Solo Law Firm Succession Planning

When it comes time to retire, many attorneys may simply give notice to their employer or other partners. But what about solo attorneys who take full responsibility for their practice? This is where a solo law firm succession planning becomes critical.

The solo attorney who uses the right legal software can greatly assist in estate planning. Clio Manage helps streamline your client management in a way that could facilitate the sale, merger or other divestiture of your practice.

What is a succession plan for a solo law firm?

An “estate plan” is the process a solo attorney will follow when transferring ownership of their practice or closing it. This plan can be implemented when the solo practitioner retiresbut it can also be implemented due to unexpected eventssuch as death or disability. Succession plans may also be relevant when a solo practice undergoes a structural change, such as a merger with another law firm.

Why is estate planning important for solo attorneys?

Solo lawyers face unique challenges that lawyers at larger firms do not encounter when planning their succession.

Risk management

Sole practitioners without a succession plan in place are at significantly higher risk than other lawyers. Since a solo lawyer does not have other attorneys to take over in his or her absence, any long-term disability due to an accident or illness could be disastrous. For example, the practice could remain unmanaged, resulting in missed deadlines, damaged client relationships, and even malpractice claims. These risks may be even greater in the event of the unexpected death of the solo lawyer.

Ethical and professional obligations

All lawyers have ethical and professional obligations to their clients, and estate planning ensures that these obligations will be met in the event of an unexpected event.

For example, the ABA Model Rules of Professional Conduct specify that the appointment of a successor agent may constitute a professional obligation for solo agents. Rule 1.3 requires a lawyer to act with reasonable diligence and promptness in representations of clients. Comment 5 the rule states the following:

“In order to prevent client files from being neglected in the event of the death or disability of an independent practitioner, the duty of care may require each independent practitioner to prepare a plan, consistent with applicable rules, appointing another lawyer competent to review client files, notify each client of the attorney’s death or disability, and determine whether immediate protective action is necessary.

Beyond any legal or ethical obligation, you also want your clients’ files to be properly handled in your absence. It is unlikely that a successful solo lawyer would have been able to maintain his practice without caring about his clients and devoting himself to their representation. In short, you have a duty to your clients to properly plan your estate.

Peace of mind

Independent lawyers have a lot to do between running a business and maintaining a law practice. Simply put, having a solid succession plan in place means you will have one less problem keeping you up at night, knowing that your practice will be in good hands if the unexpected arises.

What are the key estate planning strategies for a solo attorney?

The right estate planning strategy for a solo attorney will depend on their overall strategy for ending their legal career. Below are some of the most common estate planning strategies for solo attorneys:

Closing and closing the office

For either planned retirement or the unexpected, such as death or disability, many solos may choose to simply close their office. Although you won’t reap the financial benefits of selling your business, not all solo practices are easy to sell, and closing the business may ultimately be the easiest option.

You or your successor attorney could announce the firm’s closure at a later date and offer clients the opportunity to find new counsel. Alternatively, you or the successor attorney could terminate the practice by not taking any new legal questions and completing all existing questions.

Train a successor

Another option is to recruit an associate who you then train to be your successor. The associate could eventually become a partner and then take over the firm when you retire. However, this is a long-term plan with a certain level of uncertainty, since you cannot be certain that the lawyer will stay with your firm and be up to the task of taking the reins.

Sell ​​the practice

The solo practitioner could also sell their practice to another lawyer or law firm. It depends on whether the firm has a client base and what types of legal matters can be transferred to another firm, which is not always the case for individual firms. Although the lawyer may sell his or her firm for a lump sum, the purchase price is often paid in installments over several years, and the selling lawyer may need to maintain an advisory role to help the purchasing firm retain its clients.

Transitioning to a Temporary Associate or Advisory Role

Some solos may have the opportunity to merge their practice with another solo practitioner or small firm, or to be acquired by a larger firm. The lawyer may need to remain as a partner or in a Advisory role for some time. This is an attractive alternative to ensure client continuity while allowing the attorney to retire more quickly, while still receiving payment from the merger or acquisition.

What are the key elements of a succession plan for a solo law firm?

Once you have determined your succession strategy, you will need to create your succession plan. At a minimum, your succession plan should contain these key elements.

Find a successor

The first step is to appoint a successor for your business. As noted above, your succession strategy may involve the sale, merger or acquisition of your business, in which case the successor will depend on who buys your business. However, you must choose a designated successor to take over in the event of your disability or unexpected death. You should ideally find a successor who works in the same area of ​​practice and who has little or no conflict of interest with your clientele.

Conclusion of a formal agreement with the successor

This designated lawyer must be able to review files, inform clients and take necessary actions, including transferring files to other lawyers. The formal agreement with the successor must clearly specify their duties and responsibilities, whether this includes closing or selling the practice. You will also need to consider the compensation of your successor.

Ensure accessibility of key information

The successor attorney and any firm that purchases or merges with your firm must be able to quickly access key information. This includes not only customer information and records, but also banking and accounting details. Pay particular attention to attorney trust accounts, including IOLTA accounts. Include login information and passwords for computer systems, online accounts and software.

When should I start planning my estate?

Many independent attorneys make the mistake of delaying their estate planning until they are close to retirement. Unfortunately, the unexpected can happen at any time, which is why sole-practice attorneys must prioritize estate planning early in their careers to ensure they have coverage.

Also remember that succession planning is an ongoing process. You should regularly review and update your succession plan to reflect changes in your practice.

How do I inform my clients of my succession plan?

Independent lawyers must be transparent with their clients about the existence of an estate plan. Practice management software like Clio helps you know which clients you have informed about plan details and legal issues.

Independent attorneys can leverage technology for their estate planning

Solo lawyers have too many responsibilities and too many risks to leave their estate to chance. Succession planning can provide them with a smooth transition, a comfortable retirement and peace of mind.

The right legal technology can make this process seamless by providing a successor attorney with a platform to easily review all legal issues and details of day-to-day firm management. Learn how Clio can simplify and centralize business operations, including billing, scheduling, communications and document management, by planning a free demo Today.

We published this blog post in October 2024. Last update: October 17, 2024.

Categorized in: Business