Nobody likes to think about it, but it’s a fact of life: People young as well as old die or become disabled unexpectedly.
If that happens to a solo lawyer, what will happen to his or her practice?
Too often, the lawyer has made no plans for his clients to be taken care of and his office to be closed down. The responsibility rests with his family, his staff, the local bar or, in a worst-case scenario, a court-appointed receiver.
That last possibility has officials at the Virginia State Bar alarmed. They’ve recently seen an increased demand for receiverships, which are paid for out of Virginia lawyers’ bar dues when the practice doesn’t have enough assets.
VSB Counsel Barbara Ann Williams has projected that the number of practices put into receivership likely will increase as the lawyer population ages. (See “Demand For Receivers To Increase, VSB Says“.)
Planning for death or disability is “probably one of the most important things you can do,” said Wendy Inge, assistant vice president for lawyers’ risk management at the American National Lawyers Insurance Reciprocal.
“The smaller you are in terms of firm size, the more critical it is,” she said.
However, “most lawyers don’t do any planning,” said Paul D. Georgiadis, a Richmond lawyer who does risk prevention work for ANLIR.
Inge and others offered pointers for the lawyer who wants to leave the office each day knowing that, should something happen, his clients will be taken care of, money will be distributed appropriately and his family can spend their time mourning him instead of trying to close out the practice.
The buddy system
Solo lawyers should hook up with another lawyer they trust and work out an agreement, formal or informal, to help each other out if death or disability strikes.
“It’s wise to make arrangements,” Inge said. “You like each other. You’re compatible. And you will step up to the plate for each other.”
The “buddy’s” job is “to take control of the files and protect the interests of the client,” said VSB ethics counsel James M. McCauley.
In some practices, where the spouse or an employee has worked alongside the lawyer for many years, it might be appropriate for that person to help close down the practice. A nonlawyer executor of the lawyer’s estate also might do it. But many decisions will require an attorney’s eye at some point.
Whatever arrangements are made, the lawyer should review them periodically. “It’s like a will. You may have to go back from time to time and change it,” Inge said.
Some states or insurance carriers require lawyers particularly solos to identify the lawyer who will be responsible for closing down a practice in the event of incapacity or death, McCauley said.
Delaware lawyers send the name to their state bar when they pay their annual dues. Pennsylvania is encouraging lawyers to execute the appointment of a conservator for their practices.
Habits of a lifetime
Lawyers should think about how their office is organized and ask, “If someone has to walk in your shoes, is there a practice and procedure in your firm that makes sense?” Inge said. “The sloppier your practice is, the harder it is for anyone to come in behind you.”
Ideally, neat habits are cultivated throughout a career, Inge said. Like housework, it’s easier to maintain organization than to straighten it out once it has become disorganized.
Closed-file management is another feature of the organized law office.
A well-organized lawyer will have an ongoing closed-file retention program with a regular system for destruction after 10 or 15 years have passed and the client has been notified. But, in reality, those lawyers are few and far between, sources agreed.
“With most lawyers, what happens is this lawyer has kept every single file in his career,” Inge said. And “we all suffer from catastrophic shortages of space,” Georgiadis said. Whoever winds up the practice is left with the nightmarish job of trying to sift through and determine what should be kept.
Make a notebook
Every lawyer should keep a notebook with essential information someplace where the “buddy” can find it. The notebook can be on the computer, but “it need not be high-tech,” Georgiadis said. A three-ring binder will suffice.
Into that notebook would go:
- A letter to clients informing them of the lawyer’s death or disability and outlining what happens next. This could include a final statement of billing and expenses or, in the case of contingency cases, fees and costs already incurred by the office. This can be sent over the signature of the lawyer or of the person closing down the practice. (See sample.)
“Lawyers like to control things. This is his opportunity to speak from the grave,” Inge said.
- A letter to the “buddy” with details about bank accounts, powers of attorney, office organization and other details. (See sample.)
- Copies of any agreements the lawyer worked out in advance with the designated “buddy,” including documents that give him access to the office’s bank accounts. To find out what your banks would require, contact them, McCauley advised.
