Throwing the Value of Your Estate Away
Unlike other business owners, lawyers face significant ethical consequences for failing to plan for a practice's future. Failure to plan for how clients will be taken care of as a lawyer approaches retirement age shows a disregard for client welfare that can be seen as an ethical violation. In a number of jurisdictions, if a practice must be wound up due to the death or incapacity of the lawyer, application must be made by a personal representative, guardian or conservator. If there are cases or other matters not completely closed, the appropriate bar association can intervene, assume responsibility for action, and seek both reimbursement and compensation from the lawyer's estate or assets.
The scenario raises two issues of major concern:
1) Can the estate retain control of the law practice for a reasonable period of time needed to sell the practice? If so, how should "reasonable" be defined?
2) While it's clear that the estate's representative cannot practice law without being licensed in the jurisdiction, can such a person control the business affairs of the practice and direct the attorneys in the firm vis-a-vis the business?
Without offering a definitive answer, it is clear that a representative of the estate has a role. Certainly it is best for a lawyer to have planned beforehand to select a practice representative if the lawyer dies unexpectedly. The ABA's Commentary 5 on Rule of Professional Conduct 1.3 ("Diligence") states: "To prevent neglect of client matters in the event of a sole practitioner's death or disability, the duty of diligence may require that each sole practitioner prepare a plan, in conformity with applicable rules, that designates another competent lawyer to review client files, notify each client of the lawyer's death or disability, and determine whether there is a need for immediate protective action."
Courts have ruled that an estate can be directly liable to pay damages to injured clients left in the lurch by a lawyer's death. The reasoning is that the lawyer should have known that death was possible and taken steps to protect his clients in the event that tragedy struck. Such instances suggest that an estate representative can play a direct role in practice windup, with that role most likely being defined by the courts in resolving the matter. Lawyers who do not plan for what happens to their practices if they suddenly die thus make their grieving families immediately face what to do about the practice. They also in effect are throwing away the value of their practices.
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