Succession Planning Basics

Have you considered what would happen if you were suddenly unable to practice law? If so, have you implemented a succession plan to protect your clients’ interests? No one wants to think about becoming ill, incapacitated, being suspended or disbarred, or dying unexpectedly. Perhaps for this reason, far too few attorneys have a succession plan in place. In fact, the Texas Chief Disciplinary Counsel has reported an increase in demand to address situations in which lawyers had died or were otherwise “absent” from law practice. Due to shifting demographics, this is becoming more of a pressing concern than ever–40% of Texas lawyers are over the age of 55, and 20% are over 65.

This article provides a high-level overview of how succession planning is critical to help protect your clients and avoid malpractice and disciplinary complaints if something unforeseen occurs, as well as important considerations when implementing a law succession plan.

WHY HAVE A SUCCESSION PLAN

Unlike a handful of other states, Texas does not have a rule mandating that attorneys have a succession plan in place, though it is strongly encouraged by the Texas Bar. And for good reason. Here are some principal reasons why all attorneys should have a succession plan in place.

Avoiding Malpractice and Disciplinary Complaints. Not having a succession plan in place can lead to increased exposure to malpractice and disciplinary complaints. For example, missed deadlines and the failure to complete tasks in a timely manner will certainly lead to claims. Significantly, an attorney is not immune from disciplinary action for neglect of client matters as a result of disability or even death (though rare).

While outside the scope of this article, key ethics rules implicated are: Competent and Diligent Representation (Texas Rule 1.01), Confidentiality (Texas Rule 1.05), Conflicts of Interest (Texas Rules 1.06 and 1.09), Solicitation (Texas Rule 7.03), Safekeeping of Property (Texas Rule 1.14 ), and Notification of Attorney’s Cessation of Practice (Texas Rule 13.01).

Protection of Clients, Family, Law Partners and Staff. Having a succession plan in place can substantially reduce the stress, confusion, and costs that may arise if an attorney becomes unavailable. A succession plan is also essential to protect the clients’ interests. Without a succession plan in place, there’s the possibility of missed insurance premiums, which means coverage may lapse and the lawyer’s clients, the law firm and in the event of a death, the lawyer’s estate are unprotected.

DEVELOPING A SUCCESSION PLAN

So you know you need to have a succession plan in place, but you’re not sure where to start? The ABA has provided a list of five essentials for an effective succession plan, which we’ve summarized below.

Contain written instructions on how and where client information is stored (bank and other account details)

Include other critical information regarding your law firm. (e.g. disposition of closed files, information about law office equipment, and payment of current liabilities)

Contract details with vendors (e.g. maintenance work, cleaning, office supplies)

How to access technology and online accounts (e.g. computers, voicemail, law practice management software, and other tech tools)

Detail how the Successor Attorney will be compensated (assuming practice will not continue operating)

FINDING A SUCCESSOR ATTORNEY

In addition to the recommendations provided above, it’s necessary to find a Successor Attorney. This individual is not necessarily taking over the law practice, but is assisting with transition. Once you’ve identified a Successor Attorney and agreed upon the details, you should document your agreement in writing.

The Texas Bar has provided some guidance on what the written agreement should include:

Scope of Responsibility.

This can include: attending to client matters; transferring active matters to other attorneys; managing finances; notifying your malpractice insurer; selling the practice; and securing compensation for the Successor Attorney.
Remember to be explicit regarding who the Successor Attorney will represent (you or the client). If the Successor Attorney represents you, she may be prohibited from representing your clients on certain matters. Conversely, if the Successor Attorney represents your client’s interests, she may be required to disclose to the client if you have made any errors in the case.

Duration and Triggering Event

Considerations include: defining the triggering event–the circumstances in which the Successor Attorney will assume her duties, and who will determine whether the event has occurred (e.g., Successor Attorney, doctor, family member)

Duties to be Performed

Include a signed consent authorizing the Successor Attorney to perform certain tasks, for example:
Review files for pending deadline
Obtain extensions in litigation matters
Contact clients about returning/transferring files
Wind up financial affairs
Inform the court and others who need to know of the closure of the practice
Collect fees owed to the disabled or deceased attorney
Return unearned fees

Power of Attorney

While some banks will accept the written agreement between you and the Successor Attorney, some will require a Power of Attorney. So if the Successor Attorney will be handling the firm’s financial affairs, ensure a Power of Attorney is in place so that she may access the firm’s bank accounts.
The Power of Attorney should define the triggering event, who makes that determination and the specific powers that will be granted.

Notifying Your Clients

You’re required to notify your clients that you have arranged for a Successor Attorney to wind down your practice. Since the Successor Attorney will have access to your client’s confidential information, you need to obtain your client’s consent.
The easiest way to notify your clients and obtain their consent is to put a provision in your engagement letter or retainer and fee agreements. An explanation as to why–the protection of your client’s interests and preventing his/her matter from being neglected–is important. You can find sample language from the Texas Bar here.

CONCLUSION

It’s helpful to think of succession as a risk mitigation plan to prevent ethical pitfalls and protect clients, family, law partners and staff. This article is intended to provide a high-level overview of succession planning. We recommend reviewing these additional resources, and be on the lookout for an upcoming CLE from TLIE, which will provide a more in-depth discussion of this topic.

State Bar of Texas, Checklist for an Attorney who Closes Another Attorney’s Office

State Bar of Texas, Advance Designation of a Custodian-Attorney – Instructions

State Bar of Texas, Assumption of Practice: A Custodian’s Guide

State Bar of Texas, Template Letter Advising that Lawyer Is No Longer Able to Practice Law Closed File

State Bar of Texas, Letter Advising that Lawyer Is No Longer Able to Practice Law Active File

Texas Ethics Opinion 627 (provides guidance regarding responsibilities of a law firm for preserving or disposing of files of a former client after the lawyer who represented the former client leaves the firm)

If you have questions regarding succession planning, reach out to TLIE or Texas Lawyers’ Assistance Program.

By Lauren Bianchini