Commentary: Failure to plan has consequences

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An earlier column about sole practitioners’ succession planning noted that those lawyers who fail to do such planning face significant ethical consequences. This concern needs be reviewed in more detail.

The ethical implications of failing to plan for a practice’s future when the lawyer retires or dies are so severe that state bar associations are taking action to “protect” the public. For example, a proposal now before the State Bar of California Bar Board of Governors would require lawyers to have an “estate plan for the law practice” providing for succession in the event of a lawyer’s death or disability. The action was prompted by situations such as this: The widow of a California attorney sought to work through the problem of closing her husband’s practice after his death. She ended up hiring a practice management attorney who cost a great deal of money but provided unsatisfactory service and the state bar threatened intervention. Winding down the practice was difficult and stressful, and both the family and the clients of the deceased lawyer were at risk.

The consequences can be even more serious. In Maine, a number of years ago, a lawyer died, was buried and his estate was probated. Suddenly, the estate was sued for malpractice because the plaintiff-former client was injured. Her matter was lost because of the passage of a statutory time limit. The court held the lawyer’s estate liable because the lawyer should have known that death was possible and taken steps to protect his clients if that tragedy struck. He failed to have an estate plan for his law practice, his client was injured as a result and his estate was therefore liable for damages. For bar associations that believe “protecting the public” (and not serving lawyers), is their top task, it’s obvious that such protection can now reach the gravesite.

Even insurance carriers are now asking the question: Who will take care of your practice in your absence? Failure to provide an answer is reason for refusing to issue a malpractice insurance policy. I have been called in on occasion to help either the surviving spouse or the spouse whose lawyer-spouse suddenly became disabled; the management and financial entanglements can be horrendous … and of course the challenges to protect the clients can be daunting when there is no one left in the office who knows what is the status of each of the matters.

Of course, an estate plan is not a guarantee against ethical problems. A potential issue in solo practice is that aging lawyers may emotionally leave their clients long before they close their doors. This can result in less effective representation well before the lawyer retires, with malpractice claims a potential risk. Also, too many older lawyers are behind the technology curve, even not using e-mail. This exposes the lawyer to charges of malpractice for not meeting the standard of care practiced by other law firms. It also diminishes the value of the practice if the lawyer wishes to sell it and retire because the purchasing lawyer has to invest in the IT to get the practice up to speed.

In a larger firm context, such issues are likely not to occur. The older lawyer simply receives the designation of “special counsel” or “emeritus partner,” and another lawyer in the firm takes over the practice. Or, on a sudden absence from the firm, the disabled or deceased lawyer’s case load is quickly transferred to another member of the firm. There may be a glitch, but seldom a catastrophe rising to the level of malpractice. For the solo lawyer, deciding how and by whom the practice is to be closed in the event of unexpected death or incapacity is harder to face. However, the lawyer who has not taken the possibility of his or her untimely death or disability into account for planning a practice’s future is creating a tremendous burden for loved ones left behind – one that may bring intervention by state bar authorities or by creditors.

Ed Poll J.D., M.B.A., CMC is the principal of LawBiz® Management, a national law firm practice management consultancy based in Venice, California. For more information, visit his Web site www.LawBiz.com or email him at [email protected].