So, tomorrow, I am speaking as part of a seminar put on by the Solo and Small Firm section of the Memphis Bar Association focusing on aspects of buying or selling a law practice. I’ll be doing the second hour — “What to Do When (not) Everything Must Go? The Ethics of Buying or Selling a Law Practice” — so come out if you are in Memphis and it might be of interest to you.
One thing I’ll likely just mention barely though, if at all, is another important thing that solo lawyers should have on their to-do list which is having a plan in place for who takes over or takes care of their practice in the event something sudden and horrible happens to them. In Tennessee, we’ve adopted a relatively robust provision as part of our rules of disciplinary procedure that allows for another law to serve as a receiver attorney and that permits lawyers to designate someone by contract in advance to perform those services and, presumably, end up imbued with all the same powers a receiver attorney would have if appointed by a court.
I’m pasting below a piece I authored addressing one aspect of this succession planning topic for lawyers — “Financial Planning for the Closing or Transition of Your Law Office.” This is one piece of a collection of materials I put together that are housed within the Tennessee Bar Association’s Solo In A Box Toolkit. You can read it along with the other pieces I put together for the very poorly (or at least unwieldily) named “TBA Handbook: Materials and Forms Relating to Planning/Providng For An Orderly Transition Before Sudden Death, Disability, or Incapacity Arises” (yes – typo in the original; ugh) at this link. But here are my thoughts du jour on the financial planning aspect of the subject for those that don’t want to take a look at the link (and until this gets read I’m not sure more than 5 people have ever read it because the set of materials are buried albeit not on the deep web but pretty deep into the TBA website).
Receiver Attorneys who assist in transitioning your clients or closing your law practice after your death, sudden disability, or sudden incapacity need there to be available funds for a number of purposes to pay for items needed in the closing process and, of course, to compensate them for their time and service. Attorneys should do their best to make arrangements in advance for such needs. Attorneys also should plan to make funds available as working capital to pay staff, rent, utilities as well to insure the orderly transition and closing of their office after they are no longer able to practice law. When Attorneys fail to do this, they will put the Receiver Attorney in the position of having to seek to have their fees and other expenses paid from the Attorney’s Estate if there is one which may cause unnecessary conflicts to arise and burdens imposed. Receiver Attorneys and Attorney’s staff should not have to worry about their compensation while being asked to assist the Attorney, the Attorney’s Estate or family member by transitioning and closing the Attorney’s practice and office.
Some Suggested Methods of Funding the Transition and Closing of Your Office:
1. Establish an Office Closing Fund in a separate bank account in an amount projected to be sufficient to cover 2 months of operating expenses for your office. Have your designated Receiver Attorney listed as an authorized signatory for this separate bank account.
2. Take out a small life insurance policy of $10,000 to $25,000 on your life and amend your will to designate that these funds are too be used for the purposes of funding the orderly closing of your office and direct your Personal Representative or Executor accordingly.
3. If your law practice is organized as a professional limited liability company, professional corporation, or other business entity and leave a bequest in your will to the entity with directions that the funds be made immediately available to the Receiver Attorney to pay the costs and expenses of closing your law office.
4. Have your business entity purchase a life insurance policy on your life that names the entity as the beneficiary. Again, including directions/instructions in your will regarding the use to which the funds are to be put.
If funds are available to compensate those involved in doing the work, then the Receiver Attorney and your staff should be much better positioned to pull your files together, notify clients and opposing attorneys, collect accounts receivable, prepare motions and notices to courts and otherwise efficiently, and expeditiously, complete the transition of your practice and closing of your office.