Small Law Firms

What Is Your Exit Strategy?

The entrepreneurial lawyer balances so much that it’s easy to forget planning for the end of a business and worst-case scenarios.

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I recently read an article about a bankruptcy lawyer in Virginia who was left in a lurch after his boss and law firm owner unexpectedly died at 47. The owner left neither instructions nor a business succession plan. The lawyer worked 12-hour days for weeks to contact over 140 clients and identify and organize law firm information. Fortunately, the attorney was successful and ended up acquiring the practice, even though the cleanup process was time-consuming, stressful, and unnecessary — if the owner had established a proper succession plan.

The entrepreneurial lawyer balances so much that it’s easy to forget planning for the end of a business and worst-case scenarios. However, a practice may unexpectedly end. It may come as a shock that none of us will live forever; unfortunately, many lawyers operate as if we will. Some lawyers will experience life events that require drastic changes, while others will want to sell their practice and do something else. It is essential to prepare for these scenarios. A lack of business succession planning can destroy years of dedicated hard work — and leave your employees, family, and business in a terrible predicament. With succession planning, a law firm can adjust to possible scenarios.

What Is A Succession Plan?

Law firm succession planning is the process of developing a transition plan for closing a legal practice or selling it to another firm or attorney. Every law firm must have a succession plan. A succession plan ensures your clients are taken care of should anything happen to you. By planning, you’ll prepare for client needs even during a crisis. Succession planning is a no-brainer for more prominent firms but may be challenging for small or solo firms.

Your Ethical Responsibilities

The American Bar Association provides recommendations for succession planning. The ABA’s “Model Rules of Professional Conduct” also addresses how to manage the sale of a law practice and appoint counsel to protect the client’s interests in the case of a lawyer’s disability, suspension, disbarment, disappearance, or death.

Additionally, most state bar associations have caretaker rules for the succession of a law firm, which include appointing a successor or an assuming attorney to take over your practice in case of an emergency or death. For example, in Texas, a lawyer can designate a custodian-attorney to wind down a law practice in the event of emergency or need. Not all states have mandatory succession plans for attorneys, though most highly encourage designating a lawyer to take over in the case of an emergency or death.

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How To Create A Law Firm Succession Plan

When building your succession plan, consider including the following:

  • Nominate an attorney to manage your succession plan.
  • Describe any other pertinent information on the disposition of files, law firm equipment, and liabilities.
  • Document where to access passwords, tech tools, and online accounts.
  • List law firm bank account information, including the IOLTA and operating accounts, line of credits, and reserve accounts.
  • Describe how to compensate an attorney successor.
  • Organize vendor and contract details for subscriptions, software, maintenance, etc.
  • Disclose all of your law firm’s financial information.
  • Organize your malpractice insurance information.
  • Document where client information is stored.
  • Decide how you want to end your practice (sale, winding up, etc.)

Law firm succession planning, while time-consuming, must be done with intentionality. Start with your state’s guidance when trying to determine what components to include in your succession plan. Remember to pace yourself when getting your information in order and maintaining your succession plan. It is imperative to protect your colleagues, clients, and family members in the case of an unexpected crisis or death.

Have you started your law firm succession plan? Why or why not? I’d love to hear your constructive comments or questions at iffywrites@ibekwelaw.com. I am always looking for topic suggestions! Did I mention that I signed with a literary agent for my upcoming estate planning book? You can read all about it here.

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Iffy Ibekwe is the principal attorney and founder of Ibekwe Law, PLLC. She is an estate planning attorney evangelist for intergenerational wealth transfer with effective wills and trusts. Iffy is writing her first book on culturally competent estate planning, available in 2022 (prayers up!). She graduated from The University of Texas School of Law and has practiced law for over 14 years. Iffy can be reached by email at iffywrites@ibekwelaw.com, on her website, and on Instagram @thejustincaselawyer.

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