which is to find somebody that you feel you can trust and is willing to help you out. And then the next step doesn’t take very long at all, and in some instances can be done in five minutes.

Stephanie Francis Ward: So you come up with a plan about what happens with your practice in the event of your death or something else happens where you can’t practice anymore. Who should you tell about this besides the lawyer that you tapped? I’m curious if perhaps you should name the person you tapped to wind down your practice in retainer agreements. Would that make sense?

Steve Crossland: I think it’s a really good idea certainly to let your family and staff know. And actually—I was talking to one of my relatives who’s in the advertising business in Chicago and he said, “You know, actually, I’m a small town solo practitioner and so I’m keenly aware of this as an issue.”

And he said, “You know, actually, I think that could be a marketing tool. If you have a plan in place and you’re an aging lawyer and your client knows his or her files are going to be cared for and their needs are going to be cared for in the event of your untimely death or disability, that gives them a great deal of comfort that may cause them to choose you over another lawyer who hasn’t been quite so organized and thoughtful about their clients’ needs.”

It’s really a way of demonstrating to your family, to your staff, and to your clients that you really care about them.

Stephanie Francis Ward: What do you think?

Barbara Fishleder: I totally agree with what Steve said. I think that the clients should be informed that you have a plan, and I agree it could be a great marketing tool and just an indication that you’re organized and thoughtful and caring about what happens with them and their case. I think you also don’t want to give anyone the impression that a specific plan is cast in stone because if you do have someone who is going to close your practice in the event of death or disability. That person’s circumstances might change.

So I think mentioning that you have a plan and maybe not mentioning the person’s name, but if you mention the person’s name, I think adding something that says “this is the person who is lined up to do this at this time, but if circumstances change, another person will be chosen,” just so that the client doesn’t think it’s locked in. Because you never know what your assisting lawyer’s circumstance will be at the time that you actually need help.

Steve Crossland: I think that’s important to kind of clarify, because that, too, should be communicated to family, staff, and your clients so that their expectations are clear and they can deal with what your plan is in whatever fashion they wish. But at least that’s all clear to everyone and there’s no misunderstanding when that moment of death or disability occurs.

Stephanie Francis Ward: One thing I was curious about, and I’m thinking you probably couldn’t do this, but maybe you could: When you tap someone who would wind down your practice in the event of an emergency and he or she agrees to it, could you, should you put that lawyer’s name on the client trust accounts?

Barbara Fishleder: That’s a really good question, and it’s one of the toughest decisions that lawyers have to make. It’s something that each lawyer really just has to weigh individually. The upside and the downside are kind of the same because the great part about putting somebody on your trust account is for the client’s benefit. It gives them very quick access to unearned—to fees that the lawyer hasn’t earned. And so that enables the client to much more simply and much more likely be able to go to another attorney right away.

We see a lot of situations where the client has given the lawyer a large retainer, and then everything’s tied up and the client is unable to come up with money to go to the second lawyer. So that is a very problematic situation for the client.

The downside, of course, is if you put somebody on your trust account, that person has access to the trust account and to the client’s money. So it’s a big decision. Generally, lawyers do know someone that they trust without hesitation. Some lawyers do, others don’t. The answer really does depend if the lawyer has someone that he or she trusts to the very highest level. Sometimes it’s a family member or a friend or a trusted colleague or the person that’s going to be the personal representative for their estate.

But it is a huge decision and it can make things go very smoothly or it can be a disaster, depending on the lawyer’s choice. There’s not a clear path; it’s really the lawyer’s gut feeling about it and their knowledge of who they would be including.

Stephanie Francis Ward: OK. And if someone asks you, “In case something happens to me will you be responsible for winding down my practice?” How much time would that take in terms of—when you’re formulating your answer of, “Do I have the time to take this on?” what should you, if you’re the person who’s asked to help in case something happens, what should you plan for? How much of your time is it going to take up?

Steve Crossland: I actually went through that process with another solo practitioner who I’ve been friends with for 40 years. And we went through that analysis of how much time is this going to take. And I think we concluded that in reality, at least for a short period of time, the assisting lawyer is going to be operating two law practices.

In my case, he was a small town solo practitioner as well. And we talked that through and that was one of the reasons that I wanted to make sure that he would be compensated for his efforts in doing so, because in fact, he’s stepping into my shoes, running my law practice for a period of time in order to either take it over or wind it down.

And for that reason, I honestly thought it was very important for me to have in place a life insurance policy that would cover those expenses and his costs and his fees and not relying on the income of the accounts receivable that may be in existence at the time of my death or disability.

So I think we both tried to be very realistic about it from the standpoint of realizing that from day one, they’re going to step in and be doing all of the things that I would have been doing had I been alive or not disabled. And I think that’s realistic.

I think if anything, people have to be realistic about it because if they’re not, the assisting lawyer, who’s not only going to be caught in a moment of crisis, but is also going to be facing a really significant amount of work that’s going to impact their own practice and their own lives. So I think it’s very realistic to consider that it’s going to be significant, at least for several months.

Stephanie Francis Ward: That’s everything I have to ask the two of you today. Would either of you like to add anything?

Barbara Fishleder: I would like to add a couple of things, just in terms of the mechanics. I totally agree with Steve that how long it’s going to take is going to vary greatly, and it is going to be a great idea to have a life insurance policy that can fund the process, or a disability policy that can partially go to funding the process, or just some sort of funds set aside for it.

The key things that lawyers can do to make the process go smoothly really have to do with making sure that the law office is in good shape. Meaning that you’ve, first of all, given a key to somebody and I use the term “key” very broadly and, I would say, even philosophically because we do live in the electronic age.

So it’s no longer good enough to just give somebody a physical key to your office; you have to give them the passwords and other access. Otherwise, although they might be standing in your office, they would still be completely locked out of getting any helpful information about client contacts or client files. So that’s, I think, really important. It’s “pick somebody, give them the key,” and using that broadly, including passwords to everything.

And to try to really give your loved ones and your colleagues who are going to help you the gift of an organized office. Because the difference between a minimum amount of time in making the transition and a completely horrible, overwhelming time in making the transition is going to be whether a person that’s assisting can easily see which files are open, which files are closed, what the calendar dates are, and just kind of sort through access to client contact information.

So those are three really important things that will make the difference between a big investment of time and a fairly quick, smooth transition between the practice. So I guess my mantra is: The greatest gift you can give your loved ones is to make a plan, and to keep your office in good shape.

Stephanie Francis Ward: All right. Thank you so much for joining me, and thanks to our listeners. This is Stephanie Francis Ward signing off from the ABA Journal’s Asked and Answered.

[End of transcript]

In This Podcast:

Stephanie Francis Ward
Steve Crossland, a former Washington State Bar Association president, also chaired the organization’s task force on attorney succession planning. Based in Cashmere, Washington, he handles estate planning issues.

Barbara Fishleder is the executive director of the Oregon Attorney Assistance Program. Based in Tigard, she also wrote a book about shutting down law practices, A Guide to Protecting Your Clients’ Interests in the Event of Your Disability or Death.