- An index of all open files, organized in such a way that the “buddy” can spot the impending deadlines. If the actual index or calendar is not in the notebook and continually updated, instructions should be included of how the index and calendar can be accessed.
“Every lawyer ought to have within his hand’s reach what cases he has open and what stages they’re at,” Georgiadis said. “So if you get run over by a bus tomorrow, your colleague from down the hall who has his own solo practice can come in and make intelligent decisions about your cases.”
- A copy of the malpractice insurance policy, with notice requirements and information about tail coverage highlighted. This coverage of incidents that happen in the cases after the death or disability often is included as part of a policy. If it isn’t, the lawyer should make a note of that, too, so the “buddy” knows to purchase a tail.
- Information on other insurance policies that might affect the closing down of the office, including coverage of business overhead expenses while a person is disabled.
- A list of cases that the lawyer knows contain conflicts for his “buddy.” Those cases can be sent to other attorneys by the office staff.
- The lawyer’s index of closed files, including the appropriate date of destruction.
Inform the staff
Tell the staff about your contingency plan. If you want a key employee to stay on to help with the transition, talk to her about it. Tell her that her salary will be paid out of the estate, and make sure she knows what her job will be during the closedown.
Track the clients
Client response to the office’s closing should be documented in the copies of the files that will be kept with the departed lawyer’s practice. When they choose another lawyer or pick up the file, it should be noted.
Ethics on deadline
The person who closes down a lawyer’s office is likely to find that some cases need action immediately, before the client has had a chance to react and choose a new attorney.
“Wait until you hear from the client, if possible,” Inge advised. But recognize that there might not be enough time in a case to inform the client and obtain consent. In that case, Inge advises erring on the side of meeting the deadlines. “If an answer is due on a case this Friday, you can’t sit around and wait for them to tell you who they want.
“If you miss a deadline and you’re in default, you have a much bigger problem on your hands” than if the client complains that you took over his case without his consent, Inge said. “Sometimes you have to pick the lesser of two evils.”
As far as conflicts are concerned, “even the client identity can be at times a confidence,” Inge said. The thoughtful lawyer will anticipate cases that would present such conflicts to the person winding down the practice and arrange for his staff to handle them separately.
Ideally, “Those clients would get a separate letter,” informing them of their options for choice of a new lawyer, Inge said.
A number of insurance policies are available to Virginia lawyers that bear on death and disability, said Robert H. Spicknall, second vice president of The Reciprocal Insurance Agency, which offers several products that are endorsed by the VSB.
Other companies offer competitive products, and lawyers are advised to shop around.
Spicknall described the pertinent plans, along with the rates the Reciprocal charges for nonsmokers in various age categories. The endorsed products include:
- Term life insurance. The Reciprocal offers a group plan that is getting ready to drop its rates for the third time in the past 10 years, Spicknall said.
For a $100,000 policy, a person age 35 to 39 would pay $94 a year; a person 50 to 54 would pay $318.
- Disability income insurance. Spicknall said that, although many lawyers don’t carry this, they should consider it because, “The likelihood of permanent disability is four times greater than death.”
When shopping for disability income insurance, Spicknall advised, lawyers should make sure it includes an “own occupation” provision in other words, if the disability prevents the lawyer from practicing law, the insurance would kick in.
Spicknall said the bar-endorsed carrier’s experience has been so good that it is getting ready to offer a six-month premium holiday to subscribers.
For a policy through the Reciprocal that would pay $5,000 per month, the annual premium for people in their 30s would be $535; people in their 50s would pay $1,345.
- Business overhead insurance. This covers a maximum of two years of expenses to keep an office running, in the case of a lawyer’s temporary disability.
A policy that would require $5,000 monthly would cost $290 annually for people in their 30s, and $950 for those in their 50s, through the Reciprocal.
The horror stories
Inge, Georgiadis, McCauley and Spicknall have all had the experience of having new widows of lawyers call them in desperation, in search of insurance policies, information on where the practice’s money is and guidance in how to close down the practice.
Planning for death or disability “is never a fun thing,” Inge said. “But it’s a necessary thing, to save your family and your office staff a lot of grief.”