One of the effects of COVID has been that lawyers are taking a closer look at their practices and whether they want to continue working in the new “normal.” This means that business succession planning is more important than ever.
Business succession planning is a multi-faceted process with strategies for the future of your practice, preparing for the purchase or sale of the practice, implementing a plan for unexpected disability, disappearance, discipline, or death of attorneys or other key employees of the firm, and disaster recovery for the IT and assets of your firm. Many of these topics are likewise addressed through a similar but distinct process known as “business continuity planning.”
At any stage of your practice your firm should maintain a business succession plan to address life-cycle issues in the firm. The plan should consider the demographics of the firm and how the firm would be affected by the retirement or sudden departure of key personnel, leaders, rainmakers or even entire groups of key personnel. as well as ethical duties under the Ohio Rules of Professional Conduct Rule 1.1 Competence and Rule 1.3 Diligence to provide continuity of client service.
The firm’s strategic plan should work in tandem with its business succession plan to implement the goals for the future of the firm. This will include developing multiple successors for attorneys or other key personnel in advance of retirement. The requirements of the type of practice entity will also be important as attorneys plan for the future. Firm documents and partnership agreements may contain specific requirements. As an attorney makes plans for ultimate disposition of firm ownership interests, the type of law firm legal entity in which he or she practices and its associated requirements should also be considered. For example, an attorney cannot designate his or her interests of shares in a law firm as transfer-on-death to a successor trustee in a revocable trust, to become an irrevocable trust upon death, when one or more beneficiaries of the trust are non-attorneys. See Opinion 2019-2 Transfer on Death of a Lawyer’s Shares in a Law Firm to a Revocable Trust regarding how ownership in a law firm can or cannot be transferred, depending upon the circumstances.
An individual attorney contemplating retirement needs to plan ahead. It is best to establish a target retirement date and work to meet that date. If the attorney is part of a firm, the attorney will need to look at firm documents governing the process. If the attorney is a solo practitioner, he or she can self-guide the process as the practice decision maker. The attorney may consider selling the practice pursuant to the Ohio Rules of Professional Conduct Rule 1.17.
There is usually a question about when and how to announce retirement plans. Of course, the firm, legal colleagues and staff should be notified before clients. If the attorney is practicing as a solo, there may be considerations for what staff will do when the attorney retires. The attorney should inform clients in person, by telephone call, and by sending a closing practice letter. This letter should ask clients to make arrangements to pick up their files and inform of the firm’s record retention policy. Sometimes an attorney may need to run a newspaper notice of retirement as long-term clients may be difficult to locate.
The attorney may want to consider taking Inactive Status with Attorney Registration of the Ohio Supreme Court. This is recommended if the attorney no longer wishes to actively practice, as the retirement or resignation from the practice of law is final and irrevocable. An attorney who is no longer practicing and who satisfies the criteria of Gov. Bar Rule VI, Section 5 may register for inactive status by filing an updated certificate of registration using the Attorney Services Portal.
Throughout this process, it is a good idea for the attorney to work with their OBLIC Underwriter who can assist with questions about part-time coverage, if needed, and answer questions about “tail” coverage. “Tail” coverage is an Extended Reporting Period (“ERP”) endorsement which lengthens the time to report claims arising out of an act, error or omission which occurred prior to the expiration of the last active policy of insurance maintained by the firm or the attorney. Since “tail” coverage only applies to claims arising out of work done prior to the effective date of the “tail”, an attorney needs to be absolutely, completely, and finally finished with all legal work prior to obtaining “tail” coverage.
OBLIC is here it help you with your retirement questions. Again, it is essential to work closely with the OBLIC Underwriter during this process. With adequate pre-planning, an attorney can make a smooth trip down the road to retirement.
Gretchen Mote, Esq.
Director of Loss Prevention
Checklist for Retirement
- Decide on target retirement date
- Inform OBLIC Underwriter
- Purchase “Tail” Coverage
- Consider firm retirement policy/documents
- Plan when to announce retirement and inform clients
- Send Closing Practice Letter
- Put notice on website
- Consider phone message/call forward
- Ready client files for return to clients
- Close out all IOLTA matters
- Government filings
- Notification to Secretary of State
- Notice to Ohio Supreme Court of Address change/License status change
- Follow procedures under Ohio law for winding down type of practice, if applicable
- Address business issues
- Office lease
- Utilities and vendor contracts
- Equipment leases
- IT and electronic devices – Caveat: Be sure all data is scrubbed!
- Record storage
- Business records – tax documents, wage statements
- Client files
- Enjoy retirement!