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> ‘Work till you drop’ is not a plan, August 16th, 2010
Editor
post Oct 28 2010, 11:33 AM
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from: Wisconsin Law Journal

The simple fact is that a lawyer who is a sole practitioner owns a family business — the law practice. And studies regularly document that small business owners do not plan well for the future of their businesses. A survey several years ago by the Family Firm Institute and MassMutual Financial showed that fewer than half of small business owners expecting to retire soon had selected a successor, almost one-third had no plans to ever retire, and an equally large percentage had no estate plan beyond a simple will.

Unlike other business owners, however, 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 can, according to some authorities, be construed as reckless disregard for client welfare — a true 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.

Some lawyers may say that succession planning is more bother than it is worth, and that they intend to stay in practice until they “die with their boots on.” If so, they are extremely short-sighted. In effect, they are throwing away the value of their practices, cheating their heirs and making an unrecognized gift to strangers (existing clients have to go somewhere and the lawyers who pick them up will be the strangers and beneficiaries of the deceased lawyer’s lack of foresight). No lawyer would willingly give up a million dollar investment account, but the value lost in failing to plan for a practice’s future could be equally great.

It should go without saying that life insurance, plus a disability policy, is a prudent step for any sole practitioner. There must be reasonable expectations for the kind of policy chosen — a desire to maintain the family’s lifestyle unchanged if the lawyer were unable to practice may be outweighed by the cost of such a policy’s premiums. Other elements needed include a will and an estate plan that make legitimate application of all the advantages allowed under 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.

Failing to plan such a practice succession puts fear in charge. To counteract this fear, make a rational assessment of your practice, life and anticipated or desired retirement. Assess the realities of financial resources and physical health. As they say in the airline business, put your oxygen mask on first, before trying to help others. You can’t help others if you’re not taken care of. With estate and succession plans in place, older lawyers should have the confidence to remain in practice as long as they desire, knowing that their practice, their clients and their families are protected when the worst occurs.

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