Lawyers are not immortal

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Published on 3/24/08

A while back I learned of a story that is all too common in our profession. The widow of a California attorney sought to work through the problem of closing her husband's practice after his death. She found little information or help at the state bar and ended up hiring a practice management attorney who cost a great deal of money but provided unsatisfactory service. The practice was wound down, but the process was difficult and stressful.

The lawyer who has not taken the possibility of his or her untimely death or disability into account for planning a practice's future is playing with fire.

In a number of states, if a practice must be wound down due to the death or incapacity of the attorney, application must be made by a personal representative, guardian or conservator. If there are cases or other matters not completely closed, the state bar can intervene, assume responsibility for action, and seek both reimbursement and compensation from the lawyer's estate or assets.

It should go without saying that life insurance, plus a disability policy, is a prudent step for any sole practitioner. You must be reasonable on the kind of policy you choose — a desire to maintain your family's lifestyle unchanged if you were unable to practice may be outweighed by the cost of such a policy's premiums.

You will also need a will and an estate plan, taking all legitimate advantages allowed under the law. The plan can estimate and minimize estate tax liability exposure, create trusts to conserve assets and minimize tax impact, provide financially for all the expenses necessary to close a practice, and properly value the practice for estate tax purposes.

There are too many stories where this step was ignored. One famous example is the Nelson family. Ozzie Nelson, of television fame, was a lawyer and yet failed to have an estate plan in place. The family's financial fortunes suffered greatly as a consequence.

Beyond this, older lawyers should plan for transitioning their practice well before the necessity is forced by age or ill health. Failure to plan for how your clients will be taken care of as you approach the age of retirement can, according to some authorities, be construed as reckless disregard for client welfare — a true ethical violation.

Planning options can include simply closing or selling the practice, but other options are just as viable: for example, grooming a successor by hiring an associate to learn the practice, or merging with or hiring a lateral with the option to sell the practice to him or her.

With a succession plan in place, older lawyers who keep up with evolving professional rules and trends should have no trouble remaining in practice as long as they desire.

Nevertheless, especially in a sole practice, aging lawyers or attorneys committed to closing their practices may emotionally leave their clients long before they close their doors. This can result in less effective representation well before the lawyer retires, and it is a danger to guard against.

Grooming and building a relationship of trust with a younger partner or associate can guard against such a problem and build peace of mind for you and your clients.

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