What to Expect When You’re Expecting to Retire
While legal careers will almost certainly end because of a career change, retirement, health, or death, a surprising number of lawyers reach that end without having considered and prepared for the recurring issues common to winding down a law practice.
Here is a Top 10 list of the questions a lawyer and his or her law firm should consider before it becomes necessary to close one’s practice.
- How will I know when it is time to retire? North Carolina Rule of Professional Conduct 1.3 says “A lawyer shall act with reasonable diligence and promptness in representing a client.” Comment 5 states, “To prevent the neglect of client matters in the event of a sole practitioner’s death or disability, the duty of diligence may require that each sole practitioner prepare a plan, in conformity with applicable rules, that designates another competent lawyer to review client files, notify each client of the lawyer’s death or disability, and determine whether there is a need for immediate protective action.”
- What kind of notice or duties do I owe to my current clients when I retire? North Carolina RPC 48 discusses law firm dissolution and issues such as continuity of service, right of clients to counsel of their choice, obligation of partners to deal honestly with each other, no involvement of clients in partner disputes and protection of files and property of clients. Who should send the notice of retirement – my old firm or me? What should the notice say? Who pays for it?
- What happens to my client files after I leave practice? Who will pay for copying files for clients or the storage costs of the files? Could I be held responsible for the costs of storing files of other partners who are unwilling to pay their fair share of the storage costs? Do all client files of the firm need to be treated the same? Pending proposed North Carolina ethics opinion 2012 Proposed Opinion 13 rules that partners and managerial lawyers remaining in a firm are responsible for the safekeeping and proper disposition of both the active and closed files of a suspended, disbarred, missing, or deceased member of the firm.
- Who is responsible for the firm’s future liabilities? How will I know that my old partners will remain liable for their share of the back taxes, unpaid vendor bills, loans payments or overdue rent? Can I get out of the lease?
- What if I am suddenly incapacitated or impaired or worse yet, dead? Have I prepared for this scenario by arranging for an Emergency Attorney to close my practice? What should my clients know about such preparation? Are my client files organized and billing records current? Will the Emergency Attorney be able to ascertain file deadlines and issues that need immediate attention? How does the Emergency Attorney get paid?
- What role will my staff play in winding down my practice? Have I made my staff aware of my emergency preparations? Who has all my key technology information such as critical passwords, email addresses, etc.? Will my staff get paid while my practice is winding down? How? Are my trust account and operating account secure?
- Should my family have any role in winding down my practice? Does my next of kin know who to contact in case of an emergency? Does my next of kin have any idea about my emergency preparations? Have I made my next of kin aware of the obligations that my estate will be responsible for? Does my spouse have Power of attorney or the like? Are my bank accounts secure?
- What role if any should the State Bar take in winding down my practice? When does the State Bar have a trustee appointed to take over the winding down of a practice? Only sole practitioners? When? What about small offices with only 2 or 3 attorneys? View the State Bar Handbook for a Trustee of the Law Practice of a Missing, Incapacitated, Disabled, or Deceased (MIDD) Attorney.
- What about my malpractice coverage after I retire? Does my partnership agreement address this issue? What happens if my old firm takes me off its policy or switches carriers after I leave? Who will pay for “tail coverage” – my old firm or me? Will the “tail coverage” cover just me or the entire firm? Who will pay the deductible if I’m sued? Who will pay the deductible if my old firm is sued for something that occurred while I was still practicing?
- What should I do in case of an emergency? Call the State Bar, my local bar or malpractice provider? The State Bar can assist solo attorneys in certain situations. Lawyers Mutual is in the pilot program stage of a program called HELP – Handling Emergency Legal Problems.
What if you are considering transferring ownership of your firm?
Check out this upcoming workshop:
November 7th in Concord, N.C. Lawyers Mutual Consulting & Services and The Law Practice Exchange presents: Transferring Ownership of Your Law Firm to the Next Generation. This interactive workshop will provide all the resources you and your firm will need to transfer your law firm to new ownership! Learn the value of your law practice and how to transfer it to the next generation. Specific transition consultant analysis of your firm and development of transition structures that will work for you.
Walking away from your law practice through retirement or an emergency situation isn’t easy. Having an exit strategy not only protects you, it protects your business partners and your family.
This post originally appeared as an article on our website.