Succession Planning Part 1—The Unexpected Event
Many pundits say that lawyers don’t retire, they just die at their desk. You may have known another lawyer who passed away suddenly while working. Sadly, I have known a couple. The reality is that none of us want to think about our own demise. This is Part 1 of a two-part series discussing succession planning. Part 1 deals with how to plan for the unexpected death or disability. Part 2 of the series deals with how to plan for expected retirement or sale of a law practice.
Time flies and before we know it we have 20 or 30 years of practice experience under our belts. Indeed, we spend our legal careers trying to anticipate future alternatives to properly advise our clients on their next steps. Even with all that experience, we fail to anticipate our own inevitable futures. We have no real plan in place for how our law partners, spouses, and families should handle our clients’ files and business matters if we were to suffer a catastrophic accident or medical event leaving us disabled or dead.
The first time I thought about how to handle such a situation was when I was a young lawyer assisting a lawyer-client review an application for malpractice insurance. One of the questions on the policy application asked whether the applicant had successor counsel, and it also asked for the name and contact information for successor counsel. A few years later, I thought about this issue again in the context of litigation when we filed suit against a law firm and the principal lawyer’s estate for missing a statute of limitations deadline a month or so after the lawyer unexpectedly passed away.
Since that time, we have had the privilege of assisting spouses and families of deceased lawyers figure out what needs to be done in this situation. We have even been asked to serve as successor counsel by a few attorneys. Needless to say, spouses and families left without a succession plan by the deceased lawyer are lost and have no clue what to do to protect the firm and its clients. To be clear, it is not the purpose of successor counsel to take over the firm’s business. Instead, successor counsel’s role is to protect the firm’s clients and help the firm avoid unintended malpractice events while winding down the deceased lawyer’s practice.
If you practice with multiple lawyers or a large firm your succession plan may not need to be as detailed as that of a solo practitioner. Here are some steps to take when considering a succession plan. These steps are an outline which can be used to make your succession plan fit your specific practice type and size:
- Select a successor counsel. If you have multiple attorneys in your firm one of the other lawyers may be able to step into your shoes. If you are a solo practitioner you need to identify successor counsel who has knowledge about your practice area.
- Once successor counsel is identified, talk to the person and get their agreement to serve as successor counsel. I did hear of a situation where the lawyer chosen to serve as successor counsel did not even know he had been chosen. When he received the call from the grieving widow, he was a bit surprised and declined to assist.
- If you are a solo practitioner who has limited or no support staff, consider adding the name and contact information of your successor counsel to your engagement agreement so that your clients have another person to contact should they not be able to reach you or anyone at your office for an extended period of time.
- It’s not good enough to just talk to your partners or family members about how to handle the firm’s business—memories fade, especially when dealing with grief and loss. Write out your succession plan in an instruction manual. Save an electronic version on a thumb drive and also in a printed version and keep them in a safety deposit box or a fire proof lockable filing cabinet with your Last Will & Testament and other important documents. Make sure your family and your successor counsel know the location of the key or how to access these materials.
- In your instruction manual list out usernames and passwords for computer hardware and software, computer applications, practice management applications, billing applications, vendor accounts, etc.
- Make a list of bank accounts including operating accounts and escrow account numbers clearly delineating each type of account. Include the bank names, contact information for banking contacts, account numbers, and online usernames and passwords for those accounts. Consider adding other signatories to your bank accounts. Only allow lawyers to sign escrow account checks.
- Provide a list of names and contact information for the following service providers the firm uses:
a. bookkeeper and accountant;
b. landlord;
c. insurers or insurance brokers (e.g. malpractice, general liability, workers compensation, and health insurance); and
d. payroll company and employee benefits provider.
Include policy numbers, account numbers, and usernames and passwords for online applications where applicable.
8. Make a list of vendors, bar associations, other professional associations, and the contact person and their information for each, and reference where vendors’ paid and unpaid invoices can be located.
9. Make a list of accounts payable and the dates on which they are to be paid and any recurring amounts.
10. Provide instructions on how to access and use the firm’s calendaring systems, practice management systems, conflict check systems, and billing systems. Consider providing specific instructions on how to access and run financial reports from practice management and billing applications.
11. If your firm has standardized client file and document management systems, explain in the instruction manual where to access the information and how each such system is organized giving examples which walk the reader through each of the processes.
Lawyers have legal and ethical duties to clients, the courts, and our profession. A solid succession plan helps us fulfill those duties when we are no longer around to do it for ourselves. The more detailed your plan the easier it will be for your colleagues, family, and successor counsel to implement your plan. You cannot rely upon the State Bar or your malpractice insurance carrier to get involved. However, the State Bar and your malpractice carrier may provide checklists and reference sources for your use in creating your own plan. Here is a link to ALPS Insurance Company online resources: https://www.alpsinsurance.com/resources/succession-planning. And, please do not hesitate to reach out to us, if we can be of assistance.